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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM OF REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
MOBILE P.E.T. SYSTEMS, INC.
(Name of Small Business Issuer in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
11-2787966
(I.R.S. Employer Identification No.)
2240 SHELTER ISLAND DRIVE #205
SAN DIEGO, CALIFORNIA 92106
(Address of principal executive offices) (Zip Code)
(619) 226-6738
(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
Title of each class to be Name of each exchange on which
so registered each class is to be registered
None None
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Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.0001
(Title of Class)
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DESCRIPTION OF BUSINESS
OVERVIEW
Mobile P.E.T. Systems, Inc. is a medical service provider operating
mobile Positron Emission Tomography ("PET") imaging systems in selected
marketplaces in the United States and Europe. PET imaging systems produce
images of the body that represent the metabolic characteristics of tissues
rather than anatomical information, providing for the earliest detection of
many abnormalities that are undetected with conventional x-ray, Computerized
Axial Tomography ("CT"), or Magnetic Resonance Imaging ("MRI") imaging
systems. PET effectively detects many cancers, cardiac and neurological
disorders at their earliest stages which influences patients' treatment
options and eliminates redundant testing, hospitalization or non-beneficial
treatment procedures.
We provide the PET imaging system housed in a mobile coach. We also
provide the technical personnel who operate the equipment and implement the
PET procedure under the direction of hospital physicians. Our contracted
services provide hospitals, which do not have high patient volumes to
purchase or support a dedicated PET system, access to this advanced
diagnostic imaging technology and the related patient benefits.
ABOUT OUR INDUSTRY
The diagnostic imaging industry generates annual revenues in excess
of $50 billion in the United States, or approximately 5% to 6% of total
health care spending. There are at present approximately 84 PET systems in
the United States, including approximately 75 hospital-owned systems, 5
independent fixed site systems and 4 mobile units. By comparison, in 1998
there were approximately 4,000 MRI systems in the United States consisting of
approximately 2,400 hospital owned systems, 1,000 independent fixed site
systems and 600 mobile systems.
Recent studies by the Institute for Clinical PET ("ICP") concluded
that PET is a cost-effective diagnostic imaging procedure for a number of
indications. In cost-effectiveness studies conducted by the ICP, the use of
PET in four indications for the United States Medicare and non-Medicare
populations demonstrated significant cost savings. The four retrospective
studies focused on lung cancer, breast cancer, colorectal cancer recurrence,
and myocardial viability. In the studies of these four indications in the
Medicare population, ICP estimated the total Medicare savings from the use of
PET diagnostic imaging procedures would approximate $1.6 billion per year. In
addition, ICP estimated the number of invasive and other diagnostic
procedures would be reduced by 189,162 procedures. Finally, ICP estimated the
number of annual PET studies required for the four indications in the
Medicare population would be 388,951. ICP's cost effectiveness studies for
the non-Medicare population concluded the total cost savings from the use of
PET diagnostic imaging would approximate $4.1 billion annually. In this
population, ICP estimates the number of invasive and other diagnostic
procedures would be reduced by 182,520 procedures annually. In addition, ICP
indicated that the number of annual PET studies required in this population
would approximate 401,616 tests. It should be noted that ICP's calculations
examined only the savings related to the cost of the procedures avoided, and
did not include additional savings realized by avoiding the complications of
procedures rendered unnecessary by knowledge of PET results.
THE PET PROCEDURE
Commercial diagnostic PET imaging systems are comprised of high
speed computers, an examination table and a large imaging detector gantry,
which are used to acquire and produce detailed PET images of the human body's
metabolic functions. Performing an actual PET procedure scan involves first
introducing a radioisotope into the patient's blood stream. The patient is
then placed on an examination table which is electronically positioned into
the middle of an "open-air gantry" of the PET scanner.
The PET imaging system detects signals emitted by the radioisotope
as it moves through the body. The radioisotope is attracted to any metabolic
activity. As an example, cancer cells (which are highly metabolic) are
easily detected by the PET imaging procedure. A high-speed computer
reconstructs the signals into three dimensional images that display normal or
abnormal metabolic function. The most commonly used radioisotope is
fluro-deoxyglucose (FDG),
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a glucose based radioisotope. The radioisotope used in the PET procedure
dissipates within twenty-four hours and the patient may go home the same day.
THE ADVANTAGES OF PET
PET offers fundamental advantages over other diagnostic imaging
techniques as it provides a direct measure of biochemistry and functional/
metabolic activity. In most cases, the precursors to all disease are
biochemical in nature and initially affect function, as opposed to structure.
PET, which has a unique ability to create a diagnostic image of early
metabolic changes, can significantly reduce the time to diagnosis, reduce
costs and improve patient outcomes for numerous indications for oncology,
cardiology and neurology.
PET offers the following substantial advantages over current diagnostic
imaging procedures:
-- replaces the need for multiple, costly medical testing with a
single imaging procedure;
-- displays a 3D image of all of the organ systems of the body with
one examination;
-- diagnoses and detects diseases, in most instances, before
detection by other tests;
-- monitors the path and progress of disease as well as how the body
responds to treatment;
-- reduces or eliminates ineffective or unnecessary surgical/
medical treatments and hospitalization; and
-- reduces redundant medical costs and avoids needless discomfort to
the patient.
As a result of the cost efficiency and clinical effectiveness of
PET, hospitals and other health care providers are facing pressures from
their patients to provide PET technology and related services. Increasingly,
such health care providers are utilizing third parties, like our company, to
provide technology-driven patient services.
Approximately 7.4 million Americans have a history of cancer, and
1.3 million new U.S. cancer cases will be diagnosed in 1999. PET is currently
recognized as the only metabolic medical tool powerful enough to accurately
image and measure with a single pass the metabolic function of cancer. It can
also provide information to determine whether a primary cancer has
metastasized to other parts of the body. PET has demonstrated its usefulness
in cost-effective, whole-body metastatic surveys; avoiding biopsies for
low-grade tumors; non-invasive differentiation of tumors from radiation
necrosis; early change in course of ineffective chemotherapy; and avoiding
unnecessary diagnostic and therapeutic surgeries.
In cardiology, a PET scan is one of the most accurate tests to
detect coronary artery disease. The PET images can display inadequate blood
flow to the heart during stress that is undetected by other non-invasive
cardiac tests. PET enables physicians to screen for coronary artery disease,
to assess flow rates and flow reserve, and to distinguish viable from
nonviable myocardium for bypass and transplant candidates. It is also fast
becoming an indispensable tool for cardiologists attempting to achieve
reversal of coronary artery disease through aggressive risk factor
modification such as the Ornish diet program, enabling both doctor and
patient to directly and non-invasively measure the progress of improvement in
coronary blood flow.
In neurology, PET can assist in the early detection and diagnosis of
such brain disorders as Alzheimer's and Parkinson's diseases. PET scans can
detect a consistent diagnostic pattern for Alzheimer's disease where certain
regions of the brain may show decreased metabolism early in the disease. This
pattern often can be recognized several years before a physician is able to
make the diagnosis clinically. In addition, PET scans can differentiate
Alzheimer's from other confounding types of dementia or depression. In a
similar fashion, PET scans can detect Parkinson's disease. A labeled acid is
used with PET to determine if the brain is deficient in dopamine synthesis.
If it is determined there is no deficiency and the patient is not suffering
from Parkinson's disease, then the course of tremor evaluation and treatment
will be different.
According to the ICP and the UCLA School of Medicine, PET diagnostic
imaging offers medical specialists a metabolic and clinical process to
pinpoint soft-tissue disorders. MRIs provide anatomical images of the body
that are not as effective as PET's 10-year history of early diagnosis of a
growing number of cancers, heart and brain disorders.
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CT scanning is also less effective than PET scans as a tool for
early detection and diagnosis. PET imaging has displayed the following
detection rates compared to CT scanning and mammography:
-- an 81% detection rate for lung cancer, compared to a 52%
detection rate with CT;
-- a 95% detection rate for colon cancer, compared to a 68%
detection rate with CT; and
-- an 85% detection rate for breast cancer, compared to a 67%
detection rate for mammography.
Considering only the 131,600 new incidences of colon cancer
diagnosed in 1998, PET imaging services would have detected, based on the 95%
detection rate, 125,020 incidences as compared to only 89,488 incidences from
CT scanning. This represents a 40% higher rate of detection.
OUR SERVICES
We provide convenient cost effective PET imaging services for
hospitals, medical centers and other health care providers that are unable to
financially justify the acquisition of this important technology.
All of our PET imaging systems are housed in mobile coaches or
trailers. The coach design combines convenience, patient comfort and safety,
and includes a powered patient lift, stairway, stabilizing system for
leveling, and transportation alarm to warn of equipment not properly stowed
for transport. The interior space of the coach is divided into three
sections: a patient imaging room, a technology control room, and the PET
imaging equipment section.
We provide hospitals with PET diagnostic imaging service time to
easily accommodate their patients on a daily basis. We anticipate physician
referrals will increase to a minimum of approximately nine exams per day of
service.
We offer a complete, comprehensive "Total Solutions" approach to our
clients which includes:
-- Medical Advisory Board to stage PET seminars that inform
referring physicians on the benefits of PET.
-- Physician training programs and expert overread services that
assist the hospitals' staff physicians to become qualified PET
exam interpreters.
-- Electronic data transmission and archiving of all PET exams by
use of our Internet site and software package.
-- Licensure assistance by our physicists.
-- PET Site Planning Guide and support to accommodate mobile PET
trailers to each of our clients' locations.
-- PET Strategic Marketing Plan complete with regional specialists
to evaluate and inform referring physicians.
-- Convenient access to radiotracers at negotiated discount rates
through our master buying agreements.
We currently have eight state-of-the art ECAT-Registered Trademark-
EXACT-TM- PET systems on order from CTI/Siemens Medical Systems and we are
ordering ten Registered Trademark-ADVANCE-TM PET Imaging Systems from General
Electric Medical Systems. We have received three mobile Siemens PET systems
to date, one of which is in operation in Southern California. We expect the
balance of the Siemens PET systems to be in operation by year end 1999 with
the first European system in operation by January 2000. We expect to receive
the first GE Registered Trademark-ADVANCE-TM PET Imaging Systems commencing
in the second quarter of 2000. The cost for a fully commissioned mobile PET
imaging system can range from $1.6 to $2.0 million.
The Siemens ECAT-Registered Trademark- EXACT-TM- scanner is a
whole-body system that provides 2D and 3D volume measurements of metabolic and
physiologic processes. The system consists of the ECAT-Registered Trademark-
EXACT-TM- scanner, an integrated workstation, the 3D Advanced Computational
System, and patient couch.
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OUR OPERATIONS
CUSTOMER BASE. We believe that many hospitals and other health care
providers will seek access to PET imaging services to remain competitive in
the health care marketplace.
Regulatory and licensing requirements in many states may also limit
general access to PET imaging services. In addition, many health care
providers lack sufficient patient volumes or financial resources to justify
the purchase of a dedicated in-house PET system. As a result, providers will
consider contracting for mobile services to gain access to PET technology,
build patient flows and provide comprehensive PET services to their
communities.
Many health care providers, regardless of whether their patient flow
levels and financial resources justify the purchase of a PET system, may
prefer to contract with us to (i) obtain the use of a PET system without
significant capital investment or financial risk; (ii) retain the ability to
switch system types and avoid technological risk; (iii) eliminate the need to
recruit, train and manage qualified technologists; or (iv) provide expanded
imaging services when patient demand exceeds their in-house capability.
SERVICE CONTRACTS. We structure our service contracts with hospitals
and health care providers for a term of five years, with fees charged on a
fee-per-patient basis and minimum patient volumes. To date, we have entered
into service agreements with the following hospitals and health care
providers: (i) Pomona Valley Hospital Medical Center; (ii) Saint John's
Health Center; (iii) South Coast Nuclear Medicine Group; and (iv) Spectrum
Medical Management.
REIMBURSEMENT. Mobile diagnostic imaging service providers are
generally not reimbursed directly by health care payors such as Medicare,
Medicaid, insurance companies or managed care companies. Instead, mobile
diagnostic imaging service companies contract directly with and are paid by
the hospital, which then bills the health care payors. All of our revenues
will be paid directly by the hospital. As a result, we should realize a
higher level of accounts receivable turnover and a lower allowance for
uncollected debt.
Billing and reimbursement for diagnostic imaging services is divided
into a technical component and a professional component. Our business revenue
is based on providing the technical component, which includes the cost of the
equipment, labor and materials needed to perform the procedure by our company
and a hospital. The professional component is the cost of interpreting the
image by the nuclear medicine physician or radiologist.
We contract with a hospital to receive a negotiated rate for the
technical component of the imaging service. This wholesale rate pays us for
providing the technical component of the service and allows the hospital to
mark up the service to the healthcare payor. This markup reimburses the
hospital for its services rendered to the patient and the associated
physician costs. At the current time, the average insurance reimbursement to
a hospital for a particular PET procedure is $1,900 to $3,100.
Insurance companies currently reimburse approximately 70% of PET
procedures. In January 1998, the Health Care Financing Administration (HCFA)
approved Medicare reimbursement for the diagnostic evaluation of solitary
pulmonary nodules and for staging non-small cell lung cancer. In March 1999,
the HCFA announced approval to reimburse PET scans in the diagnosis and
management of certain cancers in Medicare beneficiaries. The March 1999
announcement approves the reimbursement for the detection and localization of
recurrent colorectal cancer with rising carcinoembryonic antigen known as
CEA; staging and characterization of both Hodgkins and non-Hodgkins lymphoma
in place of a gallium scan or lymphangiogram; and identification of
metastases in melanoma recurrence in place of gallium studies.
The implication of the foregoing HCFA approvals is an indication
that a promising technology has at last become commercially feasible. For
nearly 20 years PET imaging has shown tremendous promise in the investigation
of pharmacologic agents and the management of cancer patients, cardiac
patients and certain neurologic indications, but has not been reimbursable.
This has prevented the dissemination of this technology to community
hospitals and restricted its use to major medical centers. It appears that
small to medium hospitals can now avail themselves of a cutting edge
technology which promises to become a standard of health care.
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OUR COMPETITIVE STRATEGY
Our management team has developed and will implement a business
strategy designed to maximize return on invested capital and increase
revenues and cash flow. Our goal is to achieve a leadership position in our
industry as well as pursue significant growth opportunities based on the
following competitive strategies:
BECOME THE LARGEST PROVIDER OF MOBILE PET SERVICES. By the end of
1999, we plan to be operating mobile PET systems in four states - California,
Florida, Texas and New York. As we grow, we believe we will benefit from (i)
significant equipment purchasing savings; (ii) attractive service and
maintenance contracts from our primary equipment suppliers; (iii) strong name
recognition and a reputation for quality service; (iv) substantial financial
flexibility and access to lower-cost capital; and (v) the ability to
efficiently deploy systems in a manner which maximizes fleet utilization
while satisfying our customer requirements.
SUPERIOR CUSTOMER SERVICE AND STRONG CUSTOMER RELATIONSHIPS. We will
position ourselves as a service company rather than solely as a supplier of
equipment and will compete on the basis of value-added services in addition
to price. We will differentiate ourselves from potential competitors by
aggressively marketing our services to referring physicians, nuclear medicine
specialists, radiologists and hospital administrators by offering advance PET
imaging systems, trained technologists, as well as marketing and education
programs to accommodate the growing needs of our customers.
SECURE EXCLUSIVE, LONG-TERM CONTRACTS WITH KEY HOSPITALS IN
ATTRACTIVE MARKETS. We will generate all of our revenues from exclusive,
long-term contracts with hospitals and other health care providers, with the
price for our services determined on a fee for service basis. Our marketing
focus is currently directed at four key market segments in the U.S. They
include California, New York, Texas and Florida. We have initially targeted
40 hospitals in each market which we believe require access to PET services.
These targeted hospitals need to remain competitive in their respective
health care markets or may lack sufficient patient volumes to justify the
purchase of a dedicated PET system. We have pursued securing long-term
contracts with several high profile university hospitals, which offer the
potential of establishing market presence and name recognition for our
company. We have also developed a "Total Solutions" strategy which will
utilize our senior executives and our Medical Advisory Board members to help
our customers during the start-up phases at their facilities. Our "Total
Solutions" approach includes physician education and a focused marketing
effort to build a physician referral base. Our "Total Solutions" approach
also enables us to provide consultation in the areas of billing and third
party contracts.
SUBSTANTIAL OPERATING LEVERAGE. Because of the significant amount of
fixed costs associated with operating a mobile PET system, we can benefit
from operating leverage, with increased utilization rates resulting in
significant increases in operating earnings and margins.
FAVORABLE PAYMENT TERMS. A majority of our billings will be direct
to hospitals. The hospitals, in turn, generally will pay us prior to
collecting from patients and third party payors. Accordingly, our exposure to
uncollectable patient receivables will be minimized. In addition, we estimate
that the average number of days sales outstanding ("DSO") of receivables will
be approximately 60 to 90 days which would be more favorable than the DSO of
many health care companies.
EXPERIENCED MANAGEMENT TEAM. Our senior management team has
considerable industry experience. Our senior and operating managers have
successfully developed and implemented marketing, operating and financial
strategies with previous health care companies.
INCREASE SCAN VOLUMES. We believe that the demand for PET procedures
will continue to grow as new applications are developed and PET continues to
gain increased acceptance resulting in replacing and/or supplementing other
imaging technologies. We have an opportunity to achieve a growing level of
patient procedures by both adding new customers and increasing the number of
patient procedures performed for these customers.
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MAXIMIZE RETURN ON INVESTED CAPITAL. We will actively manage the
utilization of our PET systems to maximize our return on capital (i.e., the
amount of cash flow generated by each system relative to the carrying value
of such system). We estimate that, on average, a system can be utilized for
approximately eight years in a high demand market when properly maintained
and upgraded, after which time the system can either be utilized in a market
with less demand or traded in for a new system.
IDENTIFY ATTRACTIVE STRATEGIC ACQUISITIONS. Although our
management's initial operational focus will be directed to the significant
internal growth opportunities we have identified and targeted, we will
attempt to identify attractive strategic acquisition opportunities that may
arise as well as our ability to (i) access additional and lower cost
financial resources; (ii) realize significant synergies, operating expense
reduction and overhead cost savings; and (iii) expand into new geographic
markets.
CUSTOMER SUPPORT
As part of our professional services, we provide several levels of
support to a hospital or health care provider, including (i) developing
commercial and clinical marketing materials; (ii) sponsoring clinical
lectures; and (iii) offering educational over-read services. In addition,
consulting services for billing, collections, and third-party contracts are
available on request. We believe that these services play a key role in our
ability to sign up routes over competitors, retain accounts and build patient
procedures.
SALES AND MARKETING
Our sales force consists of five regional marketing representatives.
These representatives identify, qualify and contact candidates about our
services. Each sales representative has overall management and revenue
responsibility for a specific region of the country.
Direct marketing to referring physicians plays a primary role in our
ability to increase patient procedures. Our marketing representatives focus
on developing increased scan volumes by introducing our PET services to
referring physicians and keeping such physicians apprised of our PET service
capabilities. In addition, certain of our executive officers spend a portion
of their time marketing our services. We have also assembled a Medical
Advisory Board comprised of leading physicians who will assist in educational
programs directed to the medical community which will enhance our ability to
attract and retain customers.
Our initial target market includes hospitals located in metropolitan
areas that have an on-site oncology department or have affiliated oncology
service relationships. We believe there are approximately 2,000 hospitals in
the U.S. that meet this criteria. Our initial sales and marketing focus has
been directed at the four major markets of California, New York, Texas and
Florida. Our representatives have initially targeted approximately 40
hospitals in each market. We believe that approximately 15 of these hospitals
in each market are at a mature negotiating stage for the potential signing of
contracts.
RISKS RELATED TO OUR BUSINESS
THERE ARE RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS MADE BY US AND ACTUAL
RESULTS MAY DIFFER.
Some of the information in this registration statement contains
forward-looking statements that involve substantial risks and uncertainties.
You can identify these statements by forward-looking words such as "may,"
"will," "expect," "anticipate," "believe," "estimate," and "continue" or
similar words. You should read statements that contain these words carefully
because they:
- discuss our future expectations;
- contain projections of our future results of operations or of our
financial condition; and
- state other "forward-looking" information.
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We believe it is important to communicate our expectations. However,
there may be events in the future that we are not able to accurately predict
or over which we have no control. The risk factors listed in this section, as
well as any cautionary language in this registration statement, provide
examples of risks, uncertainties and events that may cause our actual results
to differ materially from the expectations we describe in our forward-looking
statements. You should be aware that the occurrence of the events described
in these risk factors and elsewhere in this registration statement could have
an adverse effect on our business, results of operations and financial
condition.
WE HAVE INCURRED NET LOSSES SINCE INCEPTION AND EXPECT FUTURE LOSSES.
Since inception, we have incurred significant losses, and as of June
30, 1999, had incurred cumulative net losses of $619,763. As of June 30,
1999, we had an accumulated deficit of approximately $1,446,599. We expect to
continue to incur net losses until sales generate sufficient revenues to fund
our continuing operations. We may fail to achieve significant revenues from
sales or achieve or sustain profitability.
IF WE DO NOT BECOME PROFITABLE WE MAY NOT BE ABLE TO SUSTAIN OUR OPERATIONS.
Our ability to achieve profitability in the future will depend in
part on our ability to continue to successfully market and sell PET services
on a wide scale. In turn, our future sales and profitability depend in part
on our ability to demonstrate to hospitals the potential cost and performance
advantages of the PET system over traditional diagnostic imaging systems. To
date, commercial sales of PET services have been limited. We do not know if
PET services or mobile PET service can be successfully commercialized on a
broad basis.
OUR PRODUCTS MAY NOT BE ACCEPTED BY THE MEDICAL COMMUNITY OR BY PATIENTS.
The acceptance of PET technology may be adversely affected by its
high cost, concerns by patients and physicians relating to its safety and
efficacy, and the substantial market acceptance of other diagnostic tools
such as MRIs and CT scans. We have a limited sales force and will need to
hire additional sales, technologists, and marketing personnel to increase the
general acceptance of PET services. Of all the factors impacting our
profitability, the failure of PET services to achieve broad market acceptance
would have the greatest negative impact on our business, financial condition
and results of operations and our profitability.
WE ARE DEPENDENT ON A SMALL NUMBER OF SUPPLIERS THE LOSS OF WHICH COULD
ADVERSELY AFFECT OUR BUSINESS.
We purchase the PET system from a limited group of qualified
suppliers. Siemens has approximately 75% of the market share for PET systems
worldwide. While we believe that alternative suppliers could be found for the
PET system, we cannot assure you that any supplier could be replaced in a
timely manner. Any interruption in the supply and/or delivery of the PET
system could materially harm our ability to conduct our business, our
financial condition and results of operations.
WE MAY BE UNABLE TO PROVIDE ADEQUATE SUPPORT TO OUR CUSTOMERS.
We have limited experience with widespread deployment of our
products and services to a diverse customer base, and there can be no
assurance that we will have adequate personnel to provide the level of
support that our customers may require during initial product deployment or
on an ongoing basis. An inability to provide sufficient support to our
customers could have an adverse impact on our reputation and relationship
with our customers, prevent us from gaining new customers, and adversely
affect our business, financial condition or results of operations.
OUR FOREIGN SALES ARE SUBJECT TO RISKS.
An increasing portion of our sales may be made in foreign markets.
The primary risks to which we are exposed due to our foreign sales are the
difficulty and expense of maintaining foreign sales distribution channels,
political and economic instability in foreign markets and governmental quotas
and other regulations.
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The regulation of medical devices worldwide also continues to develop,
and it is possible that new laws or regulations could be enacted which would
have an adverse effect on our business. In addition, we may experience
additional difficulties in providing prompt and cost effective service of PET
scans in foreign countries. We do not carry insurance against these risks. The
occurrence of any one or more of these events may individually or in the
aggregate have an adverse effect upon our business, financial condition and
results of operations.
THE PET SYSTEM MAY BECOME TECHNOLOGICALLY OBSOLETE AND OUR BUSINESS COULD BE
HARMED.
The markets in which our PET system competes are subject to rapid
technological change as well as the potential development of alternative
diagnostic imaging techniques or products. These changes could render the PET
system uncompetitive or obsolete. Although we believe that the PET system can be
upgraded to maintain its state-of-the-art character, the development of new
technologies or refinements of existing ones might make PET systems
technologically or economically obsolete, or cause a reduction in the value of,
or reduce the need for, PET systems. Although we are not aware of any
substantial technological change, should such change occur, there can be no
assurance that we will be able to acquire the new or improved systems which may
be required to service our customers.
We are also subject to the risk that customers will cease using our PET
services upon expiration of contracts and purchase or lease their own PET
systems.
OUR BUSINESS IS SUBJECT TO GOVERNMENTAL REGULATION.
We are required to adhere to a wide variety of other regulations
governing the operation of our business. Noncompliance with state, local,
federal or foreign requirements can result in serious penalties that could harm
our business. Although we believe that our operations comply with applicable
regulations, there can be no assurance that subsequent adoption of laws or
interpretations of existing laws will not regulate, restrict or otherwise
adversely affect our business.
Federal regulations commonly known as the "Stark Laws" impose civil
penalties and exclusion from participation in the Medicare program of
reimbursement for referrals for "designated health services" by physicians to
certain entities with which they have a financial relationship (if those
referrals do not fall within an exception to the prohibition). "Designated
health services" include, among other things, PET services. While implementing
regulations have been issued relating to referrals for clinical laboratory
services, no implementing regulations have been issued regarding the other
designated health services, including PET services. Further, under the proposed
implementing regulations interpreting the Stark Laws, it is likely that these
proposed rules will apply to mobile PET scanners, thereby restricting certain
physician referrals for such services by an investor-physician. In addition,
several states (including the State of California) in which we operate or plan
to operate have enacted or are considering legislation that restricts "physician
self-referral" arrangements in a manner similar to the Stark Laws and requires
physicians to disclose any financial interest they may have with a health care
provider to their patients to whom they recommend that provider. Possible
sanctions for violating these provisions include loss of licensure and civil and
criminal sanctions. Such state laws vary from state to state and seldom have
been interpreted by the courts or regulatory agencies. Nonetheless, strict
enforcement of these requirements is likely.
There are also numerous federal and state laws which govern financial
and other arrangements between health care providers. These include the federal
Medicare and Medicaid anti-kickback statutes which prohibit bribes, kickbacks,
rebates and any other direct or indirect remuneration in return for or to induce
the referral of an individual to a person for the furnishing, directing or
arranging of services, items or equipment for which payment may be made in whole
or in part under Medicare, Medicaid or other federal health care programs.
Violation of the anti-kickback statute may result in criminal penalties and
exclusion from the medicare and other federal health care programs. Many states
have enacted similar statutes which are not necessarily limited to items and
services paid for under Medicare or a federally funded health care program. We
believe we can market our services to health professionals and provide such
services without violating or encouraging the violation of these and related
laws dealing with the provision of health care services. However, our failure or
our customers' failure to comply with these laws and/or the Stark Laws could
result in an adverse effect on our business.
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THE LOSS OF ANY OF OUR OTHER KEY PROFESSIONALS COULD ADVERSELY AFFECT OUR
BUSINESS, INCLUDING OUR ABILITY TO DEVELOP AND MARKET OUR PRODUCTS.
We depend to a considerable degree on a limited number of key
personnel, who are listed in the "Management" section of this registration
statement. During our limited operating history, many key responsibilities have
been assigned to a relatively small number of individuals. The loss of the
services of key members of our management could harm our business. Our success
will also depend, among other factors, on the successful recruitment and
retention of qualified technical and other personnel.
IF WE FAIL TO COMPETE SUCCESSFULLY, OUR REVENUES AND OPERATING RESULTS WILL BE
ADVERSELY AFFECTED.
We are, and will continue to be, subject to intense competition in our
targeted markets, principally from businesses providing other traditional
diagnostic imaging techniques, including existing and developing technologies,
and competitive products. Many of our competitors have substantially greater
financial, marketing and manufacturing resources and experience than us.
Furthermore, we expect that other companies will enter the mobile and stationary
PET market, particularly as PET systems gain increasing market acceptance.
Significant competitive factors which will affect future sales in the
marketplace include regulatory approvals, performance, pricing and general
market acceptance.
The diagnostic imaging market is also highly competitive. There are
many companies engaged in this market, some with significantly greater resources
than ours. Our competitors may be able to develop technologies, procedures or
products that are more effective or economical than ours, or that would render
the PET system obsolete or noncompetitive.
We compete with free-standing imaging centers and health care providers
that have their own diagnostic imaging systems and with equipment manufacturers
that sell or lease imaging systems to health care providers for full-time
installation. Some of our customers may be capable of providing the same
services to their patients directly.
A SUCCESSFUL LIABILITY CLAIM ASSERTED AGAINST US DUE TO A DEFECT IN THE PET
SYSTEM IN EXCESS OF OUR INSURANCE COVERAGE WOULD HARM OUR BUSINESS.
The provision of mobile PET shared services involves the inherent risk
of professional and product liability claims against us. We currently maintain
commercial general liability insurance coverage in the amount of $2 million per
incident and medical professional liability insurance in the amount of $2
million per incident, but this insurance is expensive, subject to various
coverage exclusions and may not be obtainable in the future on terms acceptable
to us. We do not know whether claims against us arising from our use of the PET
system will be successfully defended or that our insurance will be sufficient to
cover liabilities arising from these claims. A successful claim against us in
excess of our insurance coverage could materially harm our business.
THERE IS UNCERTAINTY RELATING TO THIRD PARTY REIMBURSEMENT WHICH IS CRITICAL TO
MARKET ACCEPTANCE OF OUR PRODUCTS.
PET services are generally purchased by hospitals which then bill
various third party payors, such as government programs and private insurance
plans, for the procedures conducted using the PET system. Third-party payors
carefully review and are increasingly challenging the prices charged for
medical products and services, and scrutinizing whether to cover new products
and evaluating the level of reimbursement for covered products. While we
believe that the hospitals using the PET system have generally been
reimbursed, payors may deny coverage and reimbursement for the PET system if
they determine that the device was not reasonable and necessary for the
purpose for which it was used, was investigational or not cost-effective. As
a result, we cannot assure you that reimbursement from third party payors for
use of the PET system will be available or if available, that reimbursement
will not be limited. If third party reimbursement of these procedures is not
available, it will be more difficult for us to offer our services on a
profitable basis. Moreover, we are unable to predict what legislation or
regulation, if any, relating to the health care industry or third-party
coverage and reimbursement may be enacted in the future, or what effect such
legislation or regulation may have on us.
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<PAGE>
WE ARE EXPOSED TO RISKS RELATING TO HEALTH CARE REFORM.
Several states and the United States government are investigating a
variety of alternatives to reform the health care delivery system and further
reduce and control health care spending. These reform efforts include proposals
to limit spending on health care items and services, limit coverage for new
technology and limit or control the price health care providers and drug and
device manufacturers may charge for their services and products. If adopted and
implemented, such reforms could have an adverse effect on our business,
financial condition and results of operations.
IF WE EXPERIENCE PROBLEMS WITH YEAR 2000 COMPLIANCE OUR OPERATIONS MAY BE
DISRUPTED.
Many existing computer programs use only two digits to identify the
year in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. As a result, any
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the Year 2000. This could result in system
failure or miscalculations, causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.
If our key suppliers or customers experience Year 2000 compliance
issues, then our business could be harmed. If there is a failure in Year 2000
compliance by us or one of our suppliers or customers, we could suffer major
disruptions in our ability to schedule PET services, obtain PET systems, or
receive payment for our sales. There can be no assurance that our business will
not be negatively affected by Year 2000 problems experienced by our suppliers or
customers.
IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDING OUR BUSINESS OPERATIONS WILL BE
HARMED.
We believe that our available short-term assets and investment income
will be sufficient to meet our operating expenses and capital expenditures
through the current fiscal year. We do not know if additional financing will be
available when needed, or if it is available, if it will be available on
acceptable terms. Insufficient funds may prevent us from implementing our
business strategy or may require us to delay, scale back or eliminate certain
contracts for the provision of PET services.
OUR EMPLOYEES
We currently have 12 full-time employees and 1 part-time employee. Our
employees are non-union and none are represented by an organized labor union. We
believe our relationship with our employees is very good and we have never
experienced an employee related work stoppage. We will need to hire and retain
highly-qualified experienced technical and select management personnel in order
to execute our business plan and maintain technical advantages over competitors
in the marketplace. No assurances can be given that we will be able to locate
and hire such personnel, or that, if hired, we will continue to be able to pay
the higher salaries necessary to retain such skilled employees.
OUR CORPORATE HISTORY
Mobile P.E.T. Systems, Inc. was originally formed as a Nevada
corporation in December 1998 ("Mobile Nevada"). Soon after its formation, Mobile
Nevada's founders (who are now our majority shareholders) decided that their
company's business plan would be best accomplished if Mobile Nevada became a
publicly traded corporation. The founders concluded that the easiest and most
efficient way to achieve their goal was to locate an existing publicly traded
corporation which would acquire Mobile Nevada. That corporation was our
predecessor -- Colony International Corporation ("Colony Delaware").
Colony Delaware's predecessor, American Coin & Stamp Ventures, Inc.
("American"), was formed as a Delaware corporation in August 1985. American
supplied various editorial and advertising services to publishers. In 1986,
American made an initial public offering of its stock. Its shares were
thereafter publicly traded under the trading symbol "ACSV." In January 1997,
American sold its business to its existing management and conducted a reverse
split of its stock on a 1:19.926 basis, leaving 491,311 shares of common stock
outstanding.
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<PAGE>
American then acquired Colony International Incorporated, a
corporation formed in Nevada in April 1995 ("Colony Nevada"). Colony Nevada
was a development stage company which intended to manufacture and distribute
a technologically advanced solid waste management system. American acquired
Colony Nevada by exchanging newly issued shares of American common stock for
the shares of Colony Nevada common stock then outstanding. Once the
acquisition was completed, American officially changed its corporate name to
Colony International Incorporated ("Colony Delaware") and its trading symbol
to "CIIA." After the acquisition, American's former shareholders held
approximately 5% of the shares of Colony Delaware, and Colony Nevada's former
shareholders (and certain consultants who assisted in the acquisition) held
approximately 95% of the shares of Colony Delaware.
In December 1998, Colony Delaware transferred its business to Brian
Hauff, its sole officer and director. Colony Delaware then reverse split its
shares on a 1:50 basis. Colony Delaware then acquired Mobile Nevada by
exchanging 7,000,000 newly issued shares of Colony Delaware common stock for
the 7,000,000 shares of Mobile Nevada common stock then outstanding. Once the
acquisition was completed, Colony Delaware changed its corporate name to
Mobile P.E.T. Systems, Inc. and its trading symbol to "MBPT," and officially
became the corporation we are now. After the acquisition, Colony Delaware's
former shareholders held approximately 37% of our shares, and Mobile Nevada's
former shareholders held 63% of our shares.
We still own all of the shares of Colony Nevada and Mobile Nevada. We
intend to dissolve these two corporations.
ADDITIONAL INFORMATION
We intend to provide an annual report to our security holders, and to
make quarterly reports available for inspection by our security holders. The
annual report will include audited financial statements.
Upon completion of this offering, we will be subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") which will require us to file reports, proxy statements and other
information with the Securities and Exchange Commission. Such reports, proxy
statements and other information may be inspected at public reference facilities
of the Commission at Judiciary Plaza, 450 Fifth Street N.W., Washington D.C.
20549; Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; 7 World Trade Center, New York, New York, 10048; and 5670
Wilshire Boulevard, Los Angeles, California 90036. Copies of such material can
be obtained from the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 at prescribed rates.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND THE RELATED NOTES. THIS DISCUSSION CONTAINS FORWARD-LOOKING
STATEMENTS BASED UPON CURRENT EXPECTATIONS THAT INVOLVE RISKS AND UNCERTAINTIES,
SUCH AS OUR PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. OUR ACTUAL RESULTS
AND THE TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING
THOSE SET FORTH UNDER "RISK FACTORS," "BUSINESS" AND ELSEWHERE IN THIS
PROSPECTUS. SEE "FORWARD-LOOKING STATEMENTS."
OVERVIEW
For the period from our inception through June 30, 1999, we had no
revenues and our operating activities related primarily to establishing the
management and operating infrastructure to provide PET systems and services to
hospitals and other health care providers on a mobile, shared user basis. Since
forming the Company, operating activities have been focused on establishing a
national sales force; creating and executing a sales and marketing strategy
directed
11
<PAGE>
to key potential hospital and health care providers; securing a $10 million
lease financing package; establishing key equipment vendor relationships;
promoting our service brand strategy; and building a management and
operations infrastructure to effectively and efficiently manage future
operating growth opportunities.
We plan to provide PET systems and services to hospitals and other
health care providers on a mobile, shared user basis. Our PET services will
include the provision of high technology imaging systems, technologists to
operate the imaging systems, the management of day-to-day operations and
educational and marketing support. Our services will enable leading as well
as small to mid-size hospitals to gain access to advanced diagnostic imaging
technology and related value-added services without making a substantial
investment in equipment and personnel.
Our future revenues will principally be a function of the number of
mobile units in service, scan volumes and fees per scan. We will generate
substantially all of our revenues under exclusive five-year contracts with
hospitals and health care providers. Our contracts will offer tiered pricing
which may include lower fees per scan on incremental scans, allowing hospitals
and other health care customers to benefit from increased scan volumes and
provide us with the opportunity to benefit from operating leverage that may be
associated with increased scan volumes.
The principal component of our operating costs will include salaries
paid to technologists and drivers, annual system maintenance costs, insurance
and transportation costs. Because a majority of these expenses are fixed,
increased revenues as a result of higher scan volumes may significantly improve
our future profitability potential while lower scan volumes may result in lower
profitability.
Since inception, we have incurred significant losses and, as of June
30, 1999, had incurred cumulative net losses of $619,763. We expect to
experience operating losses and negative cash flow for the foreseeable future.
We anticipate our losses will increase significantly from current levels as we
expect to incur additional costs and expenses related to staffing,
infrastructure development, marketing and sales activities and other capital
expenditures. As a result, we will need to generate significant revenues to
achieve and maintain profitability.
We have a limited operating history on which to base an evaluation of
our business and prospects. You must consider our prospects in light of the
risks, expenses and difficulties frequently encountered by companies in their
early stage of development. To address these risks, we must establish, maintain
and expand our customer base, implement and successfully execute our business
and marketing strategy, provide superior customer service, anticipate and
respond to competitive developments and attract, retain and motivate qualified
personnel. We cannot assure you that we will be successful in addressing these
risks, and our failure to do so could have a negative impact on our business,
operating results and financial condition.
RESULTS OF OPERATIONS
OPERATING EXPENSES
General and Administrative. General and administrative expenses consist
of payroll and related expenses for general corporate functions, including
marketing and sales expenses, finance, facilities expenses, professional
services expenses, insurance and depreciation. We expect general and
administrative expenses to increase as we continue to promote and market our
mobile PET diagnostic services and expand the number of contracted PET mobile
units.
Any comparison of our results of operations to any previous period is
not meaningful as we recommenced our company and started our current mobile PET
operations as of December 1, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through
private placements of common stock and from the initial cash put into our
company as a result of Colony Delaware's acquisition of Mobile Nevada. As of
June 30, 1999, we had approximately $1.784 million in cash and cash
equivalents.
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<PAGE>
Net cash used in operating activities for the six months ended June 30,
1999 was approximately $1.173 million. The net cash used in operating activities
can be substantially attributed to the net loss incurred to date.
Net cash used in investing activities was approximately $261,020 in
the seven month period ended June 30, 1999. The net cash used in investing
activities resulted primarily from the initial deposits to equipment and
coach vendors for the initial orders.
Net cash provided by financing activities was approximately $3.470
million in the seven month period ended June 30, 1999. The net cash provided by
financing resulted primarily from the proceeds from the reverse merger
transaction in January 1999.
We have experienced a substantial increase in our capital expenditures
since our inception, consistent with our growth in operations and staffing, and
we anticipate that this will continue for the foreseeable future. Additionally,
we continue to evaluate possible expenditures and investments in businesses,
geographic service expansion and service offerings. We cannot be certain that
the underlying assumed levels of revenues and expenses will prove to be
accurate. We may seek additional funding through public or private financings or
other arrangements prior to such time. Adequate funds may not be available when
needed or may not be available on terms favorable to us. If funding is
insufficient at any time in the future, we may be unable to develop or enhance
our service offering, take advantage of business opportunities or respond to
competitive pressures, any of which could have a negative impact on our
business, operating results and financial condition.
DESCRIPTION OF PROPERTY
We lease approximately 3,500 square feet of space in an office building
in San Diego, California for our executive and principal administrative office.
Our principal place of business is located at 2240 Shelter Island Drive, Suite
205, San Diego, California 92106.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of our Common Stock as of August 26, 1999 (a) by each
person who is known by us to own beneficially more than 5% of our Common
Stock, (b) by each of our directors, and (c) by all of our officers and
directors as a group. Each person's address is c/o Mobile P.E.T. Systems,
Inc., 2240 Shelter Island Drive, #205 San Diego, California 92106.
<TABLE>
<CAPTION>
Name and Address of Beneficial Amount and Nature of
Owner Beneficial Owner Percentage of Class
- ------------------------------ -------------------- -------------------
<S> <C> <C>
Paul J. Crowe 5,100,000(1) 34.32%
Brent Nelson 1,800,000(1) 12.11%
Thomas G. Brown 450,000(2) 3.03%
Jim Corlett 200,000(1) 1.35%
Fleming & Associates 800,000 5.38%
All Executive Officers and
Directors (4 persons) 7,550,000(3) 50.80%
</TABLE>
- ----------------
(1) Includes 100,000 shares issuable upon the exercise of outstanding stock
options.
(2) Includes 350,000 shares issuable upon the exercise of outstanding stock
options.
(3) Includes 650,000 shares issuable upon the exercise of outstanding stock
options.
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<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth certain information with respect to our
directors and executive officers.
<TABLE>
<CAPTION>
Name Age Position
- -------------------- --- ------------------------------------------------------------
<S> <C> <C>
Paul J. Crowe 49 Chairman of the Board, Chief Executive Officer and President
Thomas G. Brown 54 Chief Financial Officer and Director
Jim Corlett 56 Vice President - Mobile Operations
Brent Nelson 37 Director
</TABLE>
PAUL J. CROWE has served as our Chairman, Chief Executive Officer
and President since December 1998. Mr. Crowe has over 30 years of business
experience in sales, marketing, finance and management of high-tech medical
instrumentation and services for the health care industry. Mr. Crowe has
served in sales, marketing and senior management positions for Ritter/Sybron
Corporation, Philips Medical Systems, Rohe Ultrasound and Diasonics MRI. From
1987 to 1991, Mr. Crowe served as President and Chief Executive Officer of
Paul J. Crowe & Associates, Inc., a company which developed and operated
diagnostic MRI imaging facilities and mobile MRI routes. Mr. Crowe is
currently President and CEO of NeuroTechnologies International, Inc. and
President of Radiosurgical Centers Corporation, businesses involved in the
development and operation of Gamma Knife radiosurgery centers. In July 1995,
Mr. Crowe pled guilty to unlawful taking of property, adjudicated to be a
misdemeanor. In March 1998, he was convicted of domestic violence and illegal
possession of a firearm. These incidents occurred prior to Mr. Crowe's
election as a director and appointment as an executive officer and are not
related to our business.
THOMAS G. BROWN has served as our Chief Financial Officer since April
1999. Mr. Brown is currently managing director of Wyndham Capital Corporation,
an investment banking firm that sources capital for private and public companies
as it relates to the financing of internal and external growth opportunities.
Mr. Brown was a co-founder of Ablum, Brown & Company, a company that assisted
LBO firms in the procurement of senior and subordinated capital as well as
growth capital for private businesses. In addition, Mr. Brown has served as a
securities analyst and in the corporate finance department of several New York
Stock Exchange member firms. Mr. Brown is a Chartered Financial Analyst (CFA).
JIM CORLETT has served as our Vice President - Mobile Operations since
June 1999. He previously had served as our Vice President - Sales of the Company
since December 1998. Mr. Corlett has over 16 years of experience in the
application of mobile services to high technology. Mr. Corlett was one of the
pioneers in the development of mobile MRI Services in the U.S. market for
American Shared Hospital Services in the 1980s. While at American Shared
Hospital Services, Mr. Corlett developed and implemented a strategic marketing
and sales plan which contributed to approximately $40 million of revenues.
BRENT NELSON has served as a Director since December 1998. Mr. Nelson
is the founder and managing director of Northwest Capital Partners L.L.C., a
Bellevue, Washington-based venture capital firm that provides capital to private
and public companies. Mr. Nelson has over 15 years of experience in corporate
and project financing.
All directors hold office until the next annual meeting of stockholders
and until their successors are elected. Officers are elected to serve, subject
to the discretion of the Board of Directors, until their successors are
appointed.
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EXECUTIVE COMPENSATION
Executive compensation is designed to provide incentives for those
senior members of management who bear responsibility for our goals and
achievements. Our compensation philosophy is based on a base salary, with
opportunity for significant bonuses to reward outstanding performance, and a
stock option program.
EXECUTIVE OFFICER COMPENSATION
During the fiscal year ended December 31, 1998, three different
individuals served as Chief Executive Officer for our predecessor, Colony
Delaware: Alexander Michie, Brian Hauff and Brent Nelson. Mr. Nelson received no
compensation for his service as Chief Executive Officer, and we believe that
neither Mr. Michie nor Mr. Hauff received any compensation for their service as
Chief Executive Officer. No other executive officers received compensation in
excess of $100,000 during the fiscal year ended December 31, 1998.
EMPLOYMENT AND CONSULTING AGREEMENTS
On January 1, 1999, we entered into a five-year Employment Agreement
with Paul J. Crowe, our Chief Executive Officer. The Employment Agreement
provides that Mr. Crowe is to receive a salary of $150,000 per year, which
beginning in the calendar year 2000 is to be increased by 10% if the average
market price of our stock in December of the preceding year has increased by at
least 10% above the average market price of our stock in December of the second
preceding year. The Employment Agreement also provides that the Board of
Directors will review and evaluate Mr. Crowe's performance annually and consider
awarding him a discretionary bonus.
Thomas G. Brown is compensated for his service as our Chief Financial
Officer under a two-year non-exclusive Consulting Agreement dated April 1, 1999.
The Consulting Agreement requires that Mr. Brown devote as much time to our
company's affairs as is reasonably necessary, but he is not required to spend
more than two to three days per week on our premises. Under the Consulting
Agreement, Mr. Brown received a one-time grant of 100,000 shares of our Common
Stock and an option to purchase 250,000 additional shares of our Common Stock at
an exercise price equal to the market price for the shares. He also receives a
salary of $7,500 per month.
On January 6, 1999, we entered into an Employment Agreement with Jim
Corlett, our Vice President for Mobile Operations. Upon executing the
Employment Agreement, Mr. Corlett received a signing bonus consisting of
100,000 shares of our Common Stock. The Employment Agreement also provides
that Mr. Corlett is to receive a salary of $85,000 per year. In addition, Mr.
Corlett will receive an option to purchase 100,000 shares of our Common Stock
at the end of each of the first three years during the term of the Employment
Agreement. The exercise prices of these options range between $1.10 and $1.90
per share.
We entered into a Consulting Agreement dated January 29, 1999 with
Michael Baybak and Company, Inc., a California corporation ("Baybak"). The
Consulting Agreement provides that Baybak will provide major media consulting
services for us. The Consulting Agreement is for a period of fifteen (15) months
and provides for compensation in the form of an option to purchase 150,000
shares of our Common Stock at a exercise price of $2.50 per share. The options
expire on January 29, 2004.
We entered into a Consultancy Agreement with Dr. Piers Nicholas Plowman
dated September 9, 1999. The Consultancy Agreement provides that Dr. Plowman
will oversee our operations in London, England. The Consultancy Agreement ends
on December 31, 2000. Under the terms of the Consultancy Agreement, Dr. Plowman
may receive (i) 50,000 options to purchase our shares of Common Stock at an
exercise price of $3.00 per share; (ii) 25,000 options to purchase our shares of
Common Stock at an exercise price of $1.00 per share; (iii) the right to
subscribe for 10,000 shares of Common Stock at the trading price; (iv) the right
to subscribe for up to 130,000 shares of Common Stock at prices ranging from
$1.00 to $3.00 per share; and (v) a management fee equal to 5% of the net profit
of our operations in England.
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<PAGE>
DIRECTOR COMPENSATION
In April 1999, we granted each of our directors an option to purchase
100,000 shares of our Common Stock. In addition, our directors are reimbursed
for expenses actually incurred in connection with attending meetings of the
Board of Directors.
MEDICAL ADVISORY BOARD COMPENSATION
We compensate members of our Medical Advisory Board by granting them
options to acquire our Common Stock under our 1999 Stock Option Plan. Members
of the Medical Advisory Board typically receive 25,000 options to purchase
our Common Stock for their first year of service and 10,000 options to
purchase our Common Stock for each subsequent year of service. The exercise
prices for options issued to the Medical Advisory Board range between $1.00
to $3.50 per share.
1999 STOCK OPTION PLAN
Our 1999 Stock Option Plan (the "1999 Plan") authorizes us to grant to
our directors, employees, consultants and advisors both incentive and
non-qualified stock options to purchase shares of our Common Stock. As of
September 30, 1999, our Board of Directors reserved 3,000,000 shares for
issuance under the 1999 Plan, of which 2,344,000 shares were subject to
outstanding options and 656,000 shares remained available for future grants. Our
Board of Directors or a committee appointed by the Board (the "Plan
Administrator") administers the 1999 Plan. The Plan Administrator selects the
recipients to whom options are granted and determines the number of shares to be
awarded. Options granted under the 1999 Plan are exercisable at a price
determined by the Plan Administrator at the time of the grant, but in no event
will the option price for any incentive stock option be lower than the fair
market value for our Common Stock on the date of the grant. Options become
exercisable at such times and in such installments as the Plan Administrator
provides in the terms of each individual option agreement. In general, the Plan
Administrator is given broad discretion to issue options and to accept a wide
variety of consideration (including shares of Common Stock of the Company and
promissory notes) in payment for the exercise price of options.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Brent Nelson, a director of our company, is the President of
Northwest Capital Partners, LLC. On December 15, 1998, we entered into a
Consulting Agreement under which Northwest agreed to advise us financially
and assist us in arranging financing for our business operations. The
Consulting Agreement has a three-year term, and Northwest has a right of
first refusal to consult with the Company regarding financings for three
years throughout the duration of the Consulting Agreement. The Consulting
Agreement provides for payment of monthly consulting fees to Northwest in the
amount of $5,000 per month. Commencing in April of 1999, Northwest has waived
payment of these monthly fees. The fee provision is subject to extension for
36 months upon the closing of certain financing transactions set forth in the
Consulting Agreement. In addition, the Consulting Agreement provides that
Northwest is to be granted up to 2,200,000 shares of our Common Stock if it
achieves certain milestones related to locating financing for our business,
of which 1,200,000 shares have been granted to Northwest to date. Northwest's
obligations under the Consulting Agreement are subject to certain conditions
to be performed by us, including refraining from modifying our capital
structure without Northwest's prior written consent. In addition, the
Consulting Agreement provides that for three years after the occurrence of
certain milestones set forth in the Consulting Agreement, if we desire to
issue new shares of stock or any of any of our officers or directors who hold
5% or more of our common stock ("Principal Stockholders") desire to transfer
their shares of our stock to a third party, we and the Principal Stockholders
are required to first offer such shares to the Principal Stockholders or us
(as applicable), and then to Northwest. Finally, the Consulting Agreement
provides that Northwest is entitled to nominate a director for our board of
directors for a period of five years.
In December of 1998, Northwest Capital Partners, LLC made a
non-interest bearing loan to us in the amount of $50,000. We repaid the loan
in January of 1999.
Paul J. Crowe, the CEO and a director of our company, is the
Chairman, a director and majority shareholder of the London Radiosurgical
Centre Ltd. Effective July 30, 1999, we loaned $137,319.09 to the London
Radiosurgical Centre pursuant to a Promissory Note dated September 1, 1999.
The Promissory Note provides that the unpaid principal balance on the loan
bears interest at the rate of 8% per year. The loan is due to be repaid on
October 28, 1999.
We have an 8% interest in a subordinated equity participation in
London Radiosurgical Centre Ltd. The subordinated equity participation is in
the amount of $200,000. The maximum investment of $2,500,000 will be returned
to investors from net income for distribution, after which investors will
receive 60% of net income for distribution. According to the terms of the
participation agreement, net income for distribution is equal to net income
less equipment financing payments, operating expenses, reserve capital and
taxes.
Thomas G. Brown, the CFO and a director of our Company, is currently
employed as an investment banker by Wyndham Capital Corporation, which
prepared a Confidential Information Memorandum for our company in March 1999
at a cost to us of $3,500.
In April 1999, we issued 200,000 shares of our common stock to
Northwest Capital Partners, LLC as a result of the exercise of stock options
granted to it by Colony Delaware in December 1998. See "Recent Sales of
Unregistered Securities."
DESCRIPTION OF SECURITIES
We are authorized to issue 20,000,000 shares of Common Stock, $.0001
par value, of which 13,359,658 shares were outstanding at August 26, 1999.
Holders of Common Stock are entitled to dividends, pro rata, when, as and if
declared by the Board of Directors out of funds available therefor. Holders
of Common Stock are entitled to cast one vote for each share held at all
stockholder meetings for all purposes, including the election of directors.
The holders of more than 50% of the Common Stock issued and outstanding and
entitled to vote, present in person or by proxy, constitute a quorum at all
meetings of stockholders. The vote of the holders of a majority of Common
Stock present at such a meeting will decide any question brought before such
meeting, except for certain actions such as amendments to the Company's
Certificate of Incorporation, mergers or dissolutions which require the vote
of the holders of a majority of the outstanding Common Stock. Upon
liquidation or dissolution, the holder of each outstanding share of Common
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<PAGE>
Stock will be entitled to share equally in the assets of the Company legally
available for distribution to such stockholder after payment of all
liabilities. Holders of Common Stock are not granted any preemptive,
subscription, redemption rights or registration rights. All outstanding
shares of Common Stock are fully paid and nonassessable.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings.
PART II
MARKET FOR COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
Our Common Stock is traded on the OTC Bulletin Board under
the symbol "MBPTE." The following table sets forth, for the fiscal period
indicated, the high and low closing bid prices for our Common Stock, and the
Common Stock of our predecessor Colony International Incorporated, as
reported on the OTC Bulletin Board. The quotations for the Common Stock
traded on the Bulletin Board may reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
HIGH LOW
------ -------
<S> <C> <C>
COLONY INTERNATIONAL INCORPORATED(1)
- --------------------------------------------------------------------------------------
FISCAL YEAR 1997
FIRST QUARTER 1.5 0.02
SECOND QUARTER 1.0625 0.02
THIRD QUARTER 0.5 0.02
FOURTH QUARTER(2) N/A N/A
FISCAL YEAR 1998(2) N/A N/A
MOBILE P.E.T. SYSTEMS, INC.
- --------------------------------------------------------------------------------------
FISCAL YEAR 1999
FIRST QUARTER 3.6875 2.0625
SECOND QUARTER 5.4375 2.5
THIRD QUARTER 5.1875 2.5
</TABLE>
(1) Figures shown for Fiscal Year 1997 and Fiscal Year 1998 reflect bid prices
for our predecessor Colony International Incorporated (trading symbol:
"CIIA").
(2) No trading activity occurred in Fiscal Year 1998 or the fourth quarter of
Fiscal Year 1997 for our predecessor Colony International Incorporated.
As of August 26, 1999, our shares were held by 260 shareholders of
record, not including the holders that have their shares held in a depository
trust in "street name". The transfer agent of our common stock is OTC
Corporate Transfer Service Co., P.O. Box 591, Hicksville, NY 11802.
Pursuant to NASD Rule 6530, our common stock is scheduled to be
delisted from the OTC Bulletin Board on October 19, 1999 if on that
date, we have not yet satisfied the requirements to become an issuer required
to make current filings pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. If our common stock is delisted,
18
<PAGE>
it will be traded on the National Quotation Bureau's Pink Sheets until such
time as we meet the eligibility requirements for listing on the OTC Bulletin
Board.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock.
We currently anticipate that we will retain all future earnings for use in
the operation and expansion of its business and does not anticipate paying
any cash dividends in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
As of January 1997, American Coin had outstanding 9,788,700 shares
of common stock and 175,000 options to purchase common stock. That month,
these shares were reverse split on a 1:19.926 basis. This resulted in an
outstanding share total of 491,311, after adjustments for fractional shares.
In February 1997, American Coin issued 9,500,000 shares in
connection with its acquisition of Colony Nevada. 8,200,000 of these shares
were issued to Colony Nevada's former shareholders in reliance on Section
4(2) of the Securities Act of 1933, as amended (the "Act"). 1,300,000 of
these shares were issued in reliance on Rule 504 of Regulation D under the
Act ("Rule 504") to certain entities that acted as consultants for the
acquisition.
In June 1997, Colony Delaware issued a total of 331,224 shares of
common stock to five investors in reliance on Section 4(2) of the Act. The
proceeds from this offering were $131,612.
In June and July of 1997, Colony Delaware issued a total of 5,860
shares to a consultant.
In December 1998, Colony Delaware effected a reverse split of its
10,328,395 outstanding shares on a 1:50 basis. This resulted in an
outstanding share total of 206,759, after adjustments for fractional shares.
In December 1998, Colony Delaware completed a private placement for
3,937,899 shares of common stock to several investors in reliance on Rule 504
of Regulation D under the Act ("Rule 504"). The proceeds from this offering
were $98,447.48.
In January 1999, Colony Delaware issued 7,000,000 shares to the
former shareholders of Mobile Nevada in connection with Colony Delaware's
acquisition of that company, and in reliance on Section 4(2) of the Act.
In January 1999, we issued 900,000 shares of common stock as a
result of the exercise of stock options by two investors, each of which was
granted options in December 1998 by Colony Delaware pursuant to Rule 504. The
exercise price for the options was $1.00 per share, raising $900,000.
In January 1999, we issued 100,000 shares of common stock as a
signing bonus to Jim Corlett, our Vice President for Mobile Operations.
In May 1999, we issued 100,000 shares of common stock as a signing
bonus to Thomas G. Brown, our Chief Financial Officer.
In May 1999, we issued 600,000 shares of common stock as result of
the exercise of stock options by three investors, each of which was granted
options in December 1998 by Colony Delaware pursuant to Section 4(2) of the
Act. The exercise price for the options was $1.50 per share, raising $900,000.
19
<PAGE>
In July 1999, we completed a private placement for 515,000 shares of
common stock and 51,500 warrants to purchase common stock to two investors in
reliance on Section 4(2) of the Act and Rule 506 of Regulation D under the
Act. The proceeds from this offering were $2,060,000.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Delaware General Corporation Law and our Certificate of
Incorporation, our directors will have no personal liability to us or our
stockholders for monetary damages incurred as the result of the breach or
alleged breach by a director of his "duty of care." This provision does not
apply to the directors' (i) acts or omissions that involve intentional
misconduct or a knowing and culpable violation of law, (ii) acts or omissions
that a director believes to be contrary to the best interests of the
corporation or its stockholders or that involve the absence of good faith on
the part of the director, (iii) approval of any transaction from which a
director derives an improper personal benefit, (iv) acts or omissions that
show a reckless disregard for the director's duty to the corporation or its
stockholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's duties, of a
risk of serious injury to the corporation or its stockholders, (v) acts or
omissions that constituted an unexcused pattern of inattention that amounts
to an abdication of the director's duty to the corporation or its
shareholders, or (vi) approval of an unlawful dividend, distribution, stock
repurchase or redemption. This provision would generally absolve directors of
personal liability for negligence in the performance of duties, including
gross negligence.
The effect of this provision in our Certificate of Incorporation is
to eliminate the rights of our company and our stockholders (through
stockholder's derivative suits on behalf of our company) to recover monetary
damages against a director for breach of his fiduciary duty of care as a
director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (i) through (vi)
above. This provision does not limit nor eliminate the rights of our company
or any stockholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care. In
addition, our Certificate of Incorporation provide that if the Delaware
General Corporation Law is amended to authorize the future elimination or
limitation of the liability of a director, then the liability of the
directors will be eliminated or limited to the fullest extent permitted by
the law, as amended. The Delaware General Corporation Law grants corporations
the right to indemnify their directors, officers, employees and agents in
accordance with applicable law.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
our Company pursuant to the foregoing provisions, we have been informed that
in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
We have not had any disagreements with our independent outside
auditors since inception. After Colony Delaware acquired Mobile Nevada, we
changed our independent outside auditor to Peterson & Co.
20
<PAGE>
PART F/S
MOBILE P.E.T. SYSTEMS, INC. AND SUBSIDIARIES
(FORMERLY COLONY INTERNATIONAL INCORPORATED)
FINANCIAL STATEMENTS
JUNE 30, 1999
<TABLE>
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET F-2
CONSOLIDATED STATEMENT OF OPERATIONS F-3
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (DEFICIT) F-4
CONSOLIDATED STATEMENT OF CASH FLOWS F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6
</TABLE>
21
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Board of Directors
Mobile P.E.T. Systems, Inc.
We have audited the accompanying consolidated balance sheet of Mobile P.E.T.
Systems, Inc., formerly Colony International Incorporated and subsidiaries (a
development stage company) as of June 30, 1999, and the related consolidated
statement of operations, shareholders' equity and cash flows for the period
December 1, 1998 (date of recommencement) to June 30, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Mobile
P.E.T. Systems, Inc. and its subsidiaries (a development stage company) as of
June 30, 1999, and the results its operations and its cash flows for the
period December 1, 1998 (date of recommencement) to June 30, 1999, in
conformity with generally accepted accounting principles.
PETERSON & CO.
San Diego, California
October 8, 1999
F-1
<PAGE>
MOBILE P.E.T. SYSTEMS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash $1,784,390
Due from London Radiosurgical Center, Ltd. 29,971
Prepaid expenses 17,990
Deposits 551,292
-------------
Total current assets 2,383,643
PROPERTY AND EQUIPMENT, NET 58,822
OTHER ASSETS
Subordinated equity participation 200,000
Restricted cash 252,372
Deferred taxes 377,265
-------------
Total assets $3,272,102
-------------
-------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $81,868
Income taxes payable 800
Accrued liabilities 88,750
-------------
Total current liabilities 171,418
SHAREHOLDER'S EQUITY
Common stock; $0.0001 par value; 20,000,000 shares
authorized, 12,844,658 shares issued
and outstanding 1,329
Additional paid in capital 4,545,954
Accumulated deficit (1,446,599)
-------------
Total shareholders' equity 3,100,684
-------------
Total liabilities and shareholders' equity $3,272,102
-------------
-------------
</TABLE>
F-2
<PAGE>
MOBILE P.E.T. SYSTEMS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 1, 1998 (DATE OF RECOMMENCEMENT) TO JUNE 30, 1999
<TABLE>
<S> <C>
COST AND EXPENSES
General and administrative expenses $991,865
-------------
Loss from operations (991,865)
OTHER INCOME (EXPENSES)
Interest income 2,701
Other income 1,553
Interest expense (7,017)
-------------
Total other income (expenses) (2,763)
-------------
Loss before provision for income taxes (994,628)
Provision for income taxes (374,865)
-------------
Net loss $(619,763)
-------------
-------------
</TABLE>
F-3
<PAGE>
MOBILE P.E.T. SYSTEMS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD DECEMBER 1, 1998 (DATE OF RECOMMENCEMENT) TO JUNE 30, 1999
<TABLE>
<CAPTION>
Common Stock
$0.001 Par Value
------------------------------
Additional
Paid In Accumulated
Shares Amount Capital Deficit
-------------- --------- ------------ -------------
<S> <C> <C> <C> <C>
Balance -- November 30, 1998 10,328,395 $1,033 $825,803 ($826,836)
Reverse stock split: 50 to 1 (10,121,636) (1,012) 1,012
Common stock issued 3,937,899 394 98,053
-------------- --------- ------------ -------------
Balance immediately prior to acquisition 4,144,658 415 924,868 (826,836)
Common stock issued in acquisition 7,000,000 700 (700)
Common stock issued through the
exercise of stock options 1,500,000 150 1,799,850
Common stock issued as compensation 200,000 20 249,980
Common stock subscribed, net of
offering costs 1,572,000
Net loss incurred during development stage
operations (619,763)
-------------- --------- ------------ -------------
Balance -- June 30, 1999 12,844,658 $1,285 $4,545,998 ($1,446,599)
-------------- --------- ------------ -------------
-------------- --------- ------------ -------------
</TABLE>
F-4
<PAGE>
MOBILE P.E.T. SYSTEMS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD DECEMBER 1, 1998 (DATE OF RECOMMENCEMENT) TO JUNE 30, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($619,763)
Adjustments to reconcile net loss to net cash used in operating activities 2,198
Depreciation
Deferred taxes (377,265)
Common stock issued for compensation 250,000
Increase in note due from London Radiosurgical Center, Ltd. (29,971)
Increase in prepaid expenses (17,990)
Increase in deposits (551,292)
Increase in accounts payable 81,868
Increase in income taxes payable 800
Increase in accrued liabilities 88,750
------------
Net cash used in operating activities (1,172,665)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (61,020)
Subordinated equity participation (200,000)
------------
Net cash used in investing activities (261,020)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan 50,000
Payments on loan (50,000)
Common stock issued 3,470,447
------------
Net cash provided by financing activities 3,470,447
------------
Net increase in cash 2,036,762
Cash -- beginning of period -
------------
Cash -- end of period $ 2,036,762
------------
------------
SUPPLEMENTAL DISCLOSURES
Interest paid $ 7,021
Income taxes paid $ 1,600
</TABLE>
F-5
<PAGE>
NOTE 1 - THE COMPANY
Mobile P.E.T. Systems, Inc. (the "Company"), formerly Colony
International Incorporated and prior to that named American Coin & Stamp
Ventures, Inc., was incorporated in the State of Delaware on November 2,
1988. The Company owns two subsidiaries: Colony International Incorporated, a
wholly owned subsidiary incorporated in the State of Nevada on April 25,
1995, and Mobile P.E.T. Systems, Inc., a wholly owned subsidiary incorporated
in the State of Nevada on December 1, 1998. The Company and subsidiaries were
organized to provide Positron Emission Tomography (PET) systems and services
to hospitals and other health care providers on a mobile, shared user basis.
The Company's PET services will include the provision of high technology
imaging systems, technologists to operate the imaging systems, the management
of day-to-day operations and educational and marketing support.
The Company is in the development stage and its efforts through June
30, 1999 have been principally devoted to organizational activities, raising
capital, and marketing efforts. Management anticipates incurring substantial
additional losses as it pursues its development efforts.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash and cash equivalents.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property and equipment are recorded at cost less depreciation and
amortization. Depreciation and amortization are accounted for on the
straight-line method based on estimated useful lives. The amortization of
leasehold improvements is based on the shorter of the lease term or the life
of the improvement. Betterments and large renewals, which extend the life of
an asset, are capitalized; whereas, maintenance and repairs and small
renewals are expensed as incurred.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This statement
requires an asset and liability approach to account for income taxes. The
Company provides deferred income taxes for temporary differences that will
result in taxable or deductible amounts in future years based on the
reporting of certain costs in different periods for financial and income tax
purposes.
F-6
<PAGE>
NOTE 3 - ACQUISITIONS
On December 22, 1998 the Company issued 7,000,000 shares of its
common stock in exchange for all 7,000,000 shares of outstanding common stock
of Mobile P.E.T. Systems, Inc. The acquisition has been accounted for as a
pooling of interests. The Company's consolidated financial statements have
been restated for all periods prior to the business combination and include
the combined results of Mobile P.E.T. Systems, Inc., formerly Colony
International Incorporated and American Coin & Stamp Ventures, Inc., Colony
International Incorporated, and Mobile P.E.T. Systems, Inc. Mobile P.E.T
Systems, Inc. reported no sales and a net loss of $15,200 prior to the
acquisition. The other individual companies reported no net sales and no net
income or loss prior to the acquisition.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1999 consist of the following:
<TABLE>
<S> <C>
Computer equipment $33,820
Office furniture and equipment 20,778
Other equipment 6,422
----------
61,020
Less accumulated depreciation (2,198)
----------
$58,822
----------
----------
</TABLE>
Depreciation expense for the period December 1, 1998 (date of
recommencement) to June 30, 1999 was $2,198.
NOTE 5 - CAPITALIZATION
COMMON STOCK
The Company has authorized the issuance of twenty million
(20,000,000) shares of common stock, having one hundredth of a cent ($0.0001)
par value per share. On December 1, 1998 (date of recommencement) the Company
had 10,328,395 shares of common stock issued and outstanding. Prior to
December 22, 1998 the Company authorized a 50 to 1 reverse stock split,
leaving 206,759 shares (after adjustment for fractional shares). Immediately
after the reverse stock split the Company issued shares of common stock in
cash transactions: 3,937,899 shares for cash in the amount of $98,447. On
December 22, 1998 the Company acquired Mobile P.E.T. Systems, Inc. in a
non-cash, stock for stock transaction as follows: 7,000,000 shares of the
Company in exchange for 7,000,000 shares of Mobile P.E.T. Systems, Inc.
common stock. The Company subsequently changed its name to Mobile P.E.T.
Systems, Inc. On February 5, 1999 and May 12, 1999 the Company issued common
stock in non-cash transactions as follows: 200,000 shares in connection with
employment valued at $250,000. During 1999 the Company issued additional
shares of common stock in cash transactions: 1,500,000 shares from the
exercise of stock options for cash in the amount of $1,800,000. At June 30,
1999 there are 440,000 shares of common stock subscribed for cash in the
amount of $1,572,000,
STOCK OPTIONS
In December 1999, the Board of Directors authorized the issuance of
stock options to purchase 1,500,000 shares of common stock at a price from
$1.00 to $1.50 per share. The options were exercised prior to June 30, 1999.
The Board of Directors adopted and the shareholders approved the
adoption of the Company's 1999 Stock Option Plan pursuant to which incentive
stock options or nonstatutory stock options to purchase up to 3,000,000
shares of common stock may be granted to employees, directors and
consultants. Stock options expire on June 30, 2002, with
F-7
<PAGE>
some options extending to 2004 and vesting over service periods that range
from zero to four years. As of June 30, 1999, the Company has granted options
to purchase 1,735,000 shares of common stock as follows:
<TABLE>
<CAPTION>
Exercise Price Number of Shares
-------------- ----------------
<S> <C> <C>
Outstanding, November 30, 1998 --
Granted $1.00 - $4.50 1,735,000
Fair Value
Exercised --
Canceled --
-----------
Outstanding, June 30, 1999 1,735,000
-----------
-----------
</TABLE>
WARRANTS
At June 30, 1999 a warrant was outstanding for 180,000 shares of
common stock at an exercise price of $2.50 per share or the average of the
last reported sale price of the common stock for the five trading days
preceding the issue date. This warrant expires in March 2004.
NOTE 6 - RELATED PARTY TRANSACTIONS
SUBORDINATED EQUITY PARTICIPATION
The Company carries an 8% interest in a subordinated equity
participation in London Radiosurgical Centre Ltd (LRC), a foreign corporation
with a common shareholder, officer and director. The subordinated equity
participation is recorded at cost in the amount of $200,000. The maximum
investment ($2,500,000) will be returned to investors from net income for
distribution, after which investors will receive 60% of net income for
distribution. According to the terms of the participation agreement, net
income for distribution is equal to net income less equipment financing
payments, operating expenses, reserve capital and taxes.
DUE FROM LONDON RADIOSURGICAL CENTRE LTD
During the period December 1, 1998 (date of recommencement) to June
30, 1999, the Company advanced $29,971 to LRC for working capital during
LRC's start up period. At June 30, 1999 the balance due from London
Radiosurgical Centre Ltd was $29,971.
CONSULTING AGREEMENTS
The Company has several consulting agreements for management
services. In addition to cash payments, several agreements provide for the
Company to issue common stock and options to purchase common stock in
non-cash transactions for current and future consulting services. During the
period December 1, 1998 (date of recommencement) to June 30, 1999 the Company
made cash payments of $66,000 for such services.
LOAN
In December 1998 the Company received a non-interest bearing bridge
loan from a shareholder in the amount of $50,000. The balance was repaid in
January 1999.
F-8
<PAGE>
NOTE 7 - EMPLOYMENT AGREEMENTS
The Company has employment and compensation agreements with key
officers and employees of the Company. The agreements provide options to
purchase shares of the Company's common stock.
One of the agreements, beginning January 1, 1999 and ending December
31, 2004 provides an annual salary, with adjustments contingent on the
Company's stock performance, payable over the five year term of the
agreement, which in the event of termination may result in a lump sum payment
of the net present value of the remaining salary then due under the
agreement. In addition, beginning in calendar year 2000 the agreement
provides options for the purchase of common stock, contingent on the
Company's stock performance.
NOTE 8 - INCOME TAXES
At June 30, 1999 the Company has a net operating loss carryforward
for tax purposes of approximately $602,000 which expires through the year
2019. The Internal Revenue Code contains provisions which may limit the loss
carryforward available if significant changes in shareholder ownership of the
Company occur.
The components of the benefit for provision (benefit) for income
taxes for the period December 1, 1998 (date of recommencement) to June 30,
1999 are as follows:
<TABLE>
<S> <C>
Current
Federal $ --
State 2,400
-----------
Deferred
Federal (318,860)
State (58,405)
-----------
(377,265)
-----------
$(374,865)
-----------
-----------
</TABLE>
The components of the net deferred income tax asset were as follows:
<TABLE>
<S> <C>
Deferred tax asset
Start-up costs $155,949
Net operating loss carryforward 221,316
-----------
Net deferred income tax asset $377,265
-----------
-----------
</TABLE>
NOTE 9 - COMMITMENTS
The Company leases PET equipment under a noncancellable operating
lease agreement that expires February 15, 2004. Under the terms of the lease,
the Company must maintain a restricted cash account equal to three months
rental payments. At June 30, 1999 the balance of restricted cash on deposit
is $252,372. Rental payments begin upon delivery of the equipment. The lease
is secured by all equipment, general intangibles, inventory, right to payment
of money, and fixtures of the Company.
The Company leases office space under a noncancellable operating
lease agreement that expires December 31, 2000.
F-9
<PAGE>
NOTE 9 - COMMITMENTS (CONTINUED)
The following is a schedule of future minimum rental payments
required under all leases:
<TABLE>
<S> <C>
1999 $84,376
2000 433,948
2001 433,435
2002 433,435
2003 433,435
Thereafter 288,957
------------
$2,107,586
------------
------------
</TABLE>
Rent expense under operating leases amounted to $17,686 for the
period December 1, 1998 (date of recommencement) to June 30, 1999.
In December 1998, the Company made a purchase commitment for five
mobile PET scanners at a cost of between $1,515,000 to $1,615,000 each for a
total amount of $7,725,000. The Company expects to take delivery of the units
in 1999 and 2000.
NOTE 10 - MOBILE SERVICES AGREEMENTS
In April 1999 the Company entered into a 5 year Mobile Services
Agreement with a health care provider. In May 1999 the Company entered into
two 5 year Mobile Services Agreements with health care providers.
NOTE 11 - CONCENTRATION OF CREDIT RISK
The Company maintains cash with various major financial institutions
in excess of the F.D.I.C. limits.
NOTE 12 - SUBSEQUENT EVENTS
In July 1999 the Company issued 515,000 shares of common stock,
completing a private placement. The Company received cash in the amount of
$1,572,000, net of offering costs prior to July 1, 1999 and an additional
$300,000 in July 1998 for a total of $1,872,000. In connection with this
placement, the Company issued 51,500 warrants to purchase shares of common
stock at an exercise price of $4.00 per share. The warrants expire on June
30, 2002.
During the period July 1, 1999 to September 9, 1999, the Company
issued 609,000 options to purchase shares of common stock for the average
price per share in 1999 or between $1.00 to $4.00. Stock options expire on
June 30, 2002, with some options extending to 2005 and vesting over service
periods that range from zero to four years.
F-10
<PAGE>
PART III
INDEX TO EXHIBITS
<TABLE>
<S> <C>
2.1 Acquisition Agreement between Colony International, Inc. and Mobile
P.E.T. Systems, Inc.
2.2 Acquisition Agreement between American Coin and Stamp Ventures, Inc.
and Colony International, Inc.
3.1 Certificate of Incorporation, as amended
3.2 Amended and Restated Bylaws
10.1 Equipment Lease with Finova Capital Corporation
10.2 Security Agreement with Finova Capital Corporation
10.3 Common Stock Purchase Warrant with Finova Capital Corporation
10.4 Continuing Personal Guaranty between Paul J. Crowe and Finova Capital
Corporation
10.5 Collateral Assignment of Agreements by Mobile P.E.T. Systems, Inc.
10.6 Subordination Agreement with Finova Capital Corporation
10.7 Office Space Lease Agreement
10.8 Form of Positron Emission Tomography Mobile Services Agreement
10.9 Promissory Note with The London Radiosurgical Centre, Ltd.
10.10 Letter Agreement with The London Radiosurgical Centre, Ltd.
10.11 Employment Agreement with Mr. Crowe
10.12 Employment Agreement with Mr. Corlett, as amended
10.13 Consulting Agreement with Mr. Brown
10.14 Consulting Agreement with Northwest Capital Partners, LLC
10.15 Consulting Agreement with Michael Baybak and Company, Inc.
10.16 Consultancy Agreement with Dr. Piers Nicholas Plowman
10.17 1999 Stock Option Plan
21. Subsidiaries of the Registrant
27. Financial Data Schedule
</TABLE>
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
MOBILE P.E.T. SYSTEMS, INC.
Date: October 19, 1999 By: /s/ PAUL J. CROWE
--------------------------------------
Paul J. Crowe, President
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ PAUL J. CROWE
- ----------------------------------- Chief Executive Officer and October 19, 1999
Paul J. Crowe Director
/s/ THOMAS G. BROWN
- ----------------------------------- Chief Financial Officer and October 19, 1999
Thomas G. Brown Director
/s/ BRENT NELSON
- -----------------------------------
Brent Nelson Director October 19, 1999
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<S> <C>
2.1 Acquisition Agreement between Colony International, Inc. and Mobile
P.E.T. Systems, Inc.
2.2 Acquisition Agreement between American Coin and Stamp Ventures, Inc.
and Colony International, Inc.
3.1 Certificate of Incorporation, as amended
3.2 Amended and Restated Bylaws
10.1 Equipment Lease with Finova Capital Corporation
10.2 Security Agreement with Finova Capital Corporation
10.3 Common Stock Purchase Warrant with Finova Capital Corporation
10.4 Continuing Personal Guaranty between Paul J. Crowe and Finova Capital
Corporation
10.5 Collateral Assignment of Agreements by Mobile P.E.T. Systems, Inc.
10.6 Subordination Agreement with Finova Capital Corporation
10.7 Office Space Lease Agreement
10.8 Form of Positron Emission Tomography Mobile Services Agreement
10.9 Promissory Note with The London Radiosurgical Centre, Ltd.
10.10 Letter Agreement with The London Radiosurgical Centre, Ltd.
10.11 Employment Agreement with Mr. Crowe
10.12 Employment Agreement with Mr. Corlett, as amended
10.13 Consulting Agreement with Mr. Brown
10.14 Consulting Agreement with Northwest Capital Partners, LLC
10.15 Consulting Agreement with Michael Baybak and Company, Inc.
10.16 Consultancy Agreement with Dr. Piers Nicholas Plowman
10.17 1999 Stock Option Plan
21. Subsidiaries of the Registrant
27. Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 2.1
ACQUISITION AGREEMENT
AGREEMENT dated December 22nd, 1998 (the "Agreement"), by, between and
among COLONY INTERNATIONAL, INC., a company incorporated under the laws of
the State of Delaware (hereinafter referred to as "COLONY"); the person
listed on Exhibit "A" attached hereto and made a part hereof, being the sole
officer of COLONY (hereinafter referred to as "MANAGEMENT"); and MOBILE PET
SYSTEMS, INC., a company incorporated under the laws of the state of Nevada
(hereinafter referred to as "MPET"); and the persons listed on Exhibit "A-1"
attached hereto and made a part hereof, (hereinafter referred to as the
"SELLERS").
WHEREAS, the SELLERS own a total of 7,000,000 shares of common stock,
$0.001 par value, of MPET, said shares being 100% of the issued and
outstanding common stock of MPET; and
WHEREAS, the SELLERS desire to sell and COLONY desires to purchase one
hundred (100%) percent of such shares;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereby agree as
follows:
1. PURCHASE AND SALE. The SELLERS hereby agree to sell, transfer, assign
and convey to COLONY and COLONY hereby agrees to purchase and acquire from
the SELLERS, a total of 7,000,000 shares of Common Stock of MPET, which
equals one hundred percent (100%) percent of all of MPET's currently issued
and outstanding common stock (the "MPET Common Shares"), in a tax-free
stock-for-stock acquisition.
2. PURCHASE PRICE. The aggregate purchase price to be paid by COLONY for
the MPET Common Shares shall be 7,000,000 shares of COLONY voting Class A
Common Stock (the "COLONY Common Shares"). The COLONY Common Shares will be
issued to the individual SELLERS in accordance with Exhibit "A-1" attached
hereto.
3. WARRANTIES, REPRESENTATIONS AND COVENANTS OF MPET AND MPET PRINCIPALS.
In order to induce COLONY to enter into this Agreement and to complete the
transaction contemplated hereby, MPET and its principal executive officers
(hereinafter referred to as the "MPET PRINCIPALS"), jointly and severally
warrant and represent to COLONY that:
(a) ORGANIZATION AND STANDING. MPET is a corporation duly organized,
validly existing and in good standing under the laws of the state of Nevada,
is qualified to do business as a foreign corporation in every other state or
jurisdiction in which it operates to the extent required by the laws of such
states and jurisdictions, and has full power and authority to carry on its
business as now conducted and to own and operate its assets, properties and
business. Attached hereto as Exhibit "B" are true and correct copies of MPET's
Certificate of Incorporation, amendments thereto and all current By-laws of
MPET. No changes thereto will be made in any of the Exhibit "B" documents
before the Closing. MPET has no subsidiaries or any investments or ownership
interests in any corporation, partnership, joint venture or other business
enterprise which is material to its business.
<PAGE>
(b) CAPITALIZATION. As of the Closing Date, MPET's entire authorized
equity capital consists of 13,000,000 shares of Common Stock, $0.001 par
value, of which 7,000,000 shares of Common Stock will be outstanding as of
the Closing. As of the Closing Date, there will be no other voting or equity
securities authorized or issued, nor any authorized or issued securities
convertible into voting stock, and no outstanding subscriptions, warrants,
calls, options, rights, commitments or agreements by which MPET or the
SELLERS are bound, calling for the issuance of any additional shares of
common stock or any other voting or equity security, except as set forth in
Exhibit "MPET-S", attached hereto. The 7,000,000 issued and outstanding MPET
Common Shares to be transferred by SELLERS constitutes one hundred (100.0%)
percent of the currently issued and outstanding shares of Common Stock of
MPET, which includes, inter alia, that same percentage of MPET's voting
power, right to receive dividends, when, as and if declared and paid, and the
right to receive the proceeds of liquidation attributable to common stock, if
any. After becoming management of COLONY, MPET'S management will not further
reverse split COLONY's common stock for at least 12 months.
(c) OWNERSHIP OF MPET SHARES. Each SELLER warrants and represents,
severally, that as of the date hereof, such SELLER is the sole owner of the
MPET Common shares listed by his or her name on Exhibit "A-1", free and clear
of all liens, encumbrances, and restrictions whatsoever, except that the MPET
Common Shares so listed have not been registered under the Securities Act of
1933, as amended (the "'33 Act"), or any applicable State Securities laws. By
SELLERS' transfer of the MPET Common Shares to COLONY pursuant to this
Agreement, COLONY will thereby acquire 100% of the outstanding capital stock
of MPET, free and clear of all liens, encumbrances and restrictions of any
nature whatsoever, except by reason of the fact that the MPET Common Shares
will not have been registered under the `33 Act, or any applicable State
securities laws.
(d) TAXES. MPET has filed all federal, state and local income or other
tax returns and reports that it is required to file with all governmental
agencies, wherever situate, and has paid or accrued for payment all taxes as
shown on such returns, such that a failure to file, pay or accrue will not
have a material adverse effect on MPET. MPET's income tax returns have never
been audited by any authority empowered to do so.
(e) PENDING ACTIONS. There are no material legal actions, lawsuits,
proceedings or investigations, either administrative or judicial, pending or
threatened, against or affecting MPET, or against the MPET PRINCIPALS that
arise out of their operation of MPET, except as described in Exhibit "C"
attached hereto. MPET is not knowingly in material violation of any law,
material ordinance or regulation of any kind whatever, including, but not
limited to laws, rules and regulations governing the sale of its services,
the `33 Act, the Securities Exchange Act of 1934, as amended (the "`34 Act"),
the Rules and Regulations of the U.S. Securities and Exchange Commission
("SEC"), or the Securities Laws and Regulations of any state or nation.
(f) GOVERNMENTAL REGULATION. MPET holds the licenses and registrations
set forth on Exhibit "D" hereto from the jurisdictions set forth therein,
which licenses and registrations are all of the licenses and registrations
necessary to permit MPET to conduct its current business. All of such
2
<PAGE>
licenses and registrations are in full force and effect, and there are no
proceedings, hearings or other actions pending that may affect the validity
or continuation of any of them. No approval of any other trade or
professional association or agency of government other than as set forth on
Exhibit "D" is required for any of the transactions effected by this
Agreement, and the completion of the transactions contemplated by this
Agreement will not, in and of themselves, affect or jeopardize the validity
or continuation of any of them.
(g) OWNERSHIP OF ASSETS. Except as set forth in Exhibit "E" attached
hereto, MPET has good, marketable title, without any liens or encumbrances of
any nature whatever, to all of the following, if any; its assets, properties
and rights of every type and description, including, without limitation, all
cash on hand and in banks, certificates of deposit, stocks, bonds, and other
securities, good will, customer lists, its corporate name and all variants
thereof, trademarks and trade names, copyrights and interests thereunder,
licenses and registrations, pending licenses and permits and applications
therefor, investments, processes, know-how, trade secrets, real estate and
interests therein and improvements thereto, machinery, equipment, vehicles,
notes and accounts receivable, fixtures, rights under agreements and leases,
franchises, all rights and claims under insurance policies and other
contracts of whatever nature, rights in funds of whatever nature, books and
records and all other property and rights in funds of whatever nature, books
and records and all other property and rights of every kind and nature owned
or held by MPET as of this date, and will continue to hold such title on and
after the completion of the transactions contemplated by this Agreement; nor,
except in the ordinary course of its business, has MPET disposed of any such
asset since the date of the most recent balance sheet described in Section 3(o)
of this Agreement.
(h) NO INTEREST IN SUPPLIERS, CUSTOMERS, LANDLORDS OR COMPETITORS.
Neither the MPET PRINCIPALS nor any member of their families have any
material interest of any nature whatever in any supplier, customer, landlord
or competitor of MPET.
(i) NO DEBT OWED BY MPET TO MPET PRINCIPALS. Except as set forth in
Exhibit "F" attached hereto, MPET does not owe any money, securities, or
property to either the MPET PRINCIPALS or any member of their families or to
any company controlled by such a person, directly or indirectly. To the
extent that MPET may have any undisclosed liability to pay any sum or
property to any such person or entity or any member of their families such
liability is hereby forever irrevocably released and discharged.
(j) CORPORATE RECORDS. All of MPET's books and records, including,
without limitation, its books of account, corporate records, minute book,
stock certificate books and other records are up-to-date, complete and
reflect accurately and fairly the conduct of its business in all material
respects since its date of incorporation.
(k) NO MISLEADING STATEMENTS OR OMISSIONS. Neither this Agreement nor
any financial statement, exhibit, schedule or document attached hereto or
presented to COLONY in connection herewith, contains any materially
misleading statement, or omits any fact or statement necessary to make the
other statements or facts therein set forth not materially misleading.
(l) VALIDITY OF THIS AGREEMENT. All corporate and other proceedings
required to be
3
<PAGE>
taken by the SELLERS and by MPET in order to enter into and to carry out this
Agreement have been duly and properly taken. This Agreement has been duly
executed by the SELLERS and by MPET, and constitutes the valid and binding
obligation of each of them, enforceable in accordance with its terms except
to the extent limited by applicable bankruptcy, reorganization, insolvency,
moratorium or other laws relating to or effecting generally the enforcement
of creditors rights. The execution and delivery of this Agreement and the
carrying out of its purposes will not result in the breach of any of the terms
or conditions of, or constitute a default under or violate, MPET's Certificate
of Incorporation or By-Laws, or any material agreement, lease, mortgage,
bond, indenture, license or other material document or undertaking, oral or
written, to which MPET or the SELLERS is a party or is bound or may be
affected, nor will such execution, delivery and carrying out violate any law,
rule or regulation or any order, writ, injunction or decree, of any court,
regulatory agency or other governmental body; and the business now conducted
by MPET can continue to be so conducted after completion of the transaction
contemplated hereby, with MPET as a wholly-owned subsidiary of COLONY.
(m) CONSENTS AND APPROVALS; COMPLIANCE WITH LAWS. Neither MPET nor the
SELLERS are required to make any filing with, or obtain the consent or
approval of, any person or entity as a condition to the consummation of the
transactions contemplated by this Agreement. The business of MPET has been
operated in material compliance with all laws, rules, and regulations
applicable to its business, including, without limitation, those related to
securities matters, trade matters, environmental matters, public health and
safety, and labor and employment.
(n) ACCESS TO BOOKS AND RECORDS. COLONY will have full and free access
to MPET's books during the course of this transaction prior to Closing, during
regular business hours, on reasonable notice.
(o) MPET FINANCIAL STATEMENTS. Before the Closing, MPET's unaudited
financial statements as of and for the period from inception to November 30,
1998. MPET's audited financial statements as at the Closing date will be
provided to COLONY within 90 days after Closing; the MPET financial
statements will accurately describe MPET's financial position as of the dates
thereof. The MPET financial statements will have been prepared in accordance
with generally accepted accounting principles in the United States ("GAAP") (or
as permitted by regulation S-X, S-B, and/or the rules promulgated under the
'33 Act and the '34 Act) and for the period from inception to November 30,
1998 audited by independent certified public accountants with SEC experience.
(p) MPET's CORPORATE SUMMARY. MPET's Business Plan, dated October, 1998
(attached hereto as Exhibit "L") accurately describes MPET's business,
assets, proposed operations and management as of the date thereof; since the
date of the Corporate Plan, there has been no material adverse change in the
Business Plan and no material adverse change in MPET; provided that no
warranties or representations are made as to any financial projections.
4. WARRANTIES, REPRESENTATIONS AND COVENANTS OF COLONY AND MANAGEMENT
OF COLONY ("MANAGEMENT"). In order to induce the SELLERS and MPET to enter
into this Agreement and to complete the transaction contemplated hereby,
COLONY and MANAGEMENT jointly and severally warrant, represent and covenant
to MPET and SELLERS that:
4
<PAGE>
(a) ORGANIZATION AND STANDING. COLONY is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, is qualified to do business as a foreign corporation in every other
state and jurisdiction in which it operates to the extent required by the
laws of such states or jurisdictions, and has full power and authority to
carry on its business as now conducted and to own and operate its assets,
properties and business. COLONY has no subsidiaries or any other investments
or ownership interests in any corporation, partnership, joint venture or
other business enterprise.
(b) CAPITALIZATION. COLONY's entire authorized equity capital consists of
100,000,000 shares of Class A Common Stock, $0.0001 par value, of which
4,144,474 shares will be outstanding immediately before the closing; and
10,000,000 shares of Preferred Stock, none of which are issued and
outstanding now or will be at closing. At or as of the Closing, the existing
COLONY Board of Directors will authorize the issuance of 7,000,000 restricted
Class A Common shares to MPET's shareholders. As of the Closing, giving
effect to the 7,000,000 Class A Common Shares issued to SELLERS hereunder,
COLONY will have authorized 100,000,000 shares of Class A Common Stock,
$0.0001 par value and 10,000,000 shares of Preferred Stock, and will have
issued and outstanding 11,144,474 shares of voting Class A Common Stock,
$0.0001 par value and no shares of Preferred Stock issued. Upon issuance, all
of the COLONY Class A Common Stock will be validly issued, fully paid and
non-assessable. The relative rights and preferences of COLONY's equity
securities are set forth on the Certificate of Incorporation, as amended and
COLONY's By-laws (Exhibit "H" hereto). There are no other voting or equity
securities authorized or issued, nor any authorized or issued securities
convertible into voting stock, and no outstanding subscriptions, warrants,
calls, options, rights, commitments or agreements by which COLONY is bound,
calling for the issuance of any additional shares of common stock or any
other voting or equity security. The By-laws of COLONY provide that a simple
majority of the shares voting at a stockholders' meeting at which a quorum is
present may elect all of the directors of COLONY. Cumulative voting is not
provided for by the By-Laws or Certificate of Incorporation of COLONY.
Accordingly, as of the Closing the 7,000,000 Class A Common Shares being
issued to and acquired by the SELLERS will constitute 62.81% of the
11,144,474 shares of COLONY Class A Common Stock which will then be issued
and outstanding which includes, inter alia, that same percentage of COLONY's
voting power (subject to the provisions regarding cumulative rights), right
to receive dividends, when, as and if declared and paid, and the right to
receive the proceeds of liquidation attributable to common stock, if any.
(c) OWNERSHIP OF SHARES. By COLONY's issuance of the COLONY Common Shares
to the SELLERS pursuant to this Agreement, the SELLERS will thereby acquire
good, absolute marketable title thereto, free and clear of all liens,
encumbrances and restrictions of any nature whatsoever, except by reason of
the fact that such COLONY shares will not have been registered under the '33
Act, or any applicable state securities laws.
(d) SIGNIFICANT AGREEMENTS. COLONY is not and will not at Closing be
bound by any of the following:
(i) Employment, advisory or consulting contract (except as
described in
5
<PAGE>
Section 12 herein);
(ii) Plan providing for employee benefits of any nature;
(iii) Lease with respect to any property or equipment;
(iv) Contract or commitment for any current expenditure;
(v) Contract or commitment pursuant to which it has assumed,
guaranteed, endorsed, or otherwise become liable for any
obligation of any other person, firm or organization;
(vi) Contract, agreement, understanding, commitment or
arrangement, other than in the normal course of business,
not set forth in this Agreement or an Exhibit hereto;
(vii) Agreement with any person relating to the dividend, purchase
or sale of securities, that has not been settled by the
delivery or payment of securities when due, and which remains
unsettled upon the date of this Agreement.
(e) TAXES. COLONY has filed all federal, state and local income or other
tax returns and reports that it is required to file with all governmental
agencies, wherever situate, and has paid all taxes as shown on such returns.
All of such returns are true and complete. COLONY's income tax returns have
never been audited by any authority empowered to do so.
(f) ABSENCE OF LIABILITIES. At and as of the Closing Date COLONY will
have no liabilities of any kind or nature, fixed or contingent, except for
the costs, including legal and accounting fees and other expenses, in
connection with this transaction, for which COLONY agrees to be responsible
and to pay in full at or before the Closing.
(g) NO PENDING ACTIONS. To the best of management's knowledge, there are
no legal actions, lawsuits, proceedings or investigations, either
administrative or judicial, pending or threatened, against or affecting
COLONY, or against any of the COLONY MANAGEMENT and arising out of their
operation of COLONY. COLONY has been in compliance with, and has not received
notice of violation of any law, ordinance or regulation of any kind whatever,
including, but not limited to, the '33 Act, the '34 Act, the Rules and
Regulations of the SEC, or the Securities Laws and Regulations of any state.
COLONY is not an investment company as defined in, or otherwise subject to
regulation under, the Investment Company Act of 1940. COLONY is not required
to file reports pursuant to either Section 13 or Section 15(d) of the '34 Act.
(h) CORPORATE RECORDS. All of COLONY's books and records,
including, without limitation, its books of account, corporate records,
minute book, stock certificate books and other records are up-to-date,
complete and reflect accurately and fairly the conduct of its business in all
respects since its date of incorporation; all of said books and records will
be made available for
6
<PAGE>
inspection by MPET's authorized representatives prior to the Closing as
provided by Section 4(l) herein, and will be delivered to COLONY's new
management at the Closing.
(i) NO MISLEADING STATEMENTS OR OMISSIONS. Neither this Agreement nor
any financial statement, exhibit, schedule or document attached hereto or
presented to MPET in connection herewith contains any materially misleading
statement, or omits any fact or statement necessary to make the other
statements or facts therein set forth not materially misleading.
(j) VALIDITY OF THIS AGREEMENT. All corporate and other proceedings
required to be taken by COLONY in order to enter into and to carry out this
Agreement will have been duly and properly taken at or before the Closing.
This Agreement has been duly executed by COLONY, and constitutes a valid and
binding obligation of COLONY enforceable in accordance with its terms. The
execution and delivery of this Agreement and the carrying out of its purposes
will not result in the breach of any of the terms or conditions of, or
constitute a default under or violate, COLONY's Certificate of Incorporation
or By-Laws, or any agreement, lease, mortgage, bond, indenture, license or
other document or undertaking, oral or written, to which COLONY is a party or
is bound or may be affected, nor will such execution, delivery and carrying
out violate any law, rule or regulation or any order, writ, injunction or
decree of any court, regulatory agency or other governmental body.
(k) CONSENTS AND APPROVALS; COMPLIANCE WITH LAWS. Neither COLONY nor
MANAGEMENT is required to make any filing with, or obtain the consent or
approval of, any person or entity as a condition to the consummation of the
transactions contemplated by this Agreement. The business of COLONY has been
operated in compliance with all laws, rules, and regulations applicable to
its business, including, without limitation, those related to securities
matters, trade matters, environmental matters, public health and safety, and
labor and employment.
(l) ACCESS TO BOOKS AND RECORDS. MPET and SELLERS will have full and
free access to COLONY's books and records during the course of this
transaction prior to and at the Closing, on reasonable notice.
(m) COLONY'S FINANCIAL STATEMENTS. At or before the Closing, COLONY
and MANAGEMENT will provide MPET with COLONY's audited financial statements
for the two fiscal years ended December 31, 1996 and 1997, which will be
audited in accordance with GAAP by independent certified public accountants,
together with unaudited financial statements for the period ending November
30, 1998.
(n) COLONY'S FINANCIAL CONDITION. As of the Closing, COLONY will have
no assets or liabilities.
(o) DIRECTORS' AND SHAREHOLDERS' APPROVAL. Immediately upon the
signing of this Agreement, COLONY'S Board of Directors and Shareholders, by
meeting or consent, will duly and properly authorize the matters described in
section 7(a)(iv) herein.
(p) THE COLONY SHARES. All of the COLONY Common Shares issued to
SELLERS shall be validly issued, fully-paid non-assessable shares of COLONY
Class A Common
7
<PAGE>
Stock, with full voting rights, dividend rights, and right to receive the
proceeds of liquidation, if any, as set forth in COLONY's Certificate of
Incorporation.
(q) TRADING OF COLONY STOCK. COLONY's Class A Common Stock is now and
as of the Closing will be traded on the OTC Bulletin Board (Symbol: CIIA); no
further action must be taken before the Closing for continued trading on the
Bulletin Board.
5. TERM; INDEMNIFICATION. All representations, warranties, covenants and
agreements made herein and in the exhibits attached hereto shall survive the
execution and delivery of this Agreement and payment pursuant thereto.
MANAGEMENT and MPET MANAGEMENT ("management") of both parties to the
agreement hereby agree, jointly and severally, to indemnify, defend, and hold
harmless COLONY, MPET, and the SELLERS from and against any damage, loss,
liability, or expense (including, without limitation, reasonable expenses of
investigation and reasonable attorney's fees) arising out of any material
breach of any representation, warranty, covenant, or agreement made by
MANAGEMENT or management in this Agreement.
6. RESTRICTED SHARES; LEGEND. All of the COLONY Common Shares issued to
SELLERS hereunder will be "restricted securities" as defined in Rule 144
under the '33 Act; and each stock certificate issued to SELLERS hereunder
will bear the usual restrictive legend to such effect. Appropriate Stop
Transfer instructions will be given to COLONY's stock transfer agent.
7. CONDITIONS PRECEDENT TO CLOSING. (a) The obligations of MPET and the
SELLERS under this Agreement shall be and are subject to fulfillment, prior
to or at the Closing, of each of the following conditions:
(i) That COLONY's and MANAGEMENT's representations and warranties
contained herein shall be true and correct at the time of Closing as if such
representations and warranties were made at such time, and MANAGEMENT will
deliver an executed certification confirming the foregoing;
(ii) That COLONY and MANAGEMENT shall have performed or complied
with all agreements, terms and conditions required by this Agreement to be
performed or complied with by them prior to or at the time of the Closing;
(iii) That COLONY's directors and shareholders, by proper and
sufficient vote taken either by consent or at a meeting duly and properly
called and held, shall have properly approved all of the matters required to
be approved by COLONY's directors and shareholders, respectively;
(iv) That COLONY's Board of Directors, by proper and sufficient
vote, shall have approved this Agreement and the transactions contemplated
hereby; approved the change of COLONY's corporate name to a name selected by
MPET: approved the resignation of all of COLONY's current sole director and
the election of up to three designees of MPET to serve as directors in place
of COLONY's current directors; and will have approved such other changes as
are consistent with this Agreement and approved by MPET and COLONY; and
8
<PAGE>
(b) The obligations of COLONY and MANAGEMENT under this Agreement shall
be and are subject to fulfillment, prior to or at the Closing of each of the
following conditions:
(i) That MPET's and SELLERS' representations and warranties
contained herein shall be true and correct at the time of Closing as if such
representations and warranties were made at such time and MPET and the MPET
PRINCIPALS shall deliver an executed certification confirming the foregoing;
(ii) That MPET and MPET PRINCIPALS shall have performed or complied
with all agreements, terms and conditions required by this Agreement to be
performed or complied with by them prior to or at the time of Closing; and
(iii) That MPET's officers will have signed non-compete clauses in
the form attached hereto as Exhibit "J".
(iv) That MPET's officers shall provide any existing employment
agreements which are attached hereto as Exhibit "H".
8. TERMINATION. This Agreement may be terminated at any time before or
at Closing, by:
(a) The mutual agreement of the parties;
(b) Any party if;
(i) Any provision of this Agreement applicable to a party
shall be materially untrue or fail to be accomplished
on or before October 31, 1997.
(ii) Any legal proceeding shall have been instituted or shall
be imminently threatening to delay, restrain or prevent
the consummation of this Agreement.
Upon termination of this Agreement for any reason, in accordance with
the terms and conditions set forth in this paragraph, each said party shall
bear all costs and expenses as each party has incurred and no party shall be
liable to the other.
9. EXHIBITS. All Exhibits attached hereto are incorporated herein by
this reference as if they were set forth in their entirety.
10. MISCELLANEOUS PROVISIONS. This Agreement is the entire agreement
between the parties in respect of the subject matter hereof, and there are no
other agreements, written or oral, nor may this Agreement be modified except
in writing and executed by all of the parties hereto. The failure to insist
upon strict compliance with any of the terms, covenants or conditions of this
Agreement shall not be deemed a waiver or relinquishment of such right or
power at any other time or times.
9
<PAGE>
11. CLOSING. The Closing of the transactions contemplated by this
Agreement ("Closing") shall take place at the offices of MPET, 2240 Shelter
Island Drive #110, San Diego, California, at 1:00 P.M. on the first business
day after the latter of the approval of SELLERS owning at least 80% of MPET's
Common Stock or the shareholders of COLONY approving this Agreement, or such
other date as the parties hereto shall mutually agree upon. At the Closing,
all of the documents and items referred to herein shall be exchanged.
12. FEES AND COMMISSIONS. MPET and COLONY represent to each other that no
broker, finder, or other person or entity is entitled to any fee or
commission from COLONY or MPET for services rendered on behalf of COLONY or
MPET in connection with the transactions contemplated by this Agreement.
13. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Washington.
14. COUNTERPARTS. This Agreement may be executed in duplicate facsimile
counterparts, each of which shall be deemed an original and together shall
constitute one and the same binding Agreement, with one counterpart being
delivered to each party hereto.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as
of the date and year above first written.
COLONY INTERNATIONAL, INC.
By: /s/ Brent Nelson
-------------------------------
Brent Nelson, President
MOBILE PET SYSTEMS, INC.
By: /s/ Paul Crowe
-------------------------------
Paul Crowe, President
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EXHIBIT A-1
SHAREHOLDERS OF MOBILE PET SYSTEMS, INC.
Paul J. Crowe 5,000,000
Fleming & Associates 800,000
Northwest Capital Partners L.L.C. 1,200,000
---------
Total 7,000,000
<PAGE>
EXHIBIT 2.2
ACQUISITION AGREEMENT
AGREEMENT (the "Agreement") dated November ___, 1996, by, between and
among AMERICAN COIN AND STAMP VENTURES, INC., a company incorporated under
the laws of the State of Delaware (hereinafter referred to as "AMERICAN") on
the one hand, and COLONY INTERNATIONAL INCORPORATED, a company incorporated
under the laws of the state of Nevada (hereinafter referred to as "COLONY")
and the persons listed on Exhibit "A" attached hereto and made a part
hereof, being all of COLONY's stockholders now and as of the closing date of
this Agreement (hereinafter referred to as the "Sellers") on the other.
WHEREAS, the Sellers own a total of 901,986 shares of common stock,
$0.007 par value, of COLONY, said shares being one hundred (100%) percent of
the issued and outstanding common stock of COLONY; and
WHEREAS, the Sellers desire to sell and AMERICAN desires to purchase one
hundred (100%) percent of such shares;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereby agree as
follows:
1. PURCHASE AND SALE. The Sellers hereby agree to sell, transfer,
assign and convey to AMERICAN and AMERICAN hereby agrees to purchase and
acquire from the Sellers, one hundred (100%) percent of all of COLONY's
issued and outstanding common stock (the "COLONY Common Shares"), in a
reorganization pursuant to Section 368 (a)(1)(B) of the Internal Revenue Code.
2. PURCHASE PRICE. The aggregate purchase price to be paid by
AMERICAN for the COLONY Common Shares shall be 9,500,000 (post-reverse split)
shares of AMERICAN $0.0001 par value voting common stock, (the "AMERICAN
Common Shares"). The AMERICAN Common Shares will be issued to the individual
Sellers (8,200,000 shares) and the consultants (1,300,000 shares) described
in Section 12 herein ("Consultants") in accordance with Exhibits "A-1" and
"A-2" respectively, which are attached hereto. No fractional shares of
AMERICAN Common Stock will be issued; in lieu thereof, the number of shares
of AMERICAN Common Stock to be issued to each Seller will be rounded up to
the next whole share. Each of the Sellers hereby agrees to the terms of this
Agreement.
3. WARRANTIES AND REPRESENTATIONS OF COLONY AND SELLERS In order to
induce AMERICAN to enter into this Agreement and to complete the transaction
contemplated hereby, COLONY and Sellers warrant and represent to AMERICAN as
of the date hereof and as of the Closing that:
(a) ORGANIZATION AND STANDING. COLONY is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Nevada, is qualified to do business as a foreign corporation in British
Columbia and in every other state or jurisdiction in which it operates to the
extent required by the laws of such states and jurisdictions, and has full
power and authority to carry on its business as now conducted and to own and
operate its assets, properties and business. Attached hereto as Exhibit "B"
are true and correct copies of COLONY's Certificate of Incorporation,
amendments thereto and all current By-laws of COLONY. No changes thereto
will be made in any of the Exhibit "B" documents before the Closing.
<PAGE>
(b) CAPITALIZATION. As of the date hereof, COLONY's entire
authorized equity capital consists of 60,000,000 shares of Common Stock
$0.007 par value, of which 901,986 shares of Common Stock are issued and
outstanding. As of the Closing Date, there will be no other voting or equity
securities authorized or issued, nor any authorized or issued securities
convertible into voting stock, and no outstanding subscriptions, warrants;
calls, options, rights, commitments or agreements by which COLONY or the
Sellers are bound, calling for the issuance of any additional shares of
common stock or any other voting or equity security, except for the shares to
be issued to the Consultants which shares will be exchanged for a total of
1,300,000 shares of AMERICAN stock. All of such Colony Common Shares have
been duly authorized and validly issued and are fully paid and non-assessable
and were not issued in violation of any preemptive rights or any applicable
securities laws. The 901,986 issued and outstanding COLONY Common Shares
constitute one hundred (100%) percent of the equity capital of COLONY, which
includes, INTER ALIA, one hundred (100%) percent of COLONY's voting power,
right to receive dividends, when, as and if declared and paid, and the right
to receive the proceeds of liquidation attributable to common stock, if any.
(c) OWNERSHIP OF COLONY SHARES. As of the date hereof, the
Sellers are the sole owners of the COLONY Common Shares, free and clear of
all liens, encumbrances, and restrictions whatsoever, except that the COLONY
Common Shares have not been registered under the Securities Act of 1933, as
amended (the "'33 Act"), or any applicable State Securities laws. By the
transfer of the COLONY Common Shares to AMERICAN pursuant to this Agreement,
AMERICAN will thereby acquire good and marketable title to 100% of the
capital stock of COLONY, free and clear of all liens, encumbrances and
restrictions of any nature whatsoever, except by reason of the fact that the
COLONY Common Shares will not have been registered under the '33 Act, or any
applicable State Securities laws.
(d) TAXES. COLONY has filed all federal, state and local
income or other tax returns and reports that it is required to file with all
governmental agencies, wherever situated, and has paid or accrued for payment
all taxes as shown on such returns, such that a failure to file, pay or
accrue will not have a Material Adverse Effect on COLONY. Such returns have
been prepared in accordance with the applicable tax laws and rules and
regulations thereunder to which COLONY is subject and Sellers have delivered
true and complete copies of all such tax returns to AMERICAN.
(e) PENDING ACTIONS. There are no material legal actions,
lawsuits, proceedings or investigations, either administrative or judicial,
pending or threatened, against or affecting COLONY, or against COLONY's
Officers or Directors or the Sellers that arise out of their operation of
COLONY, except as described in Exhibit "C" attached hereto. COLONY is not
knowingly in violation of any law, material ordinance or regulation of any
kind whatever, including, but not limited to laws, rules and regulations
governing the sale of its products and/or services, the '33 Act, the
Securities Exchange Act of 1934 (the "'34 Act") as amended, the Rules and
Regulations of the U.S. Securities and Exchange Commission ("SEC"), or the
securities laws and regulations of any state. Neither COLONY nor Sellers are
subject to any order, writ, judgment, injunction, decree, determination or
award of any court, arbitrator or administrative, governmental or regulatory
authority or body.
(f) GOVERNMENTAL REGULATION. COLONY holds the licenses and
registrations set forth on Exhibit "D" hereto from the jurisdictions set
forth therein, which licenses and registrations are all of the licenses and
registrations necessary to permit COLONY to conduct its current business.
All of such licenses and registrations are in full force and effect, and
there are no proceedings, hearings or other actions pending that may affect
the validity or continuation of any of them. No approval of any other trade
or professional association or agency of government other than as set forth
on Exhibit "D" is required for any of the transactions effected
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by this Agreement, and the completion of the transactions contemplated by this
Agreement will not, in and of themselves, affect or jeopardize the validity or
continuation of any of them.
(g) OWNERSHIP OF ASSETS. Except as set forth in Exhibit "E",
COLONY has good, marketable title, without any liens or encumbrances of any
nature whatever, to all of the following, if any: its assets, properties and
rights of every type and description, including, without limitation, all cash on
hand and in banks, certificates of deposit, stocks, bonds, and other securities,
good will, customer lists, its corporate name and all variants thereof,
trademarks and trade names, copyrights and interests thereunder, licenses and
registrations, pending licenses and permits and applications therefor,
inventions, processes, know-how, trade secrets, real estate and interests
therein and improvements thereto, machinery, equipment, vehicles, notes and
accounts receivable, fixtures, rights under agreements and leases, franchises,
all rights and claims under insurance policies and other contracts of whatever
nature, rights in funds of whatever nature, books and records and all other
property and rights of every kind and nature owned or held by COLONY as of this
date, and will continue to hold such title on and after the completion of the
transactions contemplated by this Agreement; nor, except in the ordinary course
of its business, has COLONY disposed of any such asset since the date of the
most recent balance sheet described in Section 3(o) of this Agreement. COLONY's
waste disposal process does not infringe any outstanding patent held by any
other person or entity.
(h) NO INTEREST IN SUPPLIERS, CUSTOMERS, LANDLORDS OR COMPETITORS.
Neither the Sellers nor any member of their families have any interest of any
nature whatever in any supplier, customer, landlord or competitor of COLONY.
(i) NO DEBT OWED BY COLONY TO SELLERS. Except as set forth in
Exhibit "F", COLONY does not owe any money, securities, or property to either
the Sellers or any member of their families or to any company controlled by or
under common control with such a person, directly or indirectly.
(j) CORPORATE RECORDS. All of COLONY's books and records,
including, without limitation, its books of account, corporate records, minute
book, stock certificate books and other records of COLONY are up-to-date,
complete and reflect accurately and fairly the conduct of its business in all
material respects since its date of incorporation. All reports, returns and
statements currently required to be filed by COLONY, with respect to the
business and operations of COLONY, with any governmental agency have been filed
or valid extensions have been obtained in accordance with normal procedures and
all governmental reporting requirements have been complied with.
(k) NO MISLEADING STATEMENTS OR OMISSIONS. Neither this Agreement
nor any financial statement, exhibit, schedule or document attached hereto or
presented to AMERICAN in connection herewith, contains any materially misleading
statement, or omits any fact or statement necessary to make the other statements
or facts therein set forth not materially misleading.
(l) VALIDITY OF THE AGREEMENT. All corporate and other proceedings
required to be taken by the Sellers and by COLONY in order to enter into and to
carry out this Agreement have been duly and properly taken. This Agreement has
been duly executed by the Sellers and by COLONY, and constitutes the valid and
binding obligation of each of them, except to the extent limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws relating to or
effecting generally the enforcement of creditors rights. The execution and
delivery of this Agreement and the carrying out of its purposes will not result
in the breach of any of the terms or conditions of, or constitute a default
under or violate, COLONY's Certificate of Incorporation or By-Laws, or any
material agreement, lease, mortgage, bond, indenture, license or other material
document or undertaking, oral or written, to which COLONY or the Sellers is a
party or is bound or may be
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<PAGE>
affected, nor will such execution, delivery and carrying out violate any order,
writ, injunction, decree, law, rule or regulation of any court, regulatory
agency or other governmental body; and the business now conducted by COLONY can
continue to be so conducted after completion of the transaction contemplated
hereby, with COLONY as a wholly-owned subsidiary of AMERICAN.
(m) ENFORCEABILITY OF THE AGREEMENT. When duly executed and
delivered, this Agreement and the Exhibits hereto which are incorporated
herein and made a part hereof are legal, valid, and enforceable by AMERICAN
according to their terms, except to the extent limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws relating to
or effecting generally the enforcement of creditors rights, and that at the
time of such execution and delivery, AMERICAN will have acquired title in and
to the COLONY Common Shares free and clear of all claims, liens and
encumbrances.
(n) ACCESS TO BOOKS AND RECORDS. AMERICAN will have full and free
access to COLONY's books during the course of this transaction prior to and at
the Closing, during regular business hours.
(o) COLONY FINANCIAL STATEMENTS. Attached hereto as Exhibit "G-1"
are recent unaudited financial statements of COLONY. Within 45 days after the
Closing, COLONY's audited financial statements will be provided to AMERICAN, and
will be annexed hereto as Exhibit "G-2"; the COLONY financial statements will
accurately describe COLONY's financial position as of the date thereof. COLONY's
financial statements will have been prepared in accordance with generally
accepted accounting principles in the United States ("GAAP") (or as permitted by
regulation S-X, S-B, and/or the rules promulgated under the U.S. Securities Act
of 1933 and the U.S. Securities Exchange Act of 1934) and present fairly in all
material respects the financial condition of COLONY as of the dates thereof and
will have been certified by independent certified public accountants with
substantial SEC experience. Without limiting any of the foregoing
representations and warranties, there are no liabilities of COLONY which will
not be reflected on the COLONY financial statements; and the audited financial
statements in Exhibits "G-2" will show no material adverse change from the
unaudited financial statements contained in Exhibit "G-1".
(p) COLONY'S CORPORATE SUMMARY. COLONY's Corporate Summary,
prepared in July, 1996 (attached hereto as Exhibit "L") accurately describes
COLONY's business, assets, proposed operations and management as of the date
thereof, since the date of the Corporate Summary, there has been no material
change in the Business Plan and no material adverse change in COLONY of any kind
or nature whatsoever.
(q) NO BROKERS. Except as set forth in paragraphs 4(b) and 12
below, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with any of the transactions
contemplated by this Agreement.
(r) COMPLIANCE WITH LAWS. COLONY represents and warrants that is
has complied with, and is not in violation of any applicable federal, state, or
local statutes, laws or regulations as respects the ownership of its property or
the operation of its business.
(s) COMPLIANCE WITH LAWS; ENVIRONMENTAL OR OTHER RELATED MATTERS.
COLONY's operations have been conducted in all material respects in accordance
with all applicable statutes, laws, rules and regulations. COLONY is not in
violation of any Federal, state, local or foreign law, ordinance or regulation
or any Governmental Order applicable to COLONY or by which any of its properties
is subject, bound or affected. There is no Governmental Order outstanding
against COLONY (nor, to the best knowledge of COLONY, threatened to be issued)
that will or would have a Material Adverse Effect. Except as disclosed herein,
COLONY currently holds (and at the Closing will hold) all the environmental,
health and safety and
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other permits, licenses, authorizations, certificates and approvals of
Governmental Authorities, whether Federal, state, local or foreign
(collectively, "Permits"), necessary or proper for the current use, occupancy
or operation of the Business, and all of the Permits are now and at the
Closing will be in full force and effect. Schedule "S" annexed hereto and
made a part hereof contains a list of all material Permits and all material
applications for Permits relating to COLONY and the Business. COLONY has not
received and has no reason to believe it will receive any notice that any
Governmental Authority is considering revoking, canceling, rescinding,
materially modifying or refusing to renew any of the Permits. Except as
otherwise disclosed herein, there is no existing practice, action or plan of
COLONY and no existing condition of the assets of COLONY that may give rise
to any civil or criminal liability under, or violate or prevent compliance
with, any environmental, health or occupational safety or other applicable
statute, regulation, ordinance, decree or Permit other than those practices,
action, plans and conditions the existence of which will not have a Material
Adverse Effect. Schedule "T" identifies all Permits that require consent,
notification or other action to remain in full force and effect following the
consummation of the transaction contemplated hereby.
4. WARRANTIES AND REPRESENTATIONS OF AMERICAN. In order to induce
the Sellers and COLONY to enter into this Agreement and to complete the
transaction contemplated hereby, AMERICAN warrants and represents to COLONY
and Sellers that:
(a) ORGANIZATION AND STANDING. AMERICAN is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, is qualified to do business as a foreign corporation in
every other state in which it operates to the extent required by the laws of
such states, and has full power and authority to carry on its business as now
conducted and to own and operate its assets, properties and business.
(b) CAPITALIZATION. AMERICAN's entire authorized equity
capital consists of 100,000,000 shares of voting common stock, $.0001 par
value. As of the Closing, after giving effect to (a) the proposed
one-for-19.926 reverse split of AMERICAN's 9,788,000 currently outstanding
shares and its 175,000 stock options; the issuance of 9,500,000 post-reverse
split shares to COLONY'S shareholders (which consists of 8,200,000 restricted
shares to COLONY's current shareholders and 1,300,000 shares to Consultants
in payment for their services in connection with this transaction); and (c)
the amendment to AMERICAN's is authorized capital stock, AMERICAN will have
20,000,000 shares of Common Stock, $.0001 par value authorized and 10,000,000
shares of voting common stock, $.0001 par value issued and outstanding
(including shares reserved for exercise of the aforesaid options). Upon
issuance, all of the AMERICAN Common Stock will be validly issued fully paid
and non-assessable. The relative rights and preferences of AMERICAN's equity
securities are set forth on the Certificate of Incorporation, as amended and
AMERICAN's By-laws (Exhibit "H" hereto). There are no other voting or equity
securities convertible into voting stock, and no outstanding subscriptions,
warrants, calls, options, rights, commitments or agreements by which AMERICAN
is bound, calling for the issuance of any additional shares of common stock
or any other voting or equity security. The By-laws of AMERICAN provide that
a simple majority of the shares voting at a stockholders' meeting at which a
quorum is present may elect all of the directors of AMERICAN. Cumulative
voting is provided for by the By-Laws or Certificate of Incorporation of
AMERICAN. Accordingly, as of the Closing the 9,500,000 shares being issued
to and acquired by the Sellers (including the shares issued to Consultants)
will constitute 95% of the 10,000,000 shares of AMERICAN which will then be
issued and outstanding, (including after giving effect to the issuance of the
above-stated number of shares as payment for all consulting fees and
commissions) which includes, INTER ALIA, that same percentage of AMERICAN's
voting power, right to receive dividends, when, as and if declared and paid,
and the right to receive the proceeds of liquidation attributable to common
stock, if any.
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<PAGE>
(c) OWNERSHIP OF SHARES. By AMERICAN's issuance of the
AMERICAN Common Shares to the Sellers pursuant to this Agreement, the Sellers
will thereby acquire good and marketable title thereto, free and clear of all
liens, encumbrances and restrictions of any nature whatsoever, except by
reason of the fact that such AMERICAN shares will not have been registered
under the '33 Act.
(d) SIGNIFICANT AGREEMENTS. AMERICAN is not and will not at
Closing be bound by any of the following other than where already disclosed
in any other exhibit, unless specifically listed in Exhibit "I" hereto:
(i) Employment, advisory or consulting contract;
(ii) Plan providing for employee benefits of any nature;
(iii) Lease with respect to any property or equipment;
(iv) Contract or commitment for any future expenditure
in excess of $1,000;
(v) Contract or commitment pursuant to which it has
assumed, guaranteed, endorsed, or otherwise become
liable for any obligation of any other person, firm
or organization;
(vi) Contract, agreement, understanding, commitment or
arrangement, other than in the normal course of
business, not fully disclosed or set forth in this
Agreement;
(vii) Agreement with any person relating to the dividend,
purchase or sale of securities, that has not been
settled by the delivery or payment of securities when
due, and which remains unsettled upon the date of
this Agreement.
(e) TAXES. AMERICAN has filed all federal, state and local
income or other tax returns and reports that it is required to file with all
governmental agencies, wherever situate, and has paid all taxes as shown on
such returns such that a failure to file, pay or accrue will not have a
Material Adverse Effect on AMERICAN. Such returns have been prepared in
accordance with the applicable tax laws and rules and regulations thereunder
to which AMERICAN is subject and AMERICAN has delivered true and complete
copies of all such tax returns for the periods August 1, 1992 to July 31,
1995 to COLONY.
(f) ABSENCE OF LIABILITIES. At and as of the Closing Date and
after giving effect to the sale of all of AMERICAN's assets to and the
assumption of liabilities by Joseph Brown and Joseph Gallo, AMERICAN will
have no liabilities of any kind or nature, undisclosed fixed or contingent,
except for (i) the costs, including legal and accounting fees and other
expenses, in connection with this transaction, for which AMERICAN agrees to
be responsible and to pay in full at or before the Closing, AND (ii) THE
TRANSACTION DESCRIBED IN SECTION 7(b)(vi) HEREIN.
(g) NO PENDING ACTIONS. There are no material legal actions,
lawsuits, proceedings or investigations, either administrative or judicial,
pending or threatened, against or affecting AMERICAN, or against any of
AMERICAN's officers or directors and arising out of their operation of
AMERICAN that are reasonably likely to have a Material Adverse Effect on
American. AMERICAN is not knowingly in violation of any law, ordinance or
regulation of any kind whatever, including, but not limited to, the '33 Act,
the 1934 Act, as amended, the Rules and Regulations of the SEC, or the
securities laws and regulations of any state.
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<PAGE>
AMERICAN is not an investment company as defined in the Securities laws.
AMERICAN is not required to file reports pursuant to either Section 12(g) or
15(d) of the '34 Act.
(h) CORPORATE RECORDS. All of AMERICAN's books and records,
including, without limitation, its books of account, corporate records,
minute book, stock certificate books and other records are up-to-date,
complete and reflect accurately and fairly the conduct of its business in all
material respects since its date of incorporation; all of said books and
records will be delivered to AMERICAN's new management at the Closing.
(i) NO MISLEADING STATEMENTS OR OMISSIONS. Neither this
Agreement nor any financial statement, exhibit, schedule or document attached
hereto or presented to COLONY in connection herewith contains any materially
misleading statement, or omits any fact or statement necessary to make the
other statements or facts therein set forth not materially misleading.
(j) VALIDITY OF THE AGREEMENT. All corporate and other
proceedings required to be taken by AMERICAN in order to enter into and to
carry out this Agreement have been duly and properly taken. This Agreement
has been duly executed by AMERICAN, and constitutes a valid and binding
obligation of AMERICAN except to the extent limited by applicable bankruptcy
reorganization, insolvency, moratorium or other laws relating to or effecting
generally the enforcement of creditors rights. The execution and delivery of
this Agreement and the carrying out of its purposes will not result in the
breach of any of the terms or conditions of, or constitute a default under or
violate, AMERICAN's Certificate of Incorporation or By-Laws, or any material
agreement, lease, mortgage, bond, indenture, license or other document or
undertaking, oral or written, to which AMERICAN is a party or is bound or may
be affected, nor will such execution, delivery and carrying out violate any
order, writ, injunction, decree, law, rule or regulation of any court,
regulatory agency or other governmental body.
(k) ENFORCEABILITY OF THE AGREEMENT. When duly executed and
delivered, this Agreement and the Exhibits hereto which are incorporated
herein and made a part hereof are legal, valid, and enforceable by COLONY and
the Sellers according to their terms, except to the extent limited by
applicable bankruptcy reorganization, insolvency, moratorium or other laws
relating to or effecting generally the enforcement of creditors rights; and
at the time of such execution and delivery, the Sellers will have acquired
good, marketable title in and to the AMERICAN Common Shares acquired pursuant
hereto, free and clear of all liens and encumbrances.
(l) ACCESS TO BOOKS AND RECORDS. COLONY and Sellers will have
full and free access during regular business hours and on reasonable prior
notice to AMERICAN's books and records during the course of this transaction
prior to and at the Closing.
(m) AMERICAN FINANCIAL STATEMENTS. Within 45 days after the
Closing, AMERICAN will provide COLONY with recent audited financial
statements, which will be certified in accordance with GAAP by independent
certified public accountants with substantial SEC experience.
(n) AMERICAN FINANCIAL CONDITION. After consummation of all of
the transactions contemplated whereby AMERICAN will have no assets or
liabilities, EXCEPT AS SET FORTH IN SECTION 7(b)(vi).
(o) DIRECTORS' APPROVAL. Promptly upon the signing of this
Agreement, AMERICAN'S Board of Directors, by meeting or consent, will
authorize the matters described in section 7(b)(i) herein.
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5. TERM. All representations, warranties, covenants and agreements
made by any party herein and in the exhibits attached hereto shall survive
the execution and delivery of this Agreement and payment pursuant thereto.
6. THE AMERICAN SHARES AND COLONY SHARES. All of the AMERICAN and the
COLONY Common Shares shall be validly issued, fully-paid and non-assessable
shares of AMERICAN and COLONY Common Stock respectively,, with full voting
rights, dividend rights, and right to receive the proceeds of liquidation, if
any, as set forth in the respective Articles of Incorporation.
7. CONDITIONS PRECEDENT TO CLOSING. (a) The obligations of COLONY and
Sellers under this Agreement shall be and are subject to fulfillment, prior
to or at the Closing, of each of the following conditions:
(i) That AMERICAN's representations and warranties contained
herein shall be true and correct at the time of Closing, as if such
representations and warranties were made at such time;
(ii) That AMERICAN in all material respects shall have performed
or complied with all agreements, terms and conditions required by this
Agreement to be performed or complied with by it prior to or at the time of
Closing;
(iii) That AMERICAN's directors, by proper and sufficient vote
taken either by consent of directors or at a meeting duly and properly called
and held, shall have properly approved all of the matters described in
Section 7(b)(i) herein;
(iv) That AMERICAN shall have filed the notice of the reverse
split required by Rule 10b-17 under the '34 Act, and shall have sent notice
to its stockholders of the transactions contemplated herein;
(v) That Messrs. Gallo and Brown shall have signed agreements
stating that neither shall publicly sell any of his shares for 90 days after
the Closing; AND THEREAFTER THEY WILL NOT SELL COLLECTIVELY IN ANY CALENDAR
MONTH, MORE THAN THE GREATER OF (A) 1/4 OF 1% OF THE TOTAL NUMBER OF SHARES
OF COMMON STOCK ISSUED AND OUTSTANDING, OR (B) 20,000 SHARES, without
COLONY's prior written consent; AND
(vi) THAT AMERICAN WILL HAVE SOLD FOR $100 ALL OF ITS EXISTING
ASSETS AND BUSINESS, SUBJECT TO ALL OF ITS LIABILITIES TO A COMPANY
CONTROLLED BY JOSEPH BROWN AND JOSEPH GALLO.
(b) The obligations of AMERICAN under this Agreement shall be and are
subject to fulfillment, prior to or at the Closing of each of the following
conditions:
(i) That AMERICAN'S Shareholders and Board of Directors, by proper
and sufficient vote, shall have approved this Agreement and the transactions
contemplated hereby; approved the contemplated reverse split of AMERICAN's
outstanding Common Stock; approved the change of the authorized Common Stock
to 20,000,000 shares; approved the resignation of all of AMERICAN'S current
directors and the election of up to four designees of COLONY to serve as
directors in place of AMERICAN's current directors; approved a change of
AMERICAN'S corporate name to a name selected by COLONY and will have approved
such other changes as are consistent with this Agreement and approved by
COLONY for submission to AMERICAN stockholders;
(ii) That COLONY's and Sellers' representations and warranties
contained herein shall be true and correct at the time of Closing as if such
representations and warranties were made at such time and that
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there shall have been no Material Adverse Effect with respect to COLONY; and
American shall have received a certificate of COLONY and Sellers to such an
effect signed by a duly authorized officer of COLONY and by each of the
Sellers; and
(iii) That COLONY and Sellers shall have performed or complied with
all agreements, terms, and conditions required by this Agreement to be
performed or complied with by them prior to or at the time of Closing Date
and AMERICAN shall have received a Certificate of COLONY and Sellers to such
effect signed by or duly authorized officer of COLONY and by each of the
Sellers;
(iv) That COLONY's officers will have signed non-compete clauses
in the form attached hereto as Exhibit "J";
(v) That COLONY shall have delivered a signed letter of intent
from a U.S.-based NASD member broker-dealer providing for a proposed "best
efforts" secondary offering of AMERICAN's securities in an amount of at least
$6.5 million; the letter of intent shall contain the usual and customary
provisions AND SHALL BE ATTACHED AS EXHIBIT "K"; and
(vi) THAT COLONY OR ITS DESIGNEE SHALL HAVE LENT $40,000 TO
AMERICAN AT THE CLOSING, BY CERTIFIED CHECK DRAWN ON A NEW YORK BANK, WHICH
FUNDS WILL BE INCLUDED IN THE ASSETS ACQUIRED BY THE COMPANY DESCRIBED IN
SECTION 7(a)(vi), BUT THE LIABILITY FOR REPAYMENT OF WHICH SHALL NOT BE
ASSUMED BY THAT COMPANY.
8. TERMINATION. This Agreement may be terminated at any time before or
at Closing, by:
(a) The mutual agreement of the parties;
(b) Any party if:
(i) Any provision of this Agreement applicable to a party shall
be materially untrue or fail to be accomplished.
(ii) Any legal proceeding shall have been instituted or shall
be imminently threatening to delay, restrain or prevent the
consummation of this Agreement or any material component
thereof.
Upon termination of this Agreement for any reason, in accordance with
the terms and conditions set forth in this paragraph, each said party shall
bear all costs and expenses as each party has incurred and no party shall be
liable to the other for such costs and expenses.
9. EXHIBITS. All Exhibits attached hereto are incorporated herein by
this reference as if they were set forth in their entirety.
10. MISCELLANEOUS PROVISIONS. This Agreement is the entire agreement
between the parties in respect of the subject matter hereof, and there are no
other agreements, written or oral, nor may this Agreement be modified except
in writing and executed by all of the parties hereto. The failure to insist
upon strict compliance with any of the terms, covenants or conditions of this
Agreement shall not be deemed a waiver or relinquishment of such right or
power at any other time or times.
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11. CLOSING. The Closing of the transactions contemplated by this
Agreement ("Closing") shall take place at 1:00 P.M. on the first business day
after the latter of the Sellers approving this Agreement or the shareholders
of AMERICAN approving this Agreement and the matters referred to in
Section 7(b)(i), or such other date as the parties hereto shall agree upon.
At the Closing, all of the documents and items referred to herein shall be
exchanged.
12. FEES AND COMMISSIONS. As compensation for its services in
initiating this transaction and ongoing consulting services to COLONY, COLONY
acknowledges that 1,300,000 of the 9,500,000 shares being issued to COLONY's
shareholders hereunder are being issued under Rule 504 in cancellation of all
debts owed to the Consultants for their services rendered or otherwise
arising out of this Agreement and the transactions contemplated hereby.
Pursuant to the Consulting Agreements attached hereto as Exhibit "X", 600,000
of such shares are being issued to COLONY's designees and the 700,000 remaining
shares will be issued equally between (a) Olympic Capital Group, Inc. and its
designees, and (b) Suppes Securities and its designees.
13. NO THIRD PART BENEFICIARIES. The provisions of this Agreement are
for the exclusive benefit of the parties who are signatories hereto and their
permitted successors and assigns, and no third party shall be a beneficiary
of, or have any rights by virtue of, this Agreement.
14. ASSIGNMENT; BINDING EFFECT. This Agreement, including both its
obligations and benefits, shall redound to the benefit of, and be binding on
the respective permitted assigns, transferees and successors of the parties.
This Agreement may not be assigned or transferred in whole or in part by
either party without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed.
15. NON-RECOURSE. Notwithstanding anything contained in this Agreement
to the contrary, it is expressly understood and agreed by the parties hereto
that each and every representation, warranty, covenant, undertaking and
agreement made in this Agreement (except with respect to the Sellers) was not
made nor intended to be made as a personal representation, undertaking,
warranty, covenant, or agreement on the part of any incorporator,
stockholder, director, officer, partner, employee or agent, past present or
future, or any of them and any recourse on account of any such
representations, warranties, covenants, undertakings or agreements made in
this Agreement, whether in common law, in equity, by statute or otherwise,
against any of them (except with respect to the Sellers) is hereby forever
waived and released.
16. MATERIAL ADVERSE EFFECT. As used in this Agreement, "Material
Adverse Effect" with respect to a party means any change in, or effect on,
the business conducted by such party that is, or is reasonably likely to be,
materially adverse to (i) the business results of operations, prospects or
condition (financial or otherwise) of such party and its Subsidiaries, taken
as a whole, or (ii) the assets and properties used or useful in the conduct
of the business of such party and its Subsidiaries, taken as a whole.
17. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware.
18. COUNTERPARTS. This Agreement may be executed in duplicate
facsimile counterparts, each of which shall be deemed an original and
together shall constitute one and the same binding Agreement, with one
counterpart being delivered to each party hereto.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as
of the date and year above first written.
AMERICAN COIN AND STAMP VENTURES, INC.
/s/ Joseph Brown
--------------------------------------
Joseph Brown
President
4/27/96
COLONY INTERNATIONAL INCORPORATED
By: /s/ President & C.O.O. S. Michie
---------------------------------------
November 28, 1996
---------------------------------------
SELLERS:
/s/ S. Michie
---------------------------------------
Sandy Michie
---------------------------------------
---------------------------------------
---------------------------------------
-12-
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
AMERICAN COIN & STAMP VENTURES, INC.
------------------------------------
I, THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, do hereby certify as follows:
FIRST: The name of the corporation is
AMERICAN COIN & STAMP VENTURES, INC.
SECOND: Its registered office is to be located at 306 South State
Street, in the City of Dover, in the County of Kent, in the State of Delaware.
The name of its registered agent at that address is the United States
Corporation Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of stock which the corporation is
authorized to issue is seventy five million (75,000,000) shares, and the par
value of each of such share is ($.00001).
FIFTH: The name and address of the single incorporator are
Leif A. Tonnessen 70 Pine Street, New York, N.Y. 10270
<PAGE>
SIXTH: The By-Laws of the corporation may be made, altered, amended,
changed, added to or repealed by the Board of Directors without the assent or
vote of the stockholders. Elections of directors need not be by ballot unless
the By-Laws so provide.
SEVENTH: The corporation shall, to the full extent permitted by Section
145 of the Delaware General Corporation Law, as amended from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
EIGHTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
IN WITNESS WHEREOF, I have hereunto set my hand and seal, the 20th day
of August, 1985.
/s/ Leif A. Tonnessen (L.S.)
----------------------
Leif A. Tonnessen
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION OF
AMERICAN COIN & STAMP VENTURES, INC.
-----------------------------------------
Adopted in accordance with the
provisions of Section 242 of the
General Corporation Law of the
State of Delaware
-----------------------------------------
We, JOSEPH BROWN, President and HAROLD M. HERSHMAN, Secretary of
AMERICAN COIN & STAMP VENTURES, INC., a corporation existing under the laws of
the State of Delaware, do hereby certify as follows:
FIRST: That the Certificate of Incorporation of said Corporation has
been amended as follows:
By striking out the whole of Article FOURTH thereof as it now exists
and inserting in lieu and instead thereof a new Article FOURTH, reading as
follows:
"The total number of shares of stock which the corporation shall have
authority to issue is One Hundred Million (100,000,000) and the par
value of each of such shares is $.0001 Cents.
SECOND: That such amendment has been duly adopted in accordance with
the provisions of the General Corporation Law of the State of Delaware by the
affirmative vote of the holders of a majority of the stock entitled to vote at
a meeting of the
<PAGE>
stockholders duly held February 20, 1986.
THIRD: That the capital of said Corporation will not be reduced under
or by reason of said amendments.
IN WITNESS WHEREOF, said AMERICAN COIN & STAMP VENTURES, INC., has
caused this Certificate to be signed by JOSEPH BROWN, its President and attested
by HAROLD M. HERSHMAN, its Secretary, this 3rd day of March, 1986.
AMERICAN COIN & STAMP VENTURES, INC.
BY: /s/ Joseph Brown
----------------------------------
JOSEPH BROWN, President
ATTEST:
BY: /s/ Harold M. Hershman
-----------------------------------
HAROLD M. HERSHMAN, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
JOSEPH BROWN, President and HAROLD M. HERSHMAN, Secretary,
respectively, of AMERICAN COIN & STAMP VENTURES, INC., a corporation organized
and existing under the laws of the State of Delaware, hereby certify:
FIRST: That a new Article NINTH of the Certificate of Incorporation of
American Coin & Stamp Ventures, Inc., be added as follows:
"NINTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a Director of
this Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a Director. No amendment to or repeal of
these provisions shall apply to or have any effect on the liability or alleged
liability of any Director of the Corporation for or with respect to any acts or
omissions of such Director occurring prior to such amendment."
SECOND: That the foregoing amendment has been duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
THIRD: That the capital of American Coin & Stamp
<PAGE>
Ventures, Inc., will not be reduced under or by reason of said amendment.
FOURTH: That the foregoing amendment shall become effective at the time
and on the day this certificate is filed in accordance with Section 103 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this certificate has been made under the seal of
American Coin & Stamp Ventures, Inc., and has been signed by the undersigned,
President and Secretary, respectively, of American Coin & Stamp Ventures, Inc.,
this 28th day of March, 1988.
/s/ Joseph Brown
-------------------------
President
Attest:
/s/ Harold M. Hershman
- ---------------------------------
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AMERICAN COIN & STAMP VENTURES, INC.
STANLEY APPELBAUM, President and HAROLD M. HERSHMAN, Secretary,
respectively, of AMERICAN COIN & STAMP VENTURES, INC., a corporation organized
and existing under the laws of the State of Delaware, hereby certify:
FIRST: That a new Article NINTH of the Certificate of Incorporation of
American Coin & Stamp Ventures, Inc., be added as follows:
"NINTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a Director of
this Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a Director. No amendment to or repeal of
these provisions shall apply to or have any effect on the liability or alleged
liability of any Director of the Corporation for or with respect to any acts or
omissions of such Director occurring prior to such amendment."
SECOND: That the foregoing amendment has been duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
THIRD: That the capital of American Coin & Stamp
<PAGE>
Ventures, Inc., will not be reduced under or by reason of said amendment.
FOURTH: That the foregoing amendment shall become effective at the time
and on the day this certificate is filed in accordance with Section 103 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this certificate has been made under the seal of
American Coin & Stamp Ventures, Inc., and has been signed by the undersigned,
President and Secretary, respectively, of American Coin & Stamp Ventures, Inc.,
this 17th day of August, 1988.
/s/ Stanley Appelbaum
----------------------------------
STANLEY APPELBAUM, President
Attest:
/s/ Harold M. Hershman
- -------------------------------
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN COIN & STAMP VENTURES, INC.
Under Section 242 of the
CORPORATION LAW OF THE STATE OF DELAWARE
AMERICAN COIN & STAMP VENTURES, INC. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by written
consent filed with the minutes of the Board, adopted the following resolutions
proposing and declaring advisable the following amendments to the Certificate of
Incorporation of said corporation:
"1. That Article FIRST of the Certificate of Incorporation be
further amended and, as further amended, read as follows:
'FIRST: The name of the Corporation is COLONY INTERNATIONAL
INCORPORATED.";
2. That Article FOURTH of the Certificate of Incorporation be
amended and, as amended, read as follows:
'FOURTH: The amount of the total authorized capital stock of this
Corporation is Twenty Million (20,000,000) shares of Common Stock, with a par
value of $.0001 per share."
3. The foregoing amendments are effective as of the opening of
business on January 27, 1997.
4. Effective as of the opening of business on January 27, 1997,
the Corporation's outstanding shares are reverse split on a one-for-19.927
basis, so that each 19.927 shares of Common Stock, $.0001 par value outstanding
prior to the reverse split shall become one share of Common Stock, $.0001 par
value after the reverse split.
SECOND: That the aforesaid amendments and reverse split were duly
adopted in accordance with the applicable provisions of Section 242 of the
General Corporation Law of the State of Delaware, at a meeting of stockholders
duly called and held for the above purposes.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Joseph Brown, its President, and attested by Harold Hershman, its
Secretary, this 15th day of January, 1997.
AMERICAN COIN & STAMP VENTURES, INC.
By: /s/ Joseph Brown
------------------------------
Joseph Brown, President
ATTEST:
By: /s/ Harold Hershman
---------------------------
Harold Hershman, Secretary
<PAGE>
CERTIFICATE OF CHANGE OF LOCATION OF REGISTERED OFFICE
AND OF REGISTERED AGENT
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
COLONY INTERNATIONAL INCORPORATED
2. The registered office of the corporation within the State of Delaware is
hereby changed to 1313 N. Market Street, City of Wilmington 19801-1151, County
of New Castle.
3. The registered agent of the corporation within the State of Delaware is
hereby changed to The Company Corporation, the business office of which is
identical with the registered office of the corporation as hereby changed.
4. The corporation has authorized the changes hereinbefore set forth by
resolution of its Board of Directors.
Signed on July 7, 1997
/s/ S. Michie
------------------------------------------
Authorized Officer
President
------------------------------------------
Title
<PAGE>
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF
COLONY INTERNATIONAL INCORPORATED
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
Colony International Incorporated.
2. Article FIRST of the Certificate of Incorporation be amended to read
as follows:
FIRST: The name of the Corporation is Mobile PET Systems, Inc.
3. The amendment of the certificate of incorporation herein certified has
been duly adopted in accordance with the provisions of Sections 228
and 242 of the General Corporation Law of the State of Delaware.
Prompt written notice of the adoption of the amendment herein
certified will be given to those stockholders who have not consented
in writing thereto, as provided in Section 228 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Brent Nelson, its President this 6th day of January, 1999.
/s/ Brent Nelson
----------------------
Brent Nelson, President
<PAGE>
EXHIBIT 3.2
MOBILE PET SYSTEMS, INC.
A DELAWARE CORPORATION
- --------------------------------------------------------------------------------
AMENDED & RESTATED BYLAWS
ARTICLE 1
STOCKHOLDERS
1. STOCK CERTIFICATES. Certificates representing stock in the
corporation shall be signed by, or in the name of, the corporation by the
Chairman or Vice-Chairman of the Board of Directors (the "BOARD"), if any, or by
the President or a Vice-President and by the Treasurer or an Assistant Treasurer
or the Secretary or an Assistant Secretary of the corporation. Any or all the
signatures on any such certificate may be a facsimile. In case of any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed on a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than
one class of stock or more than one series of any class of stock, and
whenever the corporation shall issue any shares of its stock as partly paid
stock, the certificates representing shares of any such class or series or of
any such partly paid stock shall set forth thereon the statements prescribed
by the General Corporation Law. Any restrictions on the transfer or
registration of transfer of any shares of stock of any class or series shall
be noted conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or
uncertified shares in place of any certificate theretofore issued by it,
alleged to have been lost, stolen, or destroyed, and the Board may require
the owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance
of any such new certificate or uncertificated shares.
2. UNCERTIFIED SHARES. Subject to any conditions imposed by the General
Corporation Law, the Board of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of the stock of the
corporation shall be uncertificated shares. Within a reasonable time after the
issuance or transfer of any uncertificated shares, the corporation shall send to
the registered owner thereof any written notice prescribed by the General
Corporation Law.
Page 1 of 9
<PAGE>
3. FRACTIONAL SHARES. The corporation may, but shall not be required
to, issue fractions of a share. If the corporation does not issue fractions of a
share, it shall (1) arrange for the disposition of fractional interests by those
entitled thereto, (2) pay in cash the fair value of fractions of a share as of
the time when those entitled to receive such fractions are determined, or (3)
issue scrip or warrants in registered form (either represented by a certificate
or uncertificated) or bearer form (represented by a certificate) which shall
entitle the holder to receive a full share on the surrender of such scrip or
warrants aggregating a full share. A certificate for a fractional share or an
uncertificated fractional share shall, but scrip or warrants shall not unless
otherwise provided therein, entitle the holder to exercise voting rights, to
receive dividends thereon, and to participate in any of the assets of the
corporation in the event of liquidation. The Board may cause scrip or warrants
to be issued subject to the conditions that they shall become void if not
exchanged for certificates representing full shares or uncertificated full
shares before a specified date, or subject to the conditions that the shares for
which scrip or warrants are exchangeable may be sold by the corporation and the
proceeds thereof distributed to the holders of scrip or warrants, or subject to
any other conditions which the Board may impose.
4. STOCK TRANSFERS. On compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and, in the case of shares represented by certificates, on
surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
5. RECORD DATE. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board may fix a record date, which record date
shall not precede the date on which the resolution fixing the record date is
adopted by the Board, and which record date shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting. If no record date
is fixed by the Board, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board may fix a new record date for
the adjourned meeting. In order that the corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board may fix a record date, which record date shall not precede
the date on which the resolution fixing the record date is adopted by the Board,
and which date shall not be more than ten (10) days after the date on which the
resolution fixing the record date is adopted by the Board. If no record date has
been fixed by the Board, the record date for determining the stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the Board is required by the General Corporation Law, shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the corporation having custody of the
Page 2 of 9
<PAGE>
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified
or registered mail, return receipt requested. If no record date has been
fixed by the Board and prior action by the Board is required by the General
Corporation Law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the
close of business on the day on which the Board adopts the resolution taking
such prior action, in order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights of the stockholders entitled to
exercise any rights in respect of any change, conversion, or exchange of
stock, or for the purpose of any other lawful action, the Board may fix a
record date, which record date shall not precede the date on which the
resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is
fixed, the record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto.
6. MEANING OF TERMS. As used herein in respect of the right to notice
of a meeting of stockholders or a waiver thereof or to participate or vote
thereat or to consent or dissent in writing in lieu of a meeting, as the case
may be, the term "share" or "shares" or "share of stock" or "shares of stock" or
"stockholders" or "stockholders" refers to an outstanding share or shares of
stock and to a holder or holders of record of outstanding shares of stock when
the corporation is authorized to issue only one class of shares of stock, and
said reference is also intended to include any outstanding share or shares of
stock any holder or holders of record of outstanding shares of stock of any
class on which or on whom the certificate of incorporation confers such rights
where there are two or more classes or series of shares of stock or on which or
on whom the General Corporation Law confers such rights notwithstanding that the
certificate of incorporation may provide for more than one class or series of
shares of stock, one or more of which are limited or denied such rights
thereunder; provided, however, that no such rights shall vest in the event of an
increase or a decrease in the authorized number of shares of stock of any class
or series which is otherwise denied voting rights under the provisions of the
certificate of incorporation, except as any provisions of law may otherwise
require.
ARTICLE 2
STOCKHOLDER MEETINGS
1. TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen (13) months after the
organization of the corporation, and each successive annual meeting shall be
held on a date within thirteen (13) months after the date of the preceding
annual meeting. A special meeting shall be held on the date and at the time
fixed by the directors.
2. PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Delaware, as the directors may, from time
to time, fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in Delaware.
Page 3 of 9
<PAGE>
3. CALL. Annual meetings and special meetings may be called by the
directors or by any officer instructed by the directors to call the meeting.
4. NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally
or by mail, not less than ten (10) days nor more than sixty (60) days before the
date of the meeting, unless the lapse of the prescribed period of time shall
have been waived, and directed to each stockholder at his record address or at
such other address which he may have furnished by request in writing to the
Secretary of the corporation. Notice by mail shall be deemed to be given when
deposited, with postage thereon prepaid, in the United States Mail. If a meeting
is adjourned to another time, not more than thirty (30) days hence, and/or to
another place, and if an announcement of the adjourned time and/or place is made
at the meeting, it shall not be necessary to give notice of the adjourned
meeting unless the directors, after adjournment, fix a new record date for the
adjourned meeting. Notice need not be given to any stockholder who submits a
written waiver of notice signed by him before or after the time stated therein.
Attendance of a stockholder at a meeting of stockholders shall constitute a
waiver of notice of such meeting, except when the stockholder attends the
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice.
5. STOCKHOLDER LIST. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city or other municipality or
community where the meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where the meeting is
to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock ledger shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list required
by this section or the books of the corporation, or to vote at any meeting of
stockholders.
Page 4 of 9
<PAGE>
6. CONDUCT OF MEETING. Meetings of the stockholders shall be presided
over by one of the following officers in order of seniority and if present and
acting: the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any; the President, a Vice-President, or, if none of the foregoing is in office
and present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the Chairman of the meeting shall appoint a secretary of
the meeting.
7. PROXY. Every stockholder may authorize another person or persons to
act for him by proxy in all matters in which a stockholder is entitled to
participate, whether by waiving notice of any meeting, voting or participating
at a meeting, or expressing consent or dissent without a meeting. Every proxy
must be signed by the stockholder or by his attorney-in-fact. No proxy shall be
voted or acted on after three (3) years from its date unless such proxy provides
for a longer period. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and, if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally.
8. INSPECTORS. The directors, in advance of any meeting, may, but need
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act ,
the vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before entering on the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspectors at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding the voting power of
each, the shares of stock represented at the meeting, the existence of a quorum,
the validity and effect of proxies, and shall receive votes, ballots, or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots, or consents,
determine the result, and so such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question, or matter determined by him or them and execute a
certificate of any fact found by him or them. Except as otherwise required by
subsection (e) of Section 231 of the General Corporation Law, the provisions of
that Section shall not apply to the corporation.
9. QUORUM. The holders of a majority of the outstanding shares of
stock shall constitute a quorum at a meeting of stockholders for the transaction
of any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
10. VOTING. Each share of stock shall entitle the holders thereof to
one vote. Directors shall be elected by a plurality of the vote of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. Any other action shall be authorized by a majority of
the votes case except where the General Corporation Law prescribes a different
percentage of votes and/or
Page 5 of 9
<PAGE>
a different exercise of voting power, and except as may be otherwise
prescribed by the provisions of the certificate of incorporation and these
Amended & Restated Bylaws ("BYLAWS"). In the election of directors, and for
any other action, voting need not be by ballot.
11. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Action taken pursuant to this paragraph shall be
subject to the provisions of Section 228 of the General Corporation Law.
ARTICLE 3
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by or under the direction of the Board of the
corporation. The Board shall have the authority to fix the compensation of the
members thereof. The use of the phrase "whole board" herein refers to the total
number of directors which the corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The Board
shall consist of three (3) persons. Thereafter the number of directors
constituting the whole board shall be at least one. Subject to the foregoing
limitation, such number may be fixed from time to time by action of the
stockholders or of the directors, or, if the number is not fixed, the number
shall be three (3). The number of directors may be increased or decreased by
action of the stockholders or of the directors.
3. ELECTION; TERM. Any director may resign at any time on written
notice to the corporation. Thereafter, directors who are elected at an annual
meeting of stockholders, and directors who are elected in the interim to fill
vacancies and newly created directorships, shall hold office until the next
annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Except as the General
Corporation Law may otherwise require, in the interim between annual meetings of
stockholders or of special meetings of stockholders called for the election of
directors and/or for the removal of one or more directors and for the filling of
any vacancy in that connection, newly created directorships and any vacancies in
the Board, including unfilled vacancies resulting from the removal of directors
for cause or without cause, may be filled by the vote of a majority of the
remaining directors then in office, although less than a quorum, or by the sole
remaining director.
Page 6 of 9
<PAGE>
ARTICLE 4
MEETINGS OF DIRECTORS
1. TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
2. PLACE. Meetings shall be held at such place within or without the
State of Delaware as shall be fixed by the Board.
3. CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
of any, or the President, or of a majority of the directors in office.
4. NOTICE OR ACTUAL/CONSTRUCTIVE NOTICE; WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time stated thereon. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
5. QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A majority
of the directors present, whether a quorum is present, may adjourn a meeting to
another time and place. Except as herein otherwise provided, and except as
otherwise provided by the General Corporation Law, the vote of the majority of
the directors present at a meeting at which a quorum is present shall be the act
of the Board. The quorum and voting provisions herein stated shall not be
construed as conflicting with any provisions of the General Corporation Law and
these Bylaws which govern a meeting of directors held to fill vacancies and
newly created directorships in the Board or action of disinterested directors.
Any member or members of the Board or of any committee designated
by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
Page 7 of 9
<PAGE>
6. CHAIRMAN. The Chairman of the Board, if any and if present and
acting, shall preside at all meetings. Otherwise, the vice-Chairman of the
Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
7. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the
General Corporation Law, any director or the entire Board may be removed, with
or without cause, by the holders of a majority of the shares then entitled to
vote at an election of directors.
8. COMMITTEES. The Board may, by resolution passed by a majority of
the whole Board, designate one or more committees, each committee to consist of
one or more of the directors of the corporation. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of any member of any such committee or committees, the member
or members thereof present at any meeting and not disqualified from voting,
whether he or they constitute a quorum, may unanimously appoint another member
of the Board to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board, shall have an may exercise the powers and authority of
the Board in the management of the business and affairs of the corporation with
the exception of any authority the delegation of which is prohibited by Section
141 of the General Corporation Law, and may authorize the seal of the
corporation to be affixed to all papers which may require it.
9. WRITTEN ACTION. Any cation required or permitted to be taken at any
meeting of the Board or any committee thereof may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
ARTICLE 5
OFFICERS
1. OFFICERS. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer, and, if deemed necessary, expedient, or
desirable by the Board, a Chairman of the Board, a Vice-Chairman of the Board,
an Executive Vice-President, one or more other Vice-Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
with such titles as the resolution of the Board choosing them shall designate.
Except as may otherwise be provided in the resolution of the Board choosing him,
no officer other than the Chairman or Vice-Chairman of the Board, if any, need
be a director. Any number of officers may be held by the same person, as the
directors may determine.
2. TERM. Unless otherwise provided in the resolution choosing him,
each officer shall be chosen for a term which shall continue until the meeting
of the Board following the next annual meeting of stockholders and until his
successor shall have ben chosen and qualified.
Page 8 of 9
<PAGE>
3. AUTHORITY. All officers shall have such authority and perform such
duties in the management and operation of the corporation as shall be prescribed
in the resolutions of the Board designating and choosing such officers and
prescribing their authority and duties as are incident to their office except to
the extent that such resolutions may be inconsistent therewith. The Secretary or
an Assistant Secretary of the corporation shall record all the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may be removed,
with or without cause, by the Board. Any vacancy in any office may be filled by
the Board.
ARTICLE 6
CORPORATE SEAL
The corporate seal shall be in such form as the Board shall prescribe.
ARTICLE 7
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject
to change, by the Board.
ARTICLE 8
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation, as
amended, and the provisions of the General Corporation Law, the power to amend,
alter, or repeal these Bylaws and to adopt new Bylaws may be exercised by the
Board or by the stockholders.
THE UNDERSIGNED Secretary certifies that the foregoing Bylaws have been
adopted as the Bylaws of the Corporation.
Dated as of August 11, 1999
/s/ Tom Brown
- ----------------------------------
TOM BROWN, Secretary
Page 9 of 9
<PAGE>
[FINOVA LOGO] EXHIBIT 10.1
FINANCIAL INNOVATORS
FINOVA CAPITAL CORPORATION EQUIPMENT LEASE
HEALTHCARE FINANCE
311 S. WACKER DRIVE, SUITE 4400 NO. 4125
CHICAGO, IL 60606 ---------------
----------------------
Lessee's Tax ID Number
TERMS AND CONDITIONS
FINOVA CAPITAL CORPORATION ("Lessor") agrees to lease to Lessee, and Lessee
agrees to lease from Lessor, the personal property, together with all
attachments, replacements, parts, additions, and accessories ("Equipment")
listed on any Lease Schedule. The words YOU, YOUR, and YOURS mean the Lessee
indicated below. The words WE, US, and OUR refer to the Lessor indicated
above.
1. TERM. The term of this lease will start on the date we sign this
lease ("Lease Commencement Date"). The payments of rent are payable
periodically in advance as stated on any Lease Schedule. You promise to pay
the total amount of all rent payments stated in any Lease Schedule, plus any
other amounts provided for in this lease. This lease cannot be canceled by
you.
2. RENT
(A) You will pay for use of the Equipment all rent payments and
other amounts provided for in this lease. Consecutive periodic rent payments
will be due on the first day of the month following the Acceptance Date (see
Section 3. Acceptance) of the Equipment (the "Payment Date"). You agree to
pay one prorate rent payment from the Acceptance Date to the first Payment
Date. You will pay all rent payments even if you do not receive a notice that
the payments are due. All rent payments and other amounts due will be made to
us at the address on this lease, or to any other address we designate in
writing.
(B) You will pay a late charge of five percent (5%) on any part of
a rent payment or other amount payable not made by you within five (5) days
of the due date, but only to the extent permitted by law.
(C) The rent payment on the Lease Schedule shall be raised or
lowered, in a proportionate manner, if there is an adjustment to the
equipment cost, or if a tax is required on the purchase of the Equipment or
the rent. We are authorized by you to insert the amount of the adjusted rent
on the appropriate Lease Schedule.
3. ACCEPTANCE. On the date the Equipment is available for first use
(the "Acceptance Date"), you will sign and deliver to us an acceptance
certificate in a form satisfactory to us. We may terminate this lease without
cause for any Equipment you have not accepted within six (6) months of our
issuing a purchase order for the Equipment.
4. NET LEASE. This is a net lease. You promise to pay when due all
taxes, licenses, fines, penalties, and other charges (including but not
limited to personal property, sales, state, Federal, and local taxes)
relating to this lease or the Equipment. Any taxes due will be based on the
full amount of the tax, regardless of any discounts we may receive.
5. END OF LEASE OPTION; REDELIVERY OF EQUIPMENT; LEASE EXTENSION.
(A) END OF LEASE OPTION. Provided you are not in default, at the
expiration of the lease term of any Lease Schedule, you have the option to:
(i) renew this lease with respect to all the Equipment on that Lease Schedule
for a term agreeable to us and at a rent equal to the then fair market rental
for the renewal term, payable in advance, or (ii) purchase all, but not less
than all, of the Equipment provided on that Lease Schedule for the then fair
market value, or (iii) return the Equipment to us. You will give us ninety
(90) days prior written notice of the option you choose.
(B) REDELIVERY OF EQUIPMENT. If you decide not to renew or
purchase all the Equipment, then when the term of that Lease Schedule
expires, at your own risk and expense, you will disconnect, properly package
for transportation, and return the Equipment to us, freight prepaid, to a
location designated by us within the continental United States. You agree to
include all
<PAGE>
instruction and service manuals, software documentation, service records, and
a certificate from the manufacturer of the Equipment or other service
organization reasonably acceptable to us that (i) at the time of shipment to
us, the Equipment is in good condition and contains all software and (ii) the
manufacturer will provide an extended maintenance contract to a new user at a
new location to perform the same or similar procedures as performed by you,
without additional costs for repair, refurbishment or software.
(C) LEASE EXTENSION. If you do not renew, purchase or return the
Equipment as provided above, then this lease shall be extended on a
month-to-month basis for a minimum of six (6) months and you agree to pay us
the same rent as stated on the Lease Schedule. During the month-to-month
period, at our option, we may terminate this lease at any time by giving you
ten (10) days notice.
6. OWNERSHIP; IDENTIFICATION. We are the owner of the Equipment and
have title to the Equipment. If any other person attempts to claim ownership
of the Equipment by asserting that claim against you or through you, you
agree, at your expense, to protect and defend our title to the Equipment.
Further, you agree that you will at all times, and at your expense, keep the
Equipment free from any legal process or lien, and you will give us immediate
notice if any legal process or lien is asserted or made against the
Equipment. So long as you are not in default under any of the terms of this
lease, we agree that you shall quietly use and enjoy the Equipment. We may
require plates or markings be placed on the Equipment indicating our
ownership. You represent that the Equipment shall always remain personal
property, even though the Equipment may become attached to real estate.
7. COMPLIANCE WITH LAW; INDEMNIFICATION. You will use the Equipment
for business purposes only in compliance with all applicable laws and
regulations. You agree that we are not responsible for any injuries or losses
to you or any other person caused by the installation or use of the
Equipment. EXCEPT FOR ACTS BY US THAT ARE IN VIOLATION OF OUR OBLIGATIONS
UNDER THIS LEASE, YOU AGREE TO INDEMNIFY, HOLD HARMLESS AND DEFEND US FROM
AND AGAINST ANY AND ALL CLAIMS, COSTS, ATTORNEYS' FEES, EXPENSES, DAMAGES
AND LIABILITIES ARISING FROM OR RELATING TO THE POSSESSION, OPERATION, USE,
OWNERSHIP, SELECTION, LEASING, MAINTENANCE, DELIVERY OR RETURN OF ANY OF THE
EQUIPMENT.
You agree that we shall be entitled to deductions and other benefits
provided to an owner of property by federal and state income tax laws,
including deductions for cost recovery and depreciation on the Equipment over
the shortest period available. If we lose the right to claim any benefits, or
any portion of the benefits are disallowed or recaptured as a result of any
omissions, acts, or failures to act by you, you shall pay us an amount, after
deduction of any taxes we must pay on said amount, that allows us to receive
(on an after-tax basis over the full term of the lease) the same rate of
return had there not been a loss or disallowance of benefits. You agree to
pay any interest or penalties due in connection with such loss or
disallowance.
The indemnities in this section shall continue even after the term of
the lease has expired.
8. MAINTENANCE. You agree that at your expense you will provide for
all maintenance, service, and repairs necessary to keep all Equipment in good
condition, working order and repair so that it meets or exceeds the
manufacturer's original performance specifications. You may not alter or
modify the Equipment without our prior written permission, which we will not
unreasonably withhold. You agree that all parts, modifications, alterations,
and additions are part of the Equipment and become our property.
9. DISCLAIMER OF WARRANTIES; LIMITATION OF LIABILITY. WE ARE LEASING
THE EQUIPMENT TO YOU "AS IS". WE MAKE NO WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT AND FITNESS FOR A
PARTICULAR PURPOSE OR ORDINARY USE IN CONNECTION WITH THIS LEASE. If the
seller or anyone else has made a representation or warranty to you as to the
Equipment or any other matter, you agree that such representation or warranty
shall not obligate us, nor shall the breach of such relieve you of, or in any
way affect, any of your obligations to us any this lease. If the Equipment is
not satisfactory for any reason, you shall make your claim only against the
seller and you shall nevertheless pay us all rent payable under this lease.
So long as you are not in default under any of the terms of this lease, we
transfer to you any warranties made to us by the manufacturer or seller. You
understand and agree that the seller, its agents and employees are not agents
of ours, nor are they authorized to waive or change any term or condition of
this lease. YOU AGREE, THAT REGARDLESS OF CAUSE, YOU WILL NOT ASSERT ANY
CLAIM WHATSOEVER AGAINST US FOR LOSS OF PROFITS YOU EXPECTED TO MAKE OR ANY
OTHER DIRECT, SPECIAL, OR INDIRECT DAMAGES.
10. ASSIGNMENT. YOU MAY NOT SELL, TRANSFER, ASSIGN, OR SUBLEASE THE
EQUIPMENT. WE MAY, WITHOUT NOTIFYING YOU, SELL, ASSIGN OR TRANSFER THIS LEASE
AND OWNERSHIP OF THE EQUIPMENT; AND YOU AGREE THAT IF WE DO SO, THE NEW LESSOR
WILL HAVE THE SAME RIGHTS AND BENEFITS THAT WE NOW HAVE, AND THE NEW LESSOR
WILL NOT HAVE TO PERFORM ANY OF OUR OBLIGATIONS. YOU AGREE THAT THE RIGHTS OF
THE NEW LESSOR WILL NOT BE SUBJECT TO ANY CLAIMS, DEFENSES OR SET-OFFS THAT
YOU MAY HAVE AGAINST US. HOWEVER, ANY SUCH ASSIGNMENT, SALE, OR TRANSFER OF
THIS LEASE OR THE EQUIPMENT WILL NOT RELIEVE US OF OUR
<PAGE>
OBLIGATIONS TO YOU UNDER THIS LEASE. YOU AGREE TO PAY ALL RENT PAYMENTS AND
OTHER AMOUNTS DUE DIRECTLY TO OUR ASSIGNEE IF WE NOTIFY YOU TO DO SO.
11. INSURANCE; LOSS OR DAMAGE.
(A) INSURANCE. You agree to maintain liability insurance and keep
the Equipment fully insured against loss until you have met all of your
obligations under this Lease. You agree to provide and maintain, at your
expense, insurance against fire, theft, and all other risks of loss
customarily insured against on the Equipment by businesses like yours, for
the greater of the full replacement value or the Stipulated Loss Value
reflected on the attached Exhibit A. Prior to the Equipment being delivered
to you, you agree to provide us with certificates or other evidence of
insurance in a form acceptable to us, from insurers acceptable to us, that
name us as additional insured for liability insurance and loss payee for
property damage insurance, and provide us with at least thirty (30) days
prior written notice if the policy is changed or canceled.
(B) LOSS OR DAMAGE. You will bear the entire risk of loss and
damage from any cause whatsoever ("Loss"). If a Loss occurs, you shall
promptly notify us and, at our option, either (i) place the Equipment in good
condition and repair; or (ii) replace the Equipment with equipment having the
same value and function which is acceptable to us; or (iii) pay us the fair
value of the Equipment on the date of the Loss, which you agree will be the
sum of (a) the total rent due and owing at the time of such payment, and (b)
the amount arrived at by multiplying the equipment cost by the Stipulated
Loss Value opposite the rent payment number preceding the date of Loss.
12. USE; LOCATION.
(A) USE. You shall cause the Equipment to be operated by qualified
personnel only, within its normal capacity, and in accordance with applicable
manufacturers' instructions and governmental regulations. YOU AND YOUR AGENTS
AND EMPLOYEES ASSUME RESPONSIBILITY FOR ANY CLAIMS OR DAMAGES ARISING FROM
SUCH USE. You are responsible for all licenses, permits and consents required
by law or any government body in connection with the Equipment.
(B) LOCATION. You agree that you will not remove the Equipment from
its place of installation unless you get our written permission in advance.
13. EVENT OF DEFAULT. You will be default if you (a) do not pay rent or
any other amount payable within ten (10) days of the due date; or (b) break
any of your promises or fail to perform any obligation under this lease and
your failure continues for more than ten (10) days after we send you written
notice; or (c) attempt to remove, sell, or lease any of the Equipment without
our written permission; or (d) are unable to pay your debts as they become
due, assign your assets for the benefit of your creditors, or enter
(voluntarily or involuntarily) a bankruptcy proceeding; or (e) make any
representation or warranties in this lease or the credit information that is
misleading or false in any material respect; or (f) are in default under any
material obligation; or (g) are in default under any other agreement
with us or our affiliates.
14. REMEDIES. If you are in default, we can do any one or more of the
following: (a) require you to pay us the remaining balance of all the rent
payments due under this lease, present valued using a six percent (6%) per
year discount rate; (b) require you to pay us one hundred twenty five percent
(125%) of the then applicable Stipulated Loss Value as liquidated damages;
(c) remove the Equipment from its location; (d) sell or lease any or all of
the Equipment to others or dispose of it; (e) use any of the remedies
available to us under the Uniform Commercial Code or any other law. If we
take any action to enforce this lease or protect our interest in the
Equipment, you will pay our actual costs, including reasonable attorneys'
fees. You agree that any delay or failure to enforce our rights under this
lease does not prevent us from enforcing any rights at a later time.
15. REPRESENTATIONS AND WARRANTIES OF LESSEE. You represent and
warrant that: (a) you are in good standing under the laws of the jurisdiction
under which you are organized and are fully qualified to do business in each
jurisdiction where your activities require such qualification; (b) you have
the authority and legal right to enter into and perform your obligations
under this lease and any Lease Schedule; (c) the lease and all Lease
Schedules are your valid and binding obligations and are enforceable by us;
(d) any approval, notice, registration, or other action required by your
organizational documents, or any order of any court or other governmental
agency in connection with your signing, delivery, and performance of this
lease has been given or obtained; (e) except as you have disclosed to us in
writing prior to our entering into this lease with you, there are no actions,
suits or proceedings pending or, to your knowledge, threatened against you or
your property which, if decided against you, would have a material
unfavorable effect on your financial condition or your ability to pay us
under this lease; (f) the balance sheet and related statement of income and
statement of changes in financial position of Lessee delivered to us were
prepared in conformity with generally accepted accounting principles and
fairly represent your position as of the date of such statements; (g) you
have the right, title or interest in or to the Equipment, except that given
by this lease; (h) as of the Acceptance Date, the Equipment will be new and
unused; and (i) you will not use the Equipment outside the United States.
<PAGE>
16. LESSOR'S RIGHT TO PERFORM FOR LESSEE. In the event you fail to
comply with any part of this lease, we can, but we do not have to, take any
action necessary to cause your compliance, without waiving any event of
default. If we are required to pay any amount to obtain your compliance, the
amount we pay plus all of our expenses, including reasonable attorneys' fees,
in causing your compliance, shall become additional rent and shall be paid by
you at the time of the next rental payment due.
17. REPORTS; INSPECTION.
(A) REPORTS. Within ninety (90) days after the close of each
fiscal quarter and year, you will provide us with a balance sheet, statement
of income, and statement of changes in your financial position as of the end
of such fiscal quarter and year, in each case audited by independent public
accountants. Additionally, you will provide us such other information we may
reasonably request from time to time.
(B) INSPECTION. Upon our request, you will confirm the location of
any Equipment for us and, at any reasonable time, allow us to inspect and
observe the use and condition of the Equipment and copy your operating and
maintenance records relating to the Equipment.
18. NOTICE. If any notices or demands are required under this lease,
they shall be sufficient if given in writing either personally or by
first-class mail, postage prepaid, to the addresses in the Lease Schedules,
or to any other address either party may designate in writing. Such notice
shall be effective when deposited in the United States mail.
19. JURISDICTION. THIS LEASE SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF ARIZONA, THE STATE IN WHICH LESSOR'S PRINCIPAL PLACE OF BUSINESS IS
LOCATED. YOU AGREE THAT THE COURT OF THE STATE OF ARIZONA FOR MARICOPA
COUNTY OR ANY OTHER FEDERAL DISTRICT COURT HAVING THE JURISDICTION IN THAT
COUNTY SHALL HAVE NON-EXCLUSIVE JURISDICTION FOR DETERMINING ALL DISPUTES
ARISING UNDER THIS LEASE. HOWEVER, LESSOR MAY BRING ANY ACTION OR CLAIM TO
ENFORCE THE PROVISIONS OF THIS LEASE IN ANY OTHER APPROPRIATE STATE OR FORUM.
YOU WAIVE TRIAL BY JURY IN ANY ACTION BETWEEN US.
20. FINANCING STATEMENTS. You give us the right to immediately file
any financing statements and other documents we may require with respect to
the lease and the Equipment, as well as the right to sign any such financing
statements as your attorney-in-fact.
21. UCC-ARTICLE 2A PROVISIONS. You agree that this lease is a "Finance
Lease" under Article 2A of the Uniform Commercial Code; that is you
acknowledge that (a) we did not select, manufacture or supply the Equipment,
but we did purchase the Equipment for lease to you; and (b) we have given
you the name of the seller of the Equipment you are leasing from us in the
Lease Schedule. You may have rights under the supply contracts and may
contact the seller for a description of those rights or warranties. To the
extent permitted by applicable law, you waive any and all rights and
remedies given to you under UCC Sections 2A-303 and 2A-508 through 522.
22. PUBLICITY. You authorize us to issue, at our sole option,
appropriate press releases and to cause a tombstone to be published
announcing the completion of this transaction and the total amount of the
lease.
23. MISCELLANEOUS. This lease contains the entire agreement between
Lessee and Lessor and it may not be altered, amended, modified, terminated or
otherwise changed except in writing and signed by both parties. This lease
is for the benefit of and obligates you and your personal representatives,
successors and assigns. The captions used in this lease are for convenience
only and shall not define or limit any of the terms of this lease. If more
than one Lessee is named in the lease and any Lease Schedule, the liability
of each Lessee shall be joint and several.
The parties hereto have executed this lease dated as of the _____day of
_______________, 19______.
FINOVA CAPITAL CORPORATION MOBILE PET SYSTEMS, INC.
- --------------------------------------- --------------------------------
Lessor Lessee
By: /s/ Anne M. McNeil, Vice President By: /s/ Paul J. Crowe, CEO/Pres.
------------------------------------ ------------------------------
Title Title
<PAGE>
ADDENDUM NO. ONE
TO
LEASE SCHEDULE NO. 4125.01
BETWEEN
FINOVA CAPITAL CORPORATION (LESSOR)
AND
MOBILE PET SYSTEMS, INC. (LESSEE)
DATED THE DAY OF , 19
------- ------------------------- ----
EQUIPMENT SCHEDULE
Equipment provided by: Siemens Medical Systems, Inc., 186 Wood Avenue South,
Iselin, NH 08830-0401
- - One (1) Siemens ECAT EXACT P.E.T. Scanner System
The ECAT EXACT is a high-resolution positron emission tomography
system for imaging biochemical processes and metabolism for whole
body applications. The multi-detector ring system provides 3D
acquisition and reconstruction in the static and dynamic modes.
The ECAT EXACT consists of a 47 image plane system with a 16.2 cm
(6.4 in) field of view.
- High spatial slice resolution in transaxial and axial dimensions
- Three-dimensional display of organs with a large axial view
- Excellent volume sensitivity
- Fast acquisition and reconstruction of 64 x 64 and 128 x 128
matrices
- High-resolution, flicker free, color display monitor
- Unique block detector technology provides excellent temporal
and energy resolution response
- Simultaneous data acquisition and image reconstruction for high
patient throughput
- Retractable rotating rod source holders for quick and accurate
attenuation correction. (Ge-68 is available in safe, solid form
from recommended vendors).
- Water-cooled gantry for quiet operation.
- Window-orientated operating software.
The system consists of:
Whole Body Ring Detector Gantry:
- 824 mm detector ring diameter.
- 56.2 cm gantry aperture
- 16.2 cm (6.4 inch) axial field of view
- Nine laser lines for precise, reproducible patient positioning
- Dual operator controls on gantry for positioning from either
side of patient
- Count rate monitor at gantry control panels
1
<PAGE>
ADDENDUM NO. ONE
TO
LEASE SCHEDULE NO. 4125.01
BETWEEN
FINOVA CAPITAL CORPORATION (LESSOR)
AND
MOBILE PET SYSTEMS, INC. (LESSEE)
DATED THE DAY OF , 19
------- ------------------------- ----
EQUIPMENT SCHEDULE
- Three integrated retractable transmission rod source holders
which extend/retract from a lead housing under computer control
for enhanced patient throughput and reduced radiation exposure.
Patient Handling System:
- Low attenuation foam core carbon fiber pallet
- 57 to 93 cm (22 to 36 inch) vertical motion range
- 195 cm (77 inch) horizontal scan range
- Low attenuation head holder
- Maximum patient weight of 159 kg (350 lbs.).
Data Acquisition/Processing and Storage Electronics:
- Image plane coincidence processor
- Real-time sorter (RTS) with 64 MB memory
- VME Bus acquisition controller
- 1 Quad i860 array processor
- SCSI (small computer system interface) adapter to the VME Bus
- 2.0 GB acquisition disk
- Ethernet interface to operator's console
- Sparc processor
Operator's Console for Image Display and Analysis:
- UltraSPARC 60 1300 Workstation with 20 inch, high resolution
monitor
- 256 MB main memory
- 1 x 4.2, 1 x 9.0 GB internal disk storage
- 2.6 GB erasable optical storage system for archiving image data
- CD ROM drive (mounted in desktop storage unit)
- 600 dpi laser printer
- Ethernet connection to data acquisition/processing and storage
electronics.
- 4mm DAT (digital audio tape) archive system, mounted in desktop
storage unit.
- UNIX operating system and utilities
- TCP/IP and network file system communication software.
- Floppy drive
- ECAT Software version 7.1 features, including iterative
reconstruction, segmented attenuation correction, and the whole
body protocol.
2
<PAGE>
ADDENDUM NO. ONE
TO
LEASE SCHEDULE NO. 4125.01
BETWEEN
FINOVA CAPITAL CORPORATION (LESSOR)
AND
MOBILE PET SYSTEMS, INC. (LESSEE)
DATED THE DAY OF , 19
------- ------------------------- ----
EQUIPMENT SCHEDULE
ECAT STANDARD SOFTWARE
Image Acquisition:
- Transmission scan allows accurate measurement of tissue
attenuation correction coefficients
- Static emission scan
- Dynamic emission scan
- Acquisition protocols
- Image reconstruction and processing
- Wide variety of reconstruction filters
- Image size and displacement parameters
- Calculated or measured attenuation correction.
Display Software:
- Window-oriented to allow simultaneous acquisition,
reconstruction, data processing and image display
- Image zoom and magnification
- Multi-image static display
- Any oblique data re-orientation
- Cine mode display
- Multiple plane dynamic displays
- Region of interest and image profiles
- Image filtering, summing and arithmetic
- Regions of interest and image statistics
- Screen save/restore operations
- Image labeling with variable fonts and graphics
- Interactive color translation table operations
- Three-dimensional volume interactive data review (transverse,
sagittal and coronal displays).
Utilities Software:
- Patient database
- Patient data archive
- Motion control
- System calibration
- System normalization
- Performance tests
- System diagnostics.
Educational Software:
- Multi-media educational package LPP (Let's Play PET) for use on
separate Macintosh or ICON (not provided with system).
3
<PAGE>
ADDENDUM NO. ONE
TO
LEASE SCHEDULE NO. 4125.01
BETWEEN
FINOVA CAPITAL CORPORATION (LESSOR)
AND
MOBILE PET SYSTEMS, INC. (LESSEE)
DATED THE DAY OF , 19
------- ------------------------- ----
EQUIPMENT SCHEDULE
Systems Documentation (1 set):
- ECAT scanner software manual
- ECAT scanner hardware manual.
- Water-cooled, whole-body gantry
- 9216 Bismuth germanate (BGO) crystals
- 16.2 cm (6.4 inch) axial field of view
- Simultaneous acquisition of up to 47 contiguous slices
- 23 interplane retractable septa for high axial resolution, high
sensitivity, and minimum scatter to permit 3-D acquisition.
- Full-body patient couch and head holder
- Data acquisition and electronics
- ECAT Software
- Operators console and peripherals
2 1792188 PRE-INSTALL KIT EXACT 31/47
2 3549560 ISOLATION TRANSFORMER (US)
Transformer for isolating ECAT power from line power
2 3552945 GANTRY AIR/WATER CHILLER (60HZ)
Closed system air/water chiller. Requires onsite chilled water.
Requires siting in well-ventilated utility room.
2 2964901 ECAT EXACT INSTALLATION #USA
Installation by the SMS PET Group is available.
000700 10 5220228 PET APPLICATIONS TRAINING (PER DAY)
Operator's training for ECAT Scanners performed by applications
specialist. Scheduling for training is available upon request.
Standard 7.1 software training consists of 5 working days. New
scanner installation training consists of five to ten working days.
4
<PAGE>
ADDENDUM NO. ONE
TO
LEASE SCHEDULE NO. 4125.01
BETWEEN
FINOVA CAPITAL CORPORATION (LESSOR)
AND
MOBILE PET SYSTEMS, INC. (LESSEE)
DATED THE ___________ DAY OF _________________, 19____
EQUIPMENT SCHEDULE
Equipment provided by: Calumet Coach Company, 2150 East Dolton Road, Calumet
City, IL 60409-1411
One (1) Calumet Coach Model MMS-381P 8'x40' Self-Propelled Mobile Unit for the
Siemens ECAT P.E.T. Scanner described above.
VEHICLE IDENTIFICATION NUMBER: 44KFB6287WWZ18936
-----------------------------
ECAT EXACT 47 SYSTEM
Model # 3600079-00
Serial # 0001010
EXACT GANTRY
Part # 3200839-00
Serial # 9801039
FINOVA CAPITAL CORPORATION MOBILE PET SYSTEMS, INC.
- -------------------------------------- ---------------------------------
Lessor Lessee
By: /s/ Anne M. McNeil, Vice President By: /s/ Paul J. Crowe CEO/PRES.
---------------------------------- ----------------------------
Title Title
5
<PAGE>
ADDENDUM I
TO
EQUIPMENT LEASE NO. 4125
BETWEEN
FINOVA CAPITAL CORPORATION (LESSOR)
AND
MOBILE PET SYSTEMS, INC. (LESSEE)
This Addendum I (this "Addendum") is attached to and hereby
made an integral part of that certain Equipment Lease No. 4125 between the
above-referenced Lessor and Lessee (herein, the "Lease"). This Addendum
affects the Lease and each Lease Schedule attached thereto, and in that
context is distinguished from those certain addenda which are now or may
hereafter be attached to the Lease and which reference themselves as addenda
to a specific Lease Schedule (e.g., those certain Addenda attached to Lease
Schedule No. 4125.01). Terms used herein with initial capital letters, to the
extent not otherwise defined herein, shall have the meanings given such terms
in the Lease.
1. CONDITIONS PRECEDENT. Lessor and Lessee intend that the
Lease shall govern the rights and duties of the parties with respect to a number
of different items of Equipment, each of which shall be identified and
referenced on a separate Lease Schedule. With respect to all such Equipment
other than the Equipment described on Lease Schedule No. 4125.01, the following
conditions precedent must be satisfied prior to the addition of any such
Equipment to the terms of the Lease:
(a) There shall not exist any event of default under the
Lease, or any act or occurrence which, with the giving of notice or the
passage of time, or both, would constitute an event of default;
(b) Lessee shall have demonstrated, to Lessor's
satisfaction, that Lessee possesses cash in an amount equal to twenty
percent (20%) of the total purchase price applicable to the proposed new
Equipment, which amount shall have been placed by Lessee in a separate
operating account, for use as working capital with respect to the
operations of the proposed new items of Equipment;
(c) Lessee shall have provided to Lessor documentation
substantiating that, with respect to the specific proposed new items of
Equipment, Lessee has in effect signed, valid and enforceable contractual
agreements (each of which must be in form and substance satisfactory to
Lessor) with one or more hospitals (the creditworthiness of which must be
satisfactory to Lessor in all respects), which agreements will provide
Lessee with a minimum of eighty-eight (88) positron emission tomography
("PET") procedures per month, for a term that shall not expire prior to
the date final payment is due under the Lease with respect to the
proposed new items of Equipment. Lessor shall be entitled to perform its
own due diligence
<PAGE>
with respect to each hospital which is to become party to any such
contract, to determine whether such hospital is satisfactorily
creditworthy, in Lessor's sole discretion;
(d) Lessee shall have demonstrated, to Lessor's
satisfaction, that Lessee has received not less than $1,800,000 as the
net proceeds from Lessee's pending offering of securities. In addition to
the foregoing, Lessor shall have reviewed and approved all terms and
conditions applicable to such offering of securities, together with the
rights and privileges to be granted in favor of all persons purchasing
securities issued by Lessee;
(e) Lessee shall have executed and delivered a
Collateral Assignment of Agreements, or a supplement to any previously
delivered Collateral Assignment of Agreements, either of which must be in
form and substance satisfactory to Lessor, pursuant to which Lessee shall
have collaterally assigned in favor of Lessor all of its rights under
those certain agreements referenced in Section 1(c) above;
(f) All documents and instruments previously executed in
favor of Lessor, including without limitation that certain Continuing
Personal Guaranty with respect to which Paul J. Crowe is "Guarantor," and
that certain Subordination Agreement with respect to which Paul J. Crowe,
John Fleming, and Brent Nelson are "Directors," shall each remain in full
force and effect, and none of the parties to any such agreement shall
have revoked, rescinded, or in any way attempted to repudiate their
obligations to Lessor thereunder; and
(g) Lessee shall have deposited with Lessor, as a
security deposit to be held by Lessor and in Lessor's name, an amount
equal to three (3) months rental payment under the Lease Schedule which
will be applicable to the proposed new Equipment. The foregoing deposit
may be applied by Lessor in Lessor's discretion upon the occurrence of
any event of default under the Lease. If not previously applied, the
foregoing deposit shall be applied in payment of the last three rental
payments accruing under the applicable Lease Schedule. Lessor shall not
be obligated to segregate the foregoing deposit or to establish a
separate account for the same. If requested by Lessor, Lessee shall
provide Lessor with Lessee's taxpayer identification number and any other
information necessary in order to permit Lessor to file reports for tax
purposes.
(h) In the event that Lessor's total committed funds
under the Lease (determined by reference to the total progress payments
funded by Lessor to the manufacturers and suppliers of all Equipment then
subject to the Lease, together with other ancillary items and costs
necessary in order to enable such Equipment to be installed and accepted
by Lessee) is greater than $5,000,000, or after giving effect to the
addition of such items of Equipment as are proposed to be subject to the
next Lease Schedule, would exceed $5,000,000, then the following two
additional conditions must be satisfied:
2
<PAGE>
(i) Lessee shall have demonstrated, to Lessor's
satisfaction, that Lessee possesses a minimum balance of cash and
cash equivalents of at least $500,000; and
(ii) Lessee shall have attained a Debt Service
Coverage Ratio (calculated in the manner set forth in Section 3
below), of not less than 1.0:1.0, for the shorter of (x) the
period from the Start Date (hereafter defined) of the Lease
through the date of determination or (y) the period of twelve full
calendar months most recently ended.
2. CONDITIONS PRECEDENT - LEASE SCHEDULE 4125.01. With
respect to the Equipment described on Lease Schedule No. 4125.01, Lessor has
waived or modified the conditions precedent set forth in Sections 1(b), (c), and
(d). The requirements of Section 1(g) above were not applicable to the Equipment
described on Lease Schedule No. 4125.01. In consideration of these waivers and
modifications, Paul J. Crowe has provided to Lessor his Continuing Personal
Guaranty of even date herewith. Lessor agrees to release such Continuing
Personal Guaranty at such time as Lessee has provided to Lessor evidence that
contractual agreements sufficient to satisfy the requirements of Section 1(c)
above are in force. In addition, Lessor has reduced the requirement as set
forth in Section 1(d) above to require only that Lessee have received $1,100,000
in net proceeds from such securities offering.
3. DEBT SERVICE COVERAGE COVENANT. The first day of the first
full calendar month following the month in which the last progress payment under
Lease Schedule No. 4125.01 is disbursed shall be referred to herein as the
"Start Date." Commencing with a test to be conducted for the twelve month period
beginning on the Start Date, and on a trailing twelve month basis for subsequent
tests to be conducted for the periods ending fifteen, eighteen, and twenty-one
months after the Start Date, Lessee shall maintain a ratio (the "Debt Service
Coverage Ratio") of Operating Cash Flow (hereafter defined) to Contractual Debt
Service (hereafter defined) of not less than 1.0:1.0. Commencing with the test
conducted for the trailing twelve months ending twenty-four months following the
Start Date, and continuing thereafter throughout the term of the Lease, Lessee
shall maintain a Debt Service Coverage Ratio of not less than 1.25:1.0. For
purposes of this section, the following definitions shall apply:
"Operating Cash Flow" shall mean, for any period, Lessee's net
income or loss (excluding the effect of any extraordinary gains or losses)
determined in accordance with generally accepted accounting principles ("GAAP"),
PLUS each of the following items, to the extent deducted from the revenues of
Lessee in the calculation of net income or loss: (i) depreciation; (ii)
amortization and other non-cash charges; (iii) rent paid to Lessor in respect of
the Lease; (iv) without duplication of amounts described in the preceding clause
(iii), interest expense paid or accrued, including, without limitation, interest
imputed on leases which would, in accordance with GAAP, be classified as
"capital leases"; and (v) total federal and state income tax expense determined
as the accrued liability of Lessee in respect of such period, regardless of what
portion of such expense has actually been paid by Lessee during such period, and
AFTER DEDUCTION FOR each of
3
<PAGE>
(a) federal and state income taxes, to the extent actually paid during such
period; (b) any non-cash income (but only to the extent such non-cash income was
included in the revenues of Lessee in the calculation of net income or loss);
and (c) all actual capital expenditures made by Lessee during such period and
not financed (with the qualification that all amounts expended by Lessee
pursuant to the Leases, if considered capital expenditures under GAAP, shall be
deemed financed for purposes of this definition). "Contractual Debt Service"
shall mean, for any period, the sum of payments made (or, as to clauses (i) and
(ii) of this sentence, required to be made) by Lessee during such period for (i)
scheduled payments of rent and any other amounts due under the Lease, (ii)
scheduled interest and principal payments due on any and all outstanding
indebtedness of Lessee, other than indebtedness described in the following
clause (iii), and (iii) interest and principal payments made on any indebtedness
of Lessee the repayment of which has been subordinated to the payment of
Lessee's obligations in respect of the Leases.
4. FINANCIAL REPORTING. Lessee shall furnish to Lessor:
(i) within thirty (30) days after the end of each month, internally prepared
financial statements of Lessee, including at a minimum a balance sheet and
income statement for the year to date period, together with comparable
information for the prior year to date period, prepared in accordance with
generally accepted accounting principles ("GAAP"), and on a basis consistent
with such statements delivered to Lessor for prior periods; (ii) within
ninety (90) days after the end of each of Lessor's fiscal years, audited
financial statements for Lessor, prepared in accordance with GAAP applied on
a consistent basis, and accompanied by the unqualified report thereon of
independent certified public accountants acceptable to Lessor, together with
any management letters delivered by Lessee's accountants to its management;
(iii) within forty-five (45) days prior to the end of each fiscal year of
Lessee, annual operating budgets (including income statements, balance sheets
and cash flow statements, by month) for the upcoming fiscal year of
Lessee; and (iv) such other financial information and statements as Lessor
shall request from time to time regarding Lessee's business affairs,
financial condition, and the results of its operations.
5. PRICING. Lessor shall be entitled to increase payments
accruing under any Lease Schedule if, and to the extent that, the rate offered
on a five-year United States Treasury Note increases over 4.65% (being the yield
that was available as of January 28, 1999). The rate offered on a five-year U.S.
Treasury Note shall be defined as the rate shown under the column heading "Ask
Yld." for "Govt. Bonds & Notes" in the "Treasury Bonds, Notes & Bills" Section
of THE WALL STREET JOURNAL - Western Edition published on the fifth business day
prior to the date of funding under a given Lease Schedule for the government
bond or note with a maturity date in the same month and year as the date the
final installment payment applicable to such Lease Schedule comes due (such date
being referred to herein as the "Schedule Maturity Date"), or, if there are more
than one government bonds or notes with a maturity date in the same month and
year as the Schedule Maturity Date, the highest of the rates shown in the "Ask
Yld." column for any such bond or note, or, if there is no government bond or
note with a maturity date in the same month and year as the Schedule Maturity
Date, the average (rounded to the next highest basis point) of the rates shown
in the "Ask Yld." column for the bonds or notes in the months preceding and
following the month in which the Schedule Maturity Date falls. In the event that
the foregoing information is no longer
4
<PAGE>
published in THE WALL STREET JOURNAL, then the rate offered on a five-year
U.S. Treasury Note shall be defined as that annual rate of interest quoted in
Statistical Release H.15(519) published from time to time by the Board of
Governors of the Federal Reserve System as the yield for "5-year U.S.
Government Securities-Treasury Constant Maturities" for "This Week".
The parties hereto have executed this Addendum I effective as of
the 8th day of April, 1999.
FINOVA CAPITAL CORPORATION ("Lessor")
By: /s/ Anne M. McNeil
--------------------------------
Name: Anne M. McNeil
--------------------------
Title: Vice President
--------------------------
MOBILE PET SYSTEMS, INC. ("Lessee")
By: /s/ Paul J. Crowe
--------------------------------
Name: Paul J. Crowe
--------------------------
Title: CEO / President
--------------------------
5
<PAGE>
FINOVA
FINANCIAL INNOVATORS
ADDENDUM NO. TWO
TO
LEASE SCHEDULE NO. 4125.01
BETWEEN
FINOVA CAPITAL CORPORATION (LESSOR)
AND MOBILE PET SYSTEMS, INC. (LESSEE)
INTERIM RENT:
Notwithstanding anything to the contrary in the Lease, Lessor and Lessee
hereby agree that COMPUTERS UNLIMITED ("Seller") is providing Equipment under
the Lease and requires that advance monies be paid by Lessor prior to
delivery and acceptance by Lessee. The advance required by Seller is TWENTY
PERCENT (20%) of the purchase price to be paid by customer upon issuance of
the purchase order to Seller; Fifty Percent (50%) of the purchase price upon
the completion, and THIRTY PERCENT (30%) of the purchase price plus
applicable sales tax upon Lessor's receipt of Lessee's written acceptance of
the Equipment.
To compensate Lessor for performing as described above, Lessee agrees to pay
Lessor rental(s), monthly in arrears, computed at two percent (2%) over the
prime rate as quoted in the Wall Street Journal, which rate shall be adjusted
accordingly as such prime rate changes from time to time during the term of
this Interim Rent Agreement, from the day said advance monies are paid by
Lessor for the actual number of days such advances are outstanding ("Interim
Rent").
The Interim Rent chargeable to the Lessee shall terminate upon Lessor's
receipt of Lessee's written acceptance of the equipment for the purpose of
the Lease and the commencement of the basic lease term, in accordance with
the terms of the Lease, at which time the full lease rental under the Lease
("Basic Rental") will commence.
The monies advanced by Lessor to Seller as aforesaid are in any and all events
an obligation of Lessee. Lessee agrees to promptly reimburse Lessor in the
event, and for any reason whatsoever, Lessee does not accept the Equipment. In
addition, Lessee agrees to hold Lessor harmless from any and all claims by
the Seller arising out of Lessee's failure or refusal to accept the Equipment.
The undersigned agree to all the terms and conditions set forth above and IN
WITNESS WHEREOF, Lessor and Lessee hereby execute this Addendum this ____ day
of ______________, 19___.
FINOVA CAPITAL CORPORATION MOBILE PET SYSTEMS, INC.
- -------------------------------------- -----------------------------------
Lessor Lessee
By: /s/ Anne M. McNeil, Vice President By: /s/ Paul J. Crowe CEO/PRES.
----------------------------------- --------------------------------
Title Title
<PAGE>
FINOVA
FINANCIAL INNOVATORS
LEASE SCHEDULE FINOVA CAPITAL CORPORATION
NO. 4125.01 311 SOUTH WACKER DRIVE
SUITE 4400
CHICAGO, ILLINOIS 60606
<TABLE>
<S><C>
The following described equipment and accessories are leased by Lessor to Lessee, on the terms
specified in this Lease Schedule, subject to the terms and conditions of the Equipment Lease
Number 4125 dated ____________________, 1999.
- ----------------------------------------------------------------------------------------------
1. DESCRIPTION OF EQUIPMENT: One (1) Calumet Coach company Model MMS-381P Mobile Unit with
One (1) Siemens ECAT EXACT P.E.T. Scanner System as further itemized on the Equipment
Schedule Addendum No. One attached hereto and made a part hereof.
- ----------------------------------------------------------------------------------------------
2. SELLER: See Addendum No. One attached hereto and made a part hereof.
------------------------------------------------------------------------------
SELLER'S ADDRESS: See Addendum No. One attached hereto and made a part hereof.
-------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
3. TERM: 60 months 4. SECURITY DEPOSIT: N/A
----------------------- ----------------------
5. RENTAL PAYMENTS: $16,000.00 per period for the three (3) consecutive monthly rental
periods: 22,000.00 per period for the next three (3) consecutive monthly rental periods; and
$34,8885.28 per period for the remaining fifty four (54) consecutive rental periods.
To each rental payment, when paid, shall be added the amount of any applicable sales or
use tax.
6. ADVANCE RENTALS: $ 16,000.00 to be applied to the FIRST rental payments.
- ----------------------------------------------------------------------------------------------
7. EQUIPMENT LOCATION: 2240 Shelter Island Drive, Suite 110 San Diego
---------------------------------------------------------------
(Street) (City)
San Diego CA
---------------------------------------------------------------
(County) (State)
8. LESSEE'S ADDRESS (if different than paragraph 7 above):
- -------------------------------------------------------------------------------------
(Street) (City) (State) (Zip code)
- ----------------------------------------------------------------------------------------------
9. Other Provisions
- - Addendum No. One, Two and Three attached hereto and made a part hereof.
- - "Notwithstanding anything to the contrary in Equipment lease F4125 and provided Lessee is
not in default thereunder, Lessee, upon giving Lessor ninety (90) days prior written
notice, shall have a one time Option to Purchase not less than all the Equipment under
this Lease at maturity of the base lease term for the then fair market value not to
exceed twelve percent (12.00%) of the original equipment cost a paid by Lessor the
Equipment and any other items or charges included in the Lease plus applicable sales taxes."
- - FINOVA has the option to adjust its monthly payment consistent with increases in the
five-year, fixed-rate cost of financing from the date of this Lease Schedule to delivery
and acceptance of the Equipment. Upon acceptance of the Equipment, the monthly payment will
become fixed for the entire term.
- ----------------------------------------------------------------------------------------------
</TABLE>
The parties hereto have executed this Lease Schedule as of the ___________
day of ___________________, 19_______.
FINOVA CAPITAL CORPORATION MOBILE PET SYSTEMS, INC.
- -------------------------------------- ----------------------------------
Lessor Lessee
By: /s/ Anne M. McNeil, Vice President By: /s/ Paul J. Crowe CEO/PRES.
----------------------------------- -------------------------------
Title Title
<PAGE>
AMENDMENT NUMBER ONE
TO
LEASE SCHEDULE NO. F4125.01
BETWEEN
FINOVA CAPITAL CORPORATION ("LESSOR")
AND
MOBILE PET SYSTEMS, INC ("LESSEE").
Rentals: Notwithstanding anything to the contrary in Lease Schedule
F4125.01, Lessee and Lessor agree that due to an modification in the cost of
the equipment described on the Addendum No. One to Lease Schedule, the Lessee
shall pay rents for the term of the lease as set forth below:
$16,000.00 PER MONTH FOR THE THREE (3) CONSECUTIVE RENTAL PERIODS;
22,000.00 PER MONTH FOR THE NEXT THREE (3) CONSECUTIVE RENTAL PERIODS;
AND $36,119.60 PER MONTH FOR THE REMAINING FIFTY FOUR (54) CONSECUTIVE
RENTAL PERIODS, PLUS ANY APPLICABLE SALES OR USE TAXES
The undersigned agree to all the terms and conditions set forth above and IN
WITNESS WHEREOF, Lessor and Lessee hereby execute this Amendment this 15th
day of April, 1999.
FINOVA CAPITAL CORPORATION MOBILE PET SYSTEMS, INC.
- -------------------------- -----------------------------
Lessor Lessee
By: By: /s/ Paul J. Crowe CEO/Pres.
---------------------- ------------------------------
Title
(RO383)
<PAGE>
EXHIBIT 10.2
SECURITY AGREEMENT
SECURITY AGREEMENT dated effective as of April 8, 1999, by and
between MOBILE PET SYSTEMS, INC., a Delaware corporation ("Lessee") and FINOVA
CAPITAL CORPORATION, a Delaware corporation ("Lessor"), executed pursuant to
that certain Equipment Lease No. 4125 between Lessee and Lessor, as the same may
be supplemented from time to time by the addition of Lease Schedules referencing
further items of equipment which shall become subject thereto (as so
supplemented, the "Lease").
1. DEFINITIONS. All terms used herein which are defined in
the Arizona Uniform Commercial Code (the "Code") shall have the same meanings
herein as in the Code unless the context in which such terms are used herein
indicates otherwise. All capitalized terms defined in the Lease and which are
used as defined terms in this Security Agreement, unless otherwise defined
herein, shall have the meanings ascribed to them in the Lease, the applicable
provisions of which are incorporated herein.
2. SECURITY INTEREST. To secure the performance and payment
of all obligations of Lessee pursuant to the Lease (collectively, the "Lessee's
Obligations"), Lessee hereby grants to Lessor a security interest in all of
Lessee's right, title and interest in the property and property rights more
fully described on EXHIBIT A attached hereto and incorporated herein by
reference (collectively, the "Collateral"). Such security interests shall be
superior and prior to all other liens.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS. Lessee hereby
represents, warrants and covenants to Lessor as follows:
3.1 Lessee is the owner of the Collateral, except the
portion thereof consisting of after-acquired property, and Lessee will be
the owner of such after-acquired property, free from any lien except the
lien created hereby in favor of Lessor.
3.2 There is listed in EXHIBIT B attached hereto the
location of the chief place of business of Lessee and, if different, the
location(s) where any Tangible Collateral (as hereafter defined) and the
books and records of Lessee are kept. Lessee shall not (a) change any
such locations(s), (b) open any new places of business, (c) change its
corporate name, or (d) conduct a business under any other names or use
any trade names or fictitious names, other than its own corporate name,
without, in each case, giving to Lessor
<PAGE>
thirty days' prior written notice of any such change. "Tangible
Collateral" consists of all items which would be considered "goods,"
"equipment," "inventory" or "fixtures" under the Code.
3.3 Lessee will at all times keep the Tangible
Collateral in good operating condition and repair, operate and maintain
the same in compliance with all laws and insurance policies applicable
thereto, and pay promptly when due all taxes, insurance premiums and
other governmental charges upon or relating to any of the property,
income or receipts of Lessee.
4. INSURANCE. Lessee shall maintain such insurance, written
by such insurers and in such amounts and on such forms as are satisfactory to
Lessor. The net proceeds collected by Lessor, after deducting all costs and
expenses (including attorneys' fees) of collection shall be applied, at Lessor's
option, either toward replacing or restoring the Collateral, in a manner and on
terms satisfactory to Lessor, or to the payment of Lessee's obligations. Any
proceeds applied to the payment of Lessee's Obligations shall be applied in such
manner as Lessor may elect. In no event shall such application relieve Lessee
from payment in full of all installments of rent coming due under the Lease.
5. PROTECTION OF COLLATERAL. In the event of the failure of
Lessee to (a) maintain in force and pay for any insurance which Lessee is
required to provide pursuant to this Security Agreement or the Lease, (b) keep
the Tangible Collateral in good repair and operating condition, (c) keep the
Collateral free from any other liens, and (d) pay when due all taxes, levies and
assessments on or in respect of the Collateral, Lessor, at its option, may (but
shall not be required to) procure and pay for such insurance, place the Tangible
Collateral in good repair and operating condition, or otherwise make good any
other aforesaid failure of Lessee and all sums advanced by Lessor, with interest
thereon at the rate of fourteen percent (14%) per annum, shall be part of
Lessee's Obligations, payable on demand.
6. FINANCING STATEMENTS; FURTHER ASSURANCES. Lessee,
concurrently with the execution of this Security Agreement, and from time to
time thereafter as requested by Lessor, shall execute and deliver to Lessor such
financing statements, continuation statements, amendments to financing
statements and other documents, in form satisfactory to Lessor, as Lessor may
require to perfect and continue in effect the lien of Lessor. Lessee
irrevocably appoints Lessor its attorney-in-fact, in the name of Lessee or
Lessor, to execute and file from time to time any such financing statements,
continuation statements and amendments thereto, which appointment shall be
deemed to be a power coupled with an interest.
7. EVENTS OF DEFAULT. Lessee shall be in default under this
Security Agreement upon the occurrence of (i) any failure of Lessee to perform
its
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obligations hereunder or (ii) any default under the Lease (collectively herein,
an "Event of Default").
8. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of
Default, Lessor shall have all the rights and remedies of a secured party under
the Arizona Uniform Commercial Code and all other rights and remedies accorded
to a secured party in equity or law. Upon the request of Lessor, Lessee shall
assemble and make the Tangible Collateral available to Lessor at a place
reasonably convenient to Lessor. Any notice of sale or other disposition of the
Collateral given not less than ten (10) days prior to such proposed action shall
constitute reasonable and fair notice of such action. Lessee shall be liable
for any deficiency. Lessee expressly waives any right to have the Collateral
marshalled on any foreclosure, sale or other enforcement hereof.
9. NOTICES. All notices and communications under this
Security Agreement shall be given in accordance with the Lease.
10. SUCCESSORS AND ASSIGNS. This Security Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of Lessor and Lessee.
11. APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA, EXCEPT TO THE
EXTENT THAT APPLICABLE LAW REQUIRES THAT THE LAWS OF ANOTHER JURISDICTION GOVERN
THE PERFECTION AND ENFORCEMENT OF THE SECURITY INTERESTS GRANTED TO LESSOR.
12. TERMINATION. This Security Agreement shall terminate upon
the payment in full of Lessee's Obligations.
13. COUNTERPARTS; FACSIMILE EXECUTION. This Security Agreement
may be executed in any number of separate counterparts, all of which, when taken
together, shall constitute one and the same instrument, admissible into
evidence, notwithstanding the fact that all parties did not sign the same
counterpart. Delivery of an executed counterpart of this Security Agreement by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Security Agreement. Any party delivering an executed
counterpart of this Security Agreement by telefacsimile shall also deliver a
manually executed counterpart of this Security Agreement, but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Security Agreement.
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This Security Agreement has been executed and delivered by each of
the parties hereto by a duly authorized officer of each such party on the date
first set forth above.
LESSOR: LESSEE:
FINOVA CAPITAL CORPORATION, MOBILE PET SYSTEMS, INC., a
a Delaware corporation Delaware corporation
By: /s/ Anne M. McNeil By: /s/ Paul J. Crowe
--------------------- ---------------------
Name: Anne M. McNeil Name: Paul J. Crowe
Title: Vice President Title: CEO/PRESIDENT
Address: 311 South Wacker Drive Address: 2240 Shelter Island Drive
Suite 4400 ---------------------------
Chicago, Illinois 60606 San Diego, CA 92103
Attn: Vice President - Group ---------------------------
Counsel
---------------------------
Telecopy No.: (619) 226-6889
---------------------
Telecopy No.: (312) 322-3550
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EXHIBIT A
COLLATERAL
A. All equipment of Lessee, whether now owned or hereafter
acquired and wherever located, including, but not limited to, all present and
future machinery, vehicles, furniture, fixtures, manufacturing equipment, office
and record keeping equipment, parts, and tools;
B. All general intangibles of Lessee, whether now owned or
hereafter acquired, including, but not limited to, applications for patents,
patents, copyrights, trademarks, trade secrets, good will, trade names, customer
lists, permits and franchises, and the right to use Lessee's name;
C. All inventory of Lessee, whether now owned or hereafter
acquired and wherever located, including, without limitation, all inventory
wherever located in which Lessee now has or hereafter may acquire any right,
title or interest, including, without limitation, all goods and other personal
property now or hereafter owned by Lessee which are held for sale or lease or
are furnished or are to be furnished under a contract of service or which
constitute raw materials, stock-in-trade, work in process or materials used or
consumed or to be used or consumed in Lessee's business, or in the processing,
packaging or shipping of the same, and all finished goods;
D. Each and every right of Lessee to the payment of money,
including, but not limited to, all present and future debt instruments, chattel
paper, accounts, loans and obligations receivable, and tax refunds, whether such
right to payment now exists or hereafter arises, whether such right to payment
arises out of a sale, lease or other disposition of good or other property by
Lessee, out of a rendering of services by Lessee, out of a loan by Lessee, out
of the overpayment of taxes or other liabilities of Lessee, or otherwise arises
under any contract or agreement, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all liens and
security interests) which Lessee may at any time have by law or agreement
against any account debtor or other obligor obligated to make any such payment
or against any of the property of such account debtor or other obligor; and
E. All of Lessee's right, title and interest in and to any
fixtures;
together with all substitutions and replacements for and products of any of the
foregoing property and together with all proceeds of the sale, lease or other
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disposition of any and all of the foregoing property, any and all proceeds of
insurance thereon and, in the case of all Tangible Collateral, together with all
accessions and, together with (i) all accessories, attachments, additions,
parts, equipment and repairs now or hereafter attached or affixed to or used in
connection with any such collateral, and (ii) all warehouse receipts, bills of
lading and other documents of title now or hereafter covering such collateral.
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EXHIBIT B
Chief Place of Business of Lessee:
2240 SHELTER ISLAND DRIVE
---------------------------
SAN DIEGO, CA 92103
---------------------------
SUITE 205
---------------------------
Location of Tangible Collateral and Books and Records of Lessee:
2240 SHELTER ISLAND DRIVE
---------------------------
SAN DIEGO, CA 92103
---------------------------
SUITE 205
---------------------------
<PAGE>
EXHIBIT 10.3
Number W-1
NEITHER THIS WARRANT NOR THE STOCK FOR WHICH IT MAY BE EXERCISED HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"),
OR ANY OTHER FEDERAL OR STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF, EXCEPT AS PROVIDED IN ARTICLE III, UNLESS SO
REGISTERED OR UNLESS SOLD PURSUANT TO AN EXEMPTION THEREFROM.
MOBILE PET SYSTEMS, INC.
COMMON STOCK PURCHASE WARRANT
This certifies that, for value received, FINOVA CAPITAL CORPORATION,
a Delaware corporation, and any registered assignee ("Holder"), is entitled
to subscribe for and purchase from Mobile PET Systems, Inc. ("Company"), a
corporation organized and existing under the laws of the State of Delaware,
One Hundred Eighty Thousand (180,000) shares (subject to adjustment as set
forth in Article II below, "Warrant Shares") of Common Stock of the Company,
par value $.01 per share ("Common Stock"), at an Exercise Price per share as
defined below in Section 1.02 (subject to adjustment as set forth in Article
II below), at any time and from time to time beginning on the date hereof
("Original Issue Date"), and ending on March __, 2004 ("Expiration Date"),
upon written notice from the Holder to the Company ("Notice") and subject to
the terms provided herein.
Capitalized terms used herein, and not otherwise defined, shall have
the meanings specified in Article V. This Warrant is subject to the following
provisions, terms and conditions:
ARTICLE I.
EXERCISE; RESERVATION OF SHARES
Section 1.01 WARRANT EXERCISE. The rights represented by this Warrant may be
exercised by the Holder at any time and from time to time prior to the
Expiration Date, upon Notice, by the surrender at the principal office of the
Company of this Warrant together with a duly executed subscription in the
form annexed ("Subscription Form") and accompanied by payment, in certified
or immediately available funds, of the Exercise Price for the number of
Warrant Shares specified in the Subscription Form. The shares so purchased
shall be deemed to be issued to the Holder (unless contrary instructions are
provided on the Subscription Form) as the record owner of such shares as of
the close of business on the date on which this Warrant shall be exercised as
hereinabove provided. No fractional shares or script representing fractional
shares shall be issued upon the exercise of this Warrant, but the Company
shall pay the Holder an amount equal to the Market Value of such fractional
share of Common Stock in lieu of each fraction of a share otherwise called
for upon any exercise of this Warrant.
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Section 1.02 EXERCISE PRICE. "Exercise Price" shall mean a price per
share equal to the lesser of (a) $2.50 per share or (b) the average of the
last reported sale prices of the Common Stock for the five (5) trading days
immediately preceding the Original Issue Date as shown by the principal
national securities exchange or quotation system on which the Common Stock is
then listed for trading.
Section 1.03 ALTERNATE METHOD OF PAYMENT. In addition to the method
of payment set forth in Section 1.01 above and in lieu of a cash payment
required thereunder, the Holder shall have the right to exercise the Warrant
in full or in part by surrendering this Warrant in the manner specified
herein above in exchange for the number of Warrant Shares equal to the
product of (a) the number of shares as to which the Warrant is being
exercised multiplied by (b) a fraction, the numerator of which is the Market
Value of the Common Stock less the Exercise Price, and the denominator of
which is Market Value.
Section 1.04 CERTIFICATES. Certificates for the shares purchased
pursuant to Section 1.01 shall be delivered to the Holder within a reasonable
time, not exceeding ten (10) business days, after the rights represented by
this Warrant shall have been so exercised, and a new Warrant in the name of
the Holder representing the rights, if any, that shall not have been
exercised prior to the Expiration Date with respect to this Warrant shall
also be delivered to such Holder within such time, with such new Warrant to
be identical in all other respects to this Warrant. The term "Warrant," as
used herein, includes any Warrants into which this Warrant may be divided or
combined and any subsequent Warrants issued upon the transfer or exchange or
reissuance upon loss hereof. Upon receipt by the Company of this Warrant,
together with the Exercise Price, if any, at its office, or by the stock
transfer agent of the Company, if any, at its office, in proper form for
exercise in accordance with the terms hereof, the Holder shall be deemed to
be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. The Company shall pay
any and all documentary stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of shares of Common Stock on exercise of
this Warrant.
Section 1.05 RESERVATION OF SHARES. The Company represents,
warrants, covenants and agrees:
(a) That all shares of Common Stock that may be issued upon
exercise of this Warrant will, upon issuance, be validly issued,
fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof;
(b) That during the period the rights represented by this
Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of issue and delivery upon
exercise of the rights evidenced by this Warrant, a sufficient number
of shares of Common Stock to provide for the exercise of the rights
represented by this Warrant; and
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(c) If the Common Stock is listed on any national
securities exchange or similar trading market, the shares of Common
Stock that may be issued upon exercise of this Warrant will, prior
to or on the date that a registration statement covering the Warrant
Shares is effective, also be listed on such exchange subject to
notice of issuance.
ARTICLE II.
ADJUSTMENTS
Section 2.01 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER
OR SALE.
(a) CAPITAL EVENTS. If any reorganization or
reclassification of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or
the sale of all or substantially all of its assets to another
corporation (in any instance, a "Capital Event") shall be effected in
such a way that holders of Common Stock shall be entitled to receive
stock, securities or assets (including cash) with respect to or in
exchange for their Common Stock, then, as a condition of such Capital
Event, lawful and adequate provisions shall be made whereby the
Holder hereof shall thereafter have the right to purchase and receive
upon the basis and upon the terms and conditions specified in this
Warrant and in lieu of the shares of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise
of the rights represented hereby, an amount of such shares of stock,
securities or assets (including cash) as may have been issued or payable
with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise
of the rights represented hereby had such Capital Event not taken
place.
(b) PRESERVATION OF VALUE. In the case of any Capital
Event, appropriate provision shall be made with respect to the rights
and interests of the Holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for
adjustment of the number of shares that may be issued upon exercise
of this Warrant and the Exercise Price hereof) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock,
securities or assets (including cash) thereafter deliverable upon the
exercise of the rights represented hereby.
(c) OBLIGATION EXPRESSLY ASSUMED. The Company shall not
effect any consolidation, merger or sale of all or substantially all
of its assets, unless prior to the consummation thereof the successor
corporation (if other than the Company) resulting from such
consolidation or merger, or the corporation into or for the
securities of which the previously outstanding stock of the Company
shall be changed in connection with such consolidation or merger, or
the corporation purchasing such assets, as the case may be, shall
assume by written instrument executed and mailed or delivered to the
registered Holder at the last address of such Holder appearing on
the books of the Company, the obligation to deliver to such Holder,
upon exercise of this Warrant, such shares of stock,
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<PAGE>
securities or assets (including cash) as, in accordance with the
foregoing provisions, such Holder may be entitled to purchase.
Section 2.02 SUBDIVISION OR COMBINATION OF STOCK. In the event that
the Company shall at any time subdivide or split its outstanding shares of
Common Stock into a greater number of shares, the number of Warrant Shares
subject to issuance upon exercise of this Warrant at the opening of business
on the day upon which such subdivision becomes effective shall be
proportionately increased. In the event that the outstanding shares of Common
Stock of the Company shall be combined into a smaller number of shares, the
number of shares subject to issuance upon exercise of this Warrant at the
opening of business on the day upon which such subdivision becomes effective
shall be proportionately decreased. Any such increase or decrease, as the
case may be, shall become effective immediately after the opening of business
on the day following the day upon which such subdivision or combination, as
the case may be, becomes effective.
Section 2.03 STOCK DIVIDENDS. In the event that the Company shall at
any time declare any dividend or distribution upon its Common Stock payable
in stock, the number of Warrant Shares subject to issuance upon exercise of
this Warrant shall be increased by the number (and the kind) of shares which
would have been issued to the holder of this Warrant if this Warrant were
exercised immediately prior to such dividend. Such increase shall become
effective immediately after the opening of business on the day following the
record date for such dividend or distribution.
Section 2.04 CASH OR OTHER NON-STOCK DIVIDENDS. In the event that
the Company shall at any time declare any dividend or distribution upon its
Common Stock payable in cash, assets or other property, (a "Non-Stock
Dividend") the number of Warrant Shares subject to issuance upon the exercise
of this Warrant shall be increased to a number obtained by multiplying (a)
the number of Warrant Shares for which this Warrant is exercisable
immediately prior to such dividend by (b) a fraction (i) the numerator of
which shall be the Market Value per share of Common Stock at the date of the
taking of the record holders of Common Stock entitled to such dividend or
distribution and (ii) the denominator of which shall be such Market Value per
share of Common Stock minus the Non-Stock Dividend paid per one share of
Common Stock as determined for purposes of accounting for such transaction on
the books of the Company. Such increase shall become effective immediately
after the opening of business on the day following the record date for such
dividend or distribution.
Section 2.05 ADDITIONAL COMMON STOCK, OPTIONS, CONVERTIBLE SECURITIES.
In the event the Company shall (a) issue any additional shares of Common
Stock (other than through a stock subdivision or split covered by Section
2.02 or a dividend upon the Company's Common Stock payable in stock covered
by Section 2.03) for a consideration (but in no event shall said
consideration be rendered except in cash) per share less than the Market Value
thereof, (b) grant any options or warrants for the purchase of Common Stock
where the Price per Share (as hereinafter defined) of Common Stock issuable
upon conversion, exchange or exercise is less than the Market Value thereof
immediately prior to the time of issuance or grant thereof ("Options"), or
(c) issue or sell any convertible securities that are convertible into or
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<PAGE>
exchangeable for Common Stock at a Price per Share less than the Market Value
thereof immediately prior to the time of issuance or grant thereof
("Convertible Securities"), the number of Warrant Shares subject to issuance
upon exercise of this Warrant shall be increased to a number obtained by
multiplying (i) the number of Warrant Shares for which this Warrant is
exercisable immediately prior to such issuance, grant or sale by (ii) a
fraction (A) the numerator of which shall be the sum of the Outstanding
Section 2.05 Shares (as defined below) plus the Deemed Additional Shares
resulting from such issuance, grant, sale or payment and (B) the denominator
of which shall be the number of shares ("Outstanding Section 2.05 Shares") of
Common Stock exercisable or outstanding immediately prior to such issuance,
grant, sale or payment (as if all Options, warrants and rights to convert or
exchange Convertible Securities outstanding immediately prior to such
issuance, grant or sale had been exercised, whether or not actually
exercisable on such date). Such increase shall become effective immediately
after the opening of business on the day following such issuance, grant or
sale, as the case may be.
Section 2.06 PHANTOM STOCK AND SIMILAR COMPENSATION PLANS. In the
event the Company pays compensation to any employees, consultants or any
other person pursuant to any phantom stock option, stock appreciation right,
or other similar plan whereby the compensation paid is triggered by the
settlement of a right (the "Right") to receive the difference between (i) a
pre-established price per Share that is less than the Market Value of the
Common Stock immediately prior to the time of issuance or grant of the Right
and (ii) the Market Value per share of the Common Stock on the settlement
date of the Right, the number of Warrant Shares subject to issuance upon
exercise of this Warrant shall be increased to a number obtained by
multiplying (a) the number of Warrant Shares for which this Warrant is
exercisable immediately prior to the date such compensation is paid by (b) a
fraction (i) the numerator of which shall be the exercise price per share of
Common Stock on the date of grant and (ii) the denominator of which shall be
the exercise price per share of Common Stock on the date of grant minus the
amount of compensation paid allocable to one share of Common Stock. Such
increase shall become effective immediately after the opening of business on
the day following such grant.
Section 2.07 EQUITABLE ADJUSTMENT. In the event the Company shall
participate in any extraordinary corporate event or transaction not otherwise
provided for herein, including a so-called issuer self-tender, there shall be
made an equitable and proportionate adjustment in the number of shares
issuable upon exercise of this Warrant and the Exercise Price consistent with
the principles of other such adjustments provided for in this Article II.
Section 2.08 TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Company or any subsidiary of the Company and the
disposition of any such shares shall be considered an issue or sale of Common
Stock for purposes of this Article II.
Section 2.09 ADJUSTMENT OF EXERCISE PRICE. Whenever the number of
shares of Common Stock that may be issued upon exercise of this Warrant is
adjusted and effective at the time such adjustment is effective, as provided
in Sections 2.01, 2.02 and 2.03 of this Article II, the Exercise Price shall
be adjusted (to the nearest whole cent) by multiplying each such Exercise
Price immediately prior to such adjustment by a fraction (x) the numerator of
which shall be the
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number of shares of Common Stock which may be issued upon the exercise of
each such Warrant immediately prior to such adjustment, and (y) the
denominator of which shall be the number of shares of Common Stock so
purchasable immediately thereafter. The Company may retain a firm of
independent certified public accountants (which may not be the regular
accountants employed by the Company) to make any required computation, and a
certificate signed by such firm shall be conclusive evidence of the
correctness of such adjustment.
Section 2.10 COMMON STOCK BUY BACK. In the event the Company shall
commence a buy back program for the acquisition by the Company of Common
Stock, the Company agrees to purchase at Market Value all Warrant Shares from
the Holder, if the Holder so desires.
Section 2.11 RECORD DATE. In the event that the Company shall not
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend payable in Common Stock, then such record date
shall be deemed for the purposes of this Article II to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend.
Section 2.12 OFFICER'S CERTIFICATE. Whenever the Exercise Price
shall be adjusted as provided in this Article II, the Company shall forthwith
file with its Secretary and retain in the permanent records of the Company,
an officer's certificate showing the adjusted Exercise Price determined as
provided in this Article II, setting forth in reasonable detail the facts
requiring such adjustment, including a statement of the number of additional
or fewer shares of Common Stock, and such other facts as may be reasonably
necessary to show the reason for and the method of computing such adjustment.
Each such officer's certificate shall be made available at all reasonable
times for inspection by the Holder.
Section 2.13 NOTICE OF ADJUSTMENT. Upon any adjustment of the number
of shares that may be issued upon exercise of this Warrant or the Exercise
Price, the Company shall give notice thereof to the Holder, which notice
shall state the increase or decrease, if any, in the number of shares that
may be issued upon the exercise of this Warrant and the Exercise Price,
setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based.
Section 2.14 DEFINITION OF "COMMON STOCK". As used in this Article
II, the term "Common Stock" shall mean and include all of the Company's
authorized Common Stock of any class as constituted on the effective date
hereof, and shall also include any capital stock of any class of the Company
thereafter authorized that shall not be limited to a fixed sum or stated
value in respect of the rights of the holders thereof to participate in
dividends or the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Company.
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ARTICLE III.
TRANSFER RESTRICTIONS; REGISTRATION RIGHTS
Section 3.01 SECURITIES LAW TRANSFER RESTRICTIONS. By taking and
holding this Warrant, the Holder (i) acknowledges that neither this Warrant
nor any shares of Common Stock that may be issued upon exercise of this
Warrant have been registered under the Securities Act or any applicable state
securities or blue sky law (collectively, "Securities Laws"); (ii) agrees not
to sell, transfer or otherwise dispose of this Warrant or any such shares of
Common Stock without such registration unless the sale, transfer or
disposition can be effected without such registration and in compliance with
the Securities Laws; and (iii) agrees not to transfer this Warrant or any
portion thereof or interest therein except to a Permitted Assignee. In the
event the Company desires to obtain an opinion from counsel that any
disposition described above in clause (ii) can be effected without
registration in compliance with the Securities Laws, the Company shall use
its best efforts to obtain such opinion promptly (and in no event more than
thirty (30) days) after notice of such intended disposition and the Company
shall bear all costs and expenses associated with obtaining such opinion.
Any certificate for shares of Common Stock issued upon exercise of this
Warrant shall bear an appropriate legend describing the foregoing
restrictions, unless such shares of Common Stock have been effectively
registered under the applicable Securities Laws.
Section 3.02 PROVISION OF INFORMATION BY HOLDER. The Holder shall
make available to the Company such written information, presented in form and
content satisfactory to the Company, as the Company may reasonably request,
from time to time, in order to make the determination provided for in Section
3.01.
ARTICLE IV.
REGISTRATION RIGHTS
The following provisions shall apply irrespective of whether the Holder holds
this Warrant or has exercised this Warrant and holds Warrant Shares, and
shall apply during the period beginning on the Original Issue Date and
continuing until the Expiration Date:
Section 4.01 PIGGYBACK REGISTRATIONS. Whenever the Company proposes
to register any of its securities under the Securities Act (whether for the
sale by the Company or by holders thereof) and the registration form to be
used can be used for the registration of the Warrant Shares (a "Piggyback
Registration"), the Company shall give prompt written notice (in any event
within ninety (90) days prior to filing of any such registration statement by
the Company) to all holders of Warrant Shares of its intention to effect such
a registration and shall include in such registration all Warrant Shares with
respect to which the Company has received written requests for inclusion,
such requests for inclusion must be made within forty-five (45) days after
the receipt of the Company's notice. The Registration Expenses, hereinafter
defined, of the holders of Warrant Shares shall be paid by the Company in all
Piggyback Registrations.
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Section 4.02 DEMAND REGISTRATIONS. At any time on or after the
Original Issue Date, the Holder may notify the Company in writing (a "Demand
Notice") demanding that the Company file with the SEC a registration
statement on an appropriate form (a "Demand Registration") registering all of
the Warrant Shares to permit the public offering and resale of the Warrant
Shares. Within thirty (30) days following a Demand Notice, the Company shall
file with the SEC such registration statement registering all of the Warrant
Shares for public offering and resale. The Company shall promptly respond to
any SEC comments on such registration statement and shall otherwise use its
best efforts to cause such registration statement to be declared effective at
the earliest possible date. The Registration Expenses, as hereinafter
defined, of the holders of Warrant Shares shall be shared equally by the
Company and FINOVA in all Demand Registrations.
Section 4.03 REGISTRATION PROCEDURES. Whenever the holders of
Warrant Shares have requested a Piggyback or Demand Registration, the Company
shall use its best efforts to effect the registration of such Warrant Shares
in accordance with the intended method of disposition thereof, and pursuant
thereto, the Company shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Warrant
Shares, which registration statement shall state that the holders of
Warrant Shares covered thereby may sell such Warrant Shares under such
registration statement and use its best efforts to cause such
registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to the counsel selected
by the holders of a majority of the Warrant Shares covered by such
registration statement copies of all such documents proposed to be
filed, which documents shall be subject to the review of such counsel)
and to remain effective until the earlier of (i) the sale of such
Warrant Shares so registered and (ii) twelve (12) months after the
registration statement becomes effective in the case of a Piggyback
Registration or nine (9) months after the registration statement
becomes effective in the case of a Demand Registration;
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for the period
described above in Section 4.03(a) and comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(c) furnish to each seller of Warrant Shares such
number of copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration
statement (including each preliminary prospectus) and such other
documents as such seller may reasonably request in order to facilitate
the disposition of the Warrant Shares owned by such seller;
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(d) if necessary, register or qualify the Warrant Shares
covered by such registration statement under the securities or blue sky
laws of such states as the Holders participating in the registration
shall reasonably request, maintain any such registration or qualification
current for the period described above in Section 4.03(a) above, and take
any and all other actions either necessary or advisable to enable such
Holders to consummate the public sale or other disposition of the Warrant
Shares in jurisdictions where such Holders desire to effect such sales or
other disposition;
(e) notify each seller of such Warrant Shares, at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which
the prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such
seller, the Company shall prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Warrant Shares, such prospectus shall not contain, to the Company's
knowledge, an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Warrant Shares to be listed on each
securities exchange on which similar securities issued by the Company are
listed;
(g) provide a transfer agent and registrar for all such
Warrant Shares not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions
as the holders of a majority of the Warrant Shares being sold or the
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Warrant Shares (including, without
limitation, effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of
Warrant Shares, any underwriter participating in any disposition pursuant
to such registration statement, and any attorney, accountant or other
agent retained by any such seller or underwriter, 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; and use its best efforts to cause such Warrant Shares covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the sellers thereof to consummate the disposition of such Warrant Shares;
and
(j) use its best effort to furnish, at the request of
any seller of the Warrant Shares or any underwriter of any distribution
of the Warrant Shares, an opinion of legal counsel to the Company,
covering such matters as are typically covered by opinions of issuer's
counsel in similar offerings under the Securities Act.
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Section 4.04. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance
of or compliance with this Warrant, including without limitation internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the
expense of any annual audit, the expense of any liability insurance and
the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are
then listed, all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses, messenger
and delivery expenses, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other individuals or entities
retained by the Company (all such expenses being herein called
"Registration Expenses"), shall be borne by the Company.
(b) The Company shall reimburse the holders of Warrant
Shares covered by a registration for the fees and disbursements of
separate counsel chosen by the holders of such Warrant Shares.
Section 4.05 INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent
permitted by law, each holder of Warrant Shares, its officers and
directors and each individual or entity who controls such holder (within
the meaning of the Securities Act) against all losses, claims, damages,
liabilities and expenses caused by any untrue or alleged untrue statement
of material fact contained in any registration statement, prospectus or
preliminary prospectus or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as the same
are caused by or contained in any information furnished in writing to the
Company by such holder expressly for use herein or by such holder's
failure to deliver a copy of the registration statement or prospectus or
any amendments or supplements thereto after the Company has furnished
such holder with a sufficient number of copies of the same. hi connection
with an underwritten offering, the Company shall indemnify such
underwriters, their officers and directors and each individual or entity
who controls such underwriters (within the meaning of the Securities Act)
to the same extent as provided above with respect to the indemnification
of the holders of Warrant Shares.
(b) In connection with any registration statement in
which a holder of Warrant Shares is participating, each such holder shall
furnish to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any such
registration statement or prospectus and to the extent permitted by law,
agrees and shall indemnify the Company, its directors and officers and
each individual or entity who controls the Company (within the meaning of
the Securities Act) against any
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losses, claims, damages, liabilities and expenses resulting from any
untrue or alleged untrue statement of material fact or any omission or
alleged omission of a material fact required to be stated in the
registration statement or prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission
is contained in any information or affidavit so furnished in writing by
such holder; provided that the obligation to indemnify shall be several,
not joint and several, among such holders of Warrant Shares and the
liability of each such holder of Warrant Shares shall be limited to the
net amount received by such holder from the sale of Warrant Shares
pursuant to such registration statement.
(c) Any individual or entity entitled to
indemnification hereunder shall (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks
indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying
party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party shall not be subject to any liability for any
settlement made by the indemnified party without its consent (but such
consent shall not be unreasonably withheld). An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim shall
not be obligated to pay the fees and expenses of more than one counsel
for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim.
Section 4.06 RULE 144 AND RULE 144A REPORTING. With a view to making
available the benefits of certain Securities Laws which may at any time
permit the sale of the Warrant Shares to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities
Act.
(b) File with the Securities and Exchange
Commission in a timely manner all reports and other documents required of
the Company under the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(c) So long as a Holder owns any Warrant Shares,
furnish to such Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule
144, and of the Securities Act and the Exchange Act, a copy of the most
recent annual or quarterly report of the Company, and such other reports
and documents of the Company, and such other reports and documents so
filed as a Holder may reasonably request in availing itself of any rule
or regulation of the Securities and Exchange Commission allowing such
Holder to sell any such securities without registration.
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(d) If the Company is no longer subject to Section
13 or 15(d) of the Exchange Act, to provide to the Holder or any
prospective purchaser of the Holder's Warrant or Warrant Shares, to the
extent available, the information required to be delivered under
Paragraph (d)(4) of Rule 144A ("Rule 144A")(or any similar rule then in
effect) promulgated by the Securities and Exchange Commission under the
Securities Act in respect of a transaction qualifying for an exemption
under Rule 144A and it will take such further action as a Holder may
reasonably request, all to the extent required from time to time, to
enable such Holder to sell its Warrant or Warrant Shares without
registration under the Securities Act pursuant to Rule 144A.
ARTICLE IV.
DEFINITIONS
As used herein, the following terms shall have the meanings
specified below:
"DEEMED ADDITIONAL SHARES" shall mean (i) in the case of the
issuance of Common Stock for a consideration per share less than the
Market Value thereof, a number of shares of Common Stock equal to the
number obtained by subtracting (x) the number of shares of Common Stock
that would have been issued for the total consideration being paid in
connection with such issuance, if the price per share of the Common Stock
issued equalled the Market Value thereof immediately prior to such
issuance from (y) the number of shares of Common Stock so issued; or (ii)
in the case of the grant or issuance of an Option or Convertible
Security, a number of shares of Common Stock equal to the number obtained
by subtracting (x) the number of shares of Common Stock that would be
issuable under such exercise, conversion or exchange if the Price per
Share payable thereon equalled the Market Value of shares of Common Stock
immediately prior to such grant or issuance, from (y) the number of
shares of Common Stock issuable upon the exercise, conversion or exchange
thereof.
"INDEPENDENT APPRAISAL" shall mean an evaluation of the price that
would be paid if the Company were sold at that time on an orderly basis
as a going concern, which evaluation shall be made by an Independent
Financial Expert.
"INDEPENDENT FINANCIAL EXPERT" shall mean an independent financial
expert selected by the Company's Board of Directors on not less than ten (10)
days prior written notice to the Holder but shall not include any independent
financial expert to whom the Holder shall object in writing not later than
ten (10) days after the Board's delivery of notice of selection.
"MARKET VALUE" of a share of Common Stock of the Company shall be:
(i) if the Common Stock is listed on a national securities
exchange, the closing price of such Common Stock on the principal national
securities exchange on which such Common Stock is traded on the date for
which any determination of Market
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Value is made for any purpose hereunder ("Determination Date"), or, if there
shall have been no sales on any such exchange on the Determination Date, the
average of the highest bid and lowest asked prices on such principal exchange
on such Determination Date; or
(ii) if the Common Stock is not listed on a national
securities exchange, the closing price on the NASD's National Market
System, or, if there shall have been no sales on the Determination Date
on the National Market System, the average of highest bid and lowest
asked prices on the Determination Date on the National Market System, as
applicable; or
(iii) if the Common Stock is not listed on a securities
exchange or the National Market System, the average of the representative
bid and asked prices of the Stock as of the close of trading on the
Determination Date as quoted in the NASDAQ System; or
(iv) if the Common Stock is not quoted in the NASDAQ System,
the average of the high and low bid and asked prices on the Determination
Date in the over-the-counter market as reported by the NASD Bulletin
Board, the National Quotation Bureau, Incorporated, or any similar
successor organization; or
(v) if the Common Stock is not listed on or traded in any
recognized securities market, such value as the Company and the Holder
may agree upon; or
(vi) if the Company and the Holder cannot agree on a value
for the Common Stock within thirty (30) days after the Company or the
Holder has made a written proposal with respect to such value to the
other party, the fair market value of the Stock as of the Determination
Date as determined by an Independent Appraisal. The fees and expenses
incurred by the Independent Financial Expert in rendering its Independent
Appraisal shall be paid by the Company. The determination of the Market
Value of the Common Stock shall be based solely upon the value of the
Company and shall be computed by dividing the amount that represents the
value of the Company by the number of outstanding shares of Common Stock.
In making such a valuation, items such as discounts for minority
interests, lack of marketability of the Common Stock or blockage shall
not be considered.
"PERMITTED ASSIGNEE" shall mean any individual or entity who receives
valid title and interest to this Warrant or any portion thereof and who
additionally accepts by written instrument each of the terms and conditions
that govern the ownership of this Warrant.
"PRICE PER SHARE" for shares of Common Stock issuable upon the
conversion of Convertible Securities or the exercise of Options shall be
determined by dividing (i) the sum of (A) the total amount of consideration,
if any, received or receivable by the Company as consideration for the
granting of such Options or the issuance of such Convertible Securities plus
(B) the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options or the conversion or exchange
of such Convertible Securities into Common Stock plus (C) in the case of all
such Options that relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issuance of all
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such Convertible Securities and upon conversion or exchange of all such
Convertible Securities into Common Stock, by (ii) the total number of shares
of Common Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities.
ARTICLE VI.
MISCELLANEOUS
Section 6.01 TRANSFERS. Subject to Article III, this Warrant and any
shares of any Stock obtained upon exercise of this Warrant may be
transferred, in whole or in part, at the principal office of the Company by
registration in the stock books of the Company maintained for such purpose
upon delivery to the Company of a duly executed assignment in the form
annexed ("Assignment Form"). The Company shall, without charge, execute and
deliver a Warrant in the name of each assignee named in the Assignment Form
and this Warrant shall promptly be canceled. This Warrant may be divided or
combined with other Warrants that carry the same rights upon presentation
hereof at the office of the Company together with the Assignment Form.
Section 6.02 NOTICES. Any notice or communication to be given
pursuant to this Warrant shall be in writing and shall be delivered in person
or by certified mail, return receipt requested, in the United States mail,
postage prepaid. Notices to the Company shall be addressed to the Company's
principal office. Notices to the Holder shall be addressed to the Holder's
address as reflected in the records of the Company. Notices shall be
effective upon delivery in person, or, if mailed, at midnight on the fifth
business day after mailing.
Section 6.03 ISSUE TAX. The issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge
to the Holder for any issuance tax in respect thereof, provided that the
Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the Holder of the Warrant exercised.
Section 6.04 NO SHAREHOLDER RIGHTS. This Warrant shall not entitle
the Holder to any voting rights or other rights as a shareholder of the
Company.
Section 6.05 COMPANY NOTICE AND CURRENT INFORMATION. In the event (a)
the Company shall take a record of the holders of its Common Stock (or other
securities at the time receivable upon the exercise of the Warrant) for any
purpose; or (b) of any recapitalization of the Company's Common Stock; or (c)
of any voluntary or involuntary dissolution, liquidation or winding up of the
Company; then, and in each such case, the Company shall mail or cause to be
mailed to the Holder at the time outstanding a notice specifying, as the case
may be, (x) the date on which a record is to be taken, the purpose for which
the record date is being taken, the amount and character of the dividend,
distribution or right, if any; or (y) the date on which such
recapitalization, dissolution, liquidation or winding up is to take place,
and the time, if any, is to be fixed, as to which the holders of record of
Common Stock (or such other securities at the time receivable upon the
exercise of the Warrant) shall be entitled to exchange their shares of
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Common Stock (or such other securities) for securities or other property
deliverable upon such recapitalization. Such notice shall be mailed at least
twenty (20) days prior to the date therein specified and the Warrant may be
exercised prior to said date during the term of the Warrant. Moreover, the
Company shall cause copies of all financial statements and reports, proxy
statements and other documents that are provided to its shareholders to be
sent by first class mail, postage prepaid, on the date of mailing to such
shareholders, to the Holder at the address reflected in the records of the
Company.
Section 6.06 GOVERNING LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of Arizona.
Section 6.07 HEADINGS; INTERPRETATION. The section headings used
herein are for convenience of reference only and are not intended to define,
limit or describe the scope or intent of any provision of this Warrant. When
used in this Warrant, the term "including" shall mean "including, without
limitation by reason or enumeration".
Section 6.08 SUCCESSORS. The covenants, agreements and provisions of
this Warrant shall bind the parties hereto and their respective successors
and permitted assigns.
IN WITNESS WHEREOF, the Company has caused this Warrant to be issued
effective as of the 8th day of April, 1999.
ATTEST: MOBILE PET SYSTEMS, INC.
By: Thomas G. Brown By: /s/ Paul J. Crowe
-------------------------------- -----------------------------------
Title: Secretary Title: President
----------------------------- --------------------------------
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<PAGE>
SUBSCRIPTION FORM
TO BE EXECUTED ONLY UPON EXERCISE OF WARRANT
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases ______ shares of Common Stock of Mobile PET
Systems, Inc. that may be issued under this Warrant and herewith delivers the
sum of $________ in full payment of the Exercise Price for such shares, all
on the terms and conditions specified in this Warrant. Such shares are to be
registered in the name of the registered holder of this Warrant unless
contrary instructions are herein given certificates evidencing such shares
are to be delivered to it/him/her at the address reflected in the records of
the Company unless contrary instructions are herein given.
Register shares in the name of
- -------------------------------------------------------------------------------
Deliver certificates to
- -------------------------------------------------------------------------------
Dated:
----------------------------- ----------------------------------------
(Signature of Registered Owner)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
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ASSIGNMENT FORM
TO BE EXECUTED ONLY UPON ASSIGNMENT OF WARRANT
For value received, the undersigned registered owner,
_____________________________________ hereby sells, assigns and transfers unto
_______________________________________________, whose address is
__________________________________________, the right to purchase Common Stock
of Mobile PET Systems, Inc. represented by this Warrant to the extent of
_____ shares, as to which such right is exercisable and does hereby
irrevocably constitute and appoint _________________________________________,
Attorney-in-Fact, to transfer the same on the books of the Company with full
power of substitution in the premises. The assignee hereby agrees to assume
the obligations of the Warrant Holder contained in this Warrant to the extent
any such obligations are applicable to it. The registered owner and the
assignee each warrant and represent to Mobile PET Systems, Inc. that the
assignee is a Permitted Assignee as defined in the Warrant.
Dated:
----------------------------- ----------------------------------------
(Signature of Registered Owner)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
Dated:
-----------
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<PAGE>
EXHIBIT 10.4
CONTINUING PERSONAL GUARANTY
FOR VALUE RECEIVED, and in consideration of any lease, capital lease,
loan, or other financial accommodation heretofore or hereafter at any time made
or granted to MOBILE PET SYSTEMS, INC., a Delaware corporation ("Lessee"), by
FINOVA CAPITAL CORPORATION ("Lessor"), the undersigned, PAUL J. CROWE
("Guarantor"), hereby agrees as follows:
1. GUARANTY OF OBLIGATIONS. (a) Guarantor unconditionally, absolutely
and irrevocably guarantees the full and prompt payment and performance when due,
whether by acceleration or otherwise, and at all times thereafter, of all
obligations of Lessee to Lessor, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, or now or hereafter existing
or due or to become due, including, without limitation, under or in connection
with that certain Equipment Lease No. 4125 of even date herewith by and between
Lessee and Lessor (the "Lease"), and each of the documents, instruments and
agreements executed and delivered in connection therewith, but solely with
respect to those items of equipment which are included on Lease Schedule No.
4125.01 attached to the Lease, as each may be modified, amended, supplemented or
replaced from time to time (all such obligations are herein referred to
collectively as the "Liabilities", and the Lease and all other documents
evidencing or securing any of the Liabilities are herein referred to,
collectively, as the "Lease Documents"). This Continuing Personal Guaranty (this
"Continuing Guaranty") is a guaranty of payment and performance when due and not
of collection. Terms used herein with initial capital letters, which are not
otherwise defined herein, shall have the meanings given such terms in the Lease.
(b) In the event of any default by Lessee in making payment of, or
default by Lessee in performance of, any of the Liabilities, Guarantor agrees
on demand by Lessor to pay and perform all of the Liabilities as are then or
thereafter become due and owing or are to be performed under the terms of the
Lease Documents. Guarantor further agrees to pay all expenses (including
reasonable attorneys' fees and expenses) paid or incurred by Lessor in
endeavoring to collect the Liabilities, or any part thereof, and in enforcing
this Continuing Guaranty (herein, the "Collection Costs").
2. CONTINUING NATURE OF GUARANTY AND LIABILITIES. This Continuing
Guaranty shall be continuing and shall not be discharged, impaired or affected
by:
a. the insolvency of Lessee or the payment in full of all of
the Liabilities at any time or from time to time;
b. the power or authority or lack thereof of Lessee to incur
the Liabilities;
<PAGE>
c. the validity or invalidity of any of the Lease Documents or
the documents securing the same;
d. the existence or non-existence of Lessee as a legal entity;
e. any transfer by Lessee of all or any part of any collateral
in which Lessor has been granted a lien or security
interest pursuant to the Lease Documents;
f. any statute of limitations affecting the liability of
Guarantor under this Continuing Guaranty or the Lease
Documents or the ability of Lessor to enforce this
Continuing Guaranty or any provision of the Lease
Documents; or
g. any right of offset, counterclaim or defense of Guarantor,
including, without limitation, those which have been waived
by Guarantor pursuant to Section 7 hereof.
3. INSOLVENCY OF LESSEE OR GUARANTOR. Without limiting the
generality of any other provision hereof, Guarantor agrees that, in the event of
the dissolution or insolvency of Lessee or Guarantor or the inability of Lessee
or Guarantor to pay their respective debts as they mature, or an assignment by
Lessee or Guarantor for the benefit of creditors, or the institution of any
proceeding by or against Lessee or Guarantor alleging that Lessee or Guarantor
is insolvent or unable to pay their respective debts as they mature, Guarantor
will pay to Lessor forthwith the full amount which would be payable hereunder by
Guarantor if all of the Liabilities were then due and payable, whether or not
such event occurs at a time when any of the Liabilities are otherwise due and
payable.
4. PAYMENT OF THE LIABILITIES. Any amounts received by Lessor from
whatever source on account of the Liabilities may be applied by Lessor toward
the payment of such of the Liabilities, and in such order of application, as
Lessor may from time to time elect, and notwithstanding any payments made by or
for the account of Guarantor pursuant to this Continuing Guaranty.
5. REINSTATEMENT. Guarantor agrees that, if at any time all or any
part of any payment theretofore applied by Lessor to any of the Liabilities is
or must be rescinded or returned by Lessor for any reason whatsoever (including,
without limitation, the insolvency, bankruptcy or reorganization of Lessee),
such Liabilities shall, for the purposes of this Continuing Guaranty and to the
extent that such payment is or must be rescinded or returned, be deemed to have
continued in existence notwithstanding such application by Lessor, and this
Continuing Guaranty shall continue to be effective or be reinstated, as the case
may be, as to such Liabilities, all as though such application by Lessor had not
been made.
6. PERMITTED ACTIONS OF LESSOR. Lessor may from time to time, in its
sole discretion and without notice to Guarantor, take any or all of the
following actions:
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a. retain or obtain a security interest in any assets of
Lessee or any third party to secure any of the Liabilities or any
obligations of Guarantor hereunder;
b. retain or obtain the primary or secondary obligation of any
obligor or obligors, in addition to Guarantor, with respect to any of the
Liabilities;
c. extend or renew for one or more periods (whether or not
longer than the original period), alter or exchange any of the
Liabilities;
d. waive, ignore or forbear from taking action or otherwise
exercising any of its default rights or remedies with respect to any
default by Lessee under the Lease Documents;
e. release, waive or compromise any obligation of Guarantor
hereunder or any obligation of any nature of any other obligor primarily
or secondarily obligated with respect to any of the Liabilities;
f. release its security interest in, or surrender, release or
permit any substitution or exchange for, all or any part of any
collateral now or hereafter securing any of the Liabilities or any
obligation hereunder, or extend or renew for one or more periods (whether
or not longer than the original period) or release, waive, compromise,
alter or exchange any obligations of any nature of any obligor with
respect to any such property; and
g. demand payment or performance of any of the Liabilities
from Guarantor at any time or from time to time, whether or not Lessor
shall have exercised any of its rights or remedies with respect to any
property securing any of the Liabilities or any obligation hereunder or
proceeded against any other obligor primarily or secondarily liable for
payment or performance of any of the Liabilities.
7. SPECIFIC WAIVERS. Without limiting the generality of any other
provision of this Continuing Guaranty, Guarantor hereby expressly waives:
a. notice of the acceptance by Lessor of this Continuing
Guaranty;
b. notice of the existence, creation, payment, nonpayment,
performance or nonperformance of all or any of the Liabilities;
c. presentment, demand, notice of dishonor, protest, notice of
protest and all other notices whatsoever with respect to the
payment or performance of the Liabilities or the amount thereof or
any payment or performance by Guarantor hereunder;
3
<PAGE>
d. all diligence in collection or protection of or
realization upon the Liabilities or any thereof, any
obligation hereunder or any security for or guaranty of any
of the foregoing;
e. any right to direct or affect the manner or timing
of Lessor's enforcement of its rights or remedies;
f. any and all defenses which would otherwise arise
upon the occurrence of any event or contingency described
in Section 1 hereof or upon the taking of any action by
Lessor permitted hereunder;
g. any defense, right of set-off, claim or counterclaim
whatsoever and any and all other rights, benefits,
protections and other defenses available to Guarantor now
or at any time hereafter, including, without limitation,
under California Civil Code Sections 2787 to 2855,
inclusive, and California Code of Civil Procedure Sections
580a, 580b, 580d or 726, and all successor sections; and
h. all other principles or provisions of law, if any,
that conflict with the terms of this Continuing Guaranty,
including, without limitation, the effect of any
circumstances that may or might constitute a legal or
equitable discharge of a guarantor or surety.
8. IRREVOCABILITY. Guarantor hereby further waives all rights
to revoke this Continuing Guaranty at any time, and all rights to revoke any
agreement executed by Guarantor at any time to secure the payment and
performance of Guarantor's obligations under this Continuing Guaranty.
9. STATUTORY WAIVER OF RIGHTS AND DEFENSES REGARDING ELECTION
OF REMEDIES. Guarantor waives all rights and defenses arising out of an
election of remedies by Lessor, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed Guarantor's rights of subrogation and reimbursement against Lessee
by the operation of any applicable law, including without limitation Section
580d of the California Code of Civil Procedure, or otherwise.
10. SUBORDINATION. Guarantor hereby subordinates any and
all indebtedness of Lessee to Guarantor to the full and prompt payment and
performance of all of the Liabilities. Guarantor agrees that Lessor shall be
entitled to receive payment of all Liabilities prior to Guarantor's receipt
of payment of any amount of any indebtedness of Lessee to Guarantor. Any
payments on such indebtedness to Guarantor, if Lessor so requests, shall be
collected, enforced and received by Guarantor, in trust, as trustee for
Lessor and shall be paid over to Lessor on account of the Liabilities, but
without reducing or affecting in any manner the liability of Guarantor under
the other provisions of this Guaranty. Lessor is authorized and empowered,
but not obligated, in its discretion, (a) in the name of Guarantor, to
collect and enforce, and to submit claims in respect of, any indebtedness of
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<PAGE>
Lessee to Guarantor and to apply any amounts received thereon to the
Liabilities, and (b) to require Guarantor (i) to collect and enforce, and to
submit claims in respect of, any indebtedness of Lessee to Guarantor, and (ii)
to pay any amounts received on such indebtedness to Lessor for application to
the Liabilities.
11. SUBROGATION. Guarantor will not exercise any rights which
it may acquire by way of subrogation under this Continuing Guaranty, by any
payment hereunder or otherwise, until all of the Liabilities have been paid in
full, in cash, and Lessor shall have no further obligations to Lessees under the
Lease Documents or otherwise. If any amount shall be paid to Guarantor on
account of such subrogation rights at any other time, such amount shall be held
in trust for the benefit of Lessor and shall be forthwith paid to Lessor to be
credited and applied to the Liabilities, whether matured or unmatured, in such
manner as Lessor shall determine in its sole discretion.
12. ASSIGNMENT OF LESSOR'S RIGHTS. Lessor may, from time to
time, without notice to Guarantor, assign or transfer any or all of the
Liabilities or any interest therein and, notwithstanding any such assignment
or transfer of the Liabilities or any subsequent assignment or transfer
thereof, the Liabilities shall be and remain the Liabilities for the purpose
of this Continuing Guaranty. Each and every immediate and successive assignee
or transferee of any of the Liabilities or of any interest therein shall, to
the extent of such party's interest in the Liabilities, be entitled to the
benefits of this Continuing Guaranty to the same extent as if such assignee
or transferee were Lessor; PROVIDED, HOWEVER, that unless Lessor shall
otherwise consent in writing, Lessor shall have an unimpaired right, prior
and superior to that of any such assignee or transferee, to enforce this
Continuing Guaranty for its own benefit as to those of the Liabilities which
Lessor has not assigned or transferred.
13. INDULGENCES NOT WAIVERS. No delay in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by Lessor of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy; nor shall any
modification or waiver of any of the provisions of this Continuing Guaranty be
binding upon Lessor, except as expressly set forth in a writing duly signed and
delivered by Lessor. No action of Lessor permitted hereunder shall in any way
affect or impair the rights of Lessor or the obligations of Guarantor under this
Continuing Guaranty.
14. FINANCIAL CONDITION OF LESSEE. (a) Guarantor represents
and warrants that it is fully aware of the financial condition of Lessee, and
Guarantor delivers this Continuing Guaranty based solely upon its own
independent investigation of Lessee's financial condition and in no part upon
any representation or statement of Lessor with respect thereto. Guarantor
further represents and warrants that it is in a position to and hereby does
assume full responsibility for obtaining such additional information concerning
Lessee's financial condition as Guarantor may deem material to its obligations
hereunder, and Guarantor is not relying upon, nor expecting Lessor to furnish it
any information in Lessor's
5
<PAGE>
possession concerning Lessee's financial condition or concerning any
circumstances bearing on the existence or creation, or the risk of nonpayment or
nonperformance of the Liabilities.
(b) Without limiting the generality of Section 14(a) above,
Guarantor hereby waives any duty on the part of Lessor to disclose to
Guarantor any facts it may now or hereafter know about Lessee, regardless of
whether Lessor has reason to believe that any such facts materially increase
the risk beyond that which Guarantor intends to assume or has reason to
believe that such facts are unknown to Guarantor. In addition, Guarantor
hereby knowingly accepts the full range of risk encompassed within a contract
of "Continuing Guaranty" which includes, without limitation, the possibility
that Lessee will contract for additional indebtedness for which Guarantor may
be liable hereunder after Lessee's financial condition or ability to pay its
lawful debts when they fall due has deteriorated.
15. REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Lessor that each of the following statements is accurate and
complete as of the date of this Continuing Guaranty:
a. this Continuing Guaranty has been duly executed and
delivered by Guarantor and constitutes a legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in
accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights generally;
b. the execution, delivery and performance of this
Continuing Guaranty do not (i) violate any provisions of law or
any order of any court or other agency of government (each, a
"Requirement of Law"), (ii) contravene any provision of any
material contract or agreement to which Guarantor is a party or by
which Guarantor or Guarantor's assets are bound (each, a
"Contractual Obligation"), or (iii) result in the creation or
imposition of any lien, charge or encumbrance of any nature upon
any property, asset or revenue of Guarantor;
c. all consents, approvals, orders and authorizations
of, and registrations, declarations and filings with, any
governmental agency or authority or other person or entity
(including, without limitation, the members, shareholders or
partners of any entity), if any, which are required to be obtained
in connection with the execution and delivery of this Continuing
Guaranty or the performance of Guarantor's obligations hereunder
have been obtained, and each is in full force and effect;
d. Guarantor has paid all taxes and other charges
imposed by any governmental agency or authority due and payable by
Guarantor other than those which are being challenged in good
faith by appropriate proceedings;
6
<PAGE>
e. Guarantor is not in violation of any Requirement of
Law or Contractual Obligation other than any violation the
consequences of which could not have a material adverse effect on
Guarantor's ability to perform its obligations hereunder
(a "Material Adverse Effect"); and
f. no action, proceeding, investigation or litigation
is pending or, to the knowledge of Grantor, overtly threatened
against Guarantor by any person or entity which, if adversely
determined, could have a Material Adverse Effect.
16. GUARANTOR FINANCIAL INFORMATION. Guarantor will provide
Lessor in writing such financial and other information with respect to
Guarantor's assets and liabilities as Lessor shall reasonably request from time
to time, in form satisfactory to Lessor.
17. BINDING UPON SUCCESSORS; DEATH OF GUARANTOR. This
Continuing Guaranty shall be binding upon Guarantor and Guarantor's successors
and assigns and shall inure to the benefit of Lessor and its successors and
assigns. All references herein to Lessee shall be deemed to include its
successors and assigns, and all references herein to Guarantor shall be deemed
to include Guarantor named herein, it's successors and assigns, and in the event
of a death of a Guarantor, the duly appointed representative, executor or
administrator of the deceased Guarantor's estate.
18. OBLIGATIONS JOINT AND SEVERAL. In addition and
notwithstanding anything to the contrary contained in this Continuing
Guaranty or in any other document, instrument or agreement between or among
any of Lessor, Lessee, Guarantor or any third party, the obligations of
Guarantor with respect to the Liabilities shall be joint and several with any
other person or entity that now or hereafter executes a guaranty of any of
the Liabilities separate from this Continuing Guaranty.
19. NOTICES. All notices required or permitted to be given
hereunder shall be in writing and shall be either personally delivered,
transmitted by facsimile to the facsimile numbers provided herein or sent by
United States certified or registered mail, return receipt requested, addressed
to Guarantor or Lessor at their respective addresses stated below or at such
other address as either party hereafter notifies the other party as herein
provided. Notices shall be deemed received on the earlier of (i) the date noted
on the return receipt as delivered if mail delivery of the notice is successful
or the date inscribed on a confirmation of successful transmission, if sent by
facsimile; (ii) the last date of attempted delivery, as noted by the United
States Postal Service on the envelope containing the notice, if mail delivery is
unsuccessful; or (iii) the date of the actual delivery if personally delivered.
20. GOVERNING LAW; ADDITIONAL WAIVERS. (a) This Continuing Guaranty
has been delivered and shall be governed by and construed in accordance with the
internal laws (as opposed to the conflicts of law provisions) of the State of
Arizona, provided that
7
<PAGE>
Guarantor agrees that each of the waivers and agreements of Guarantor herein
which refer to provisions of the California Civil Code and the California Code
of Civil Procedure shall be effective and enforceable to the extent permitted
under applicable law, and to the extent that any court of competent jurisdiction
shall apply the laws of the State of California to determine the relative rights
or remedies of Lessor and Guarantor hereunder, such waivers and agreements by
Guarantor shall be governed by the laws of the State of California.
(b) GUARANTOR HEREBY:
(i) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO
ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS CONTINUING
GUARANTY, AND ACKNOWLEDGES THAT LESSOR ALSO WAIVES SUCH RIGHT;
(ii) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED IN MARICOPA COUNTY, ARIZONA, OVER ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO
THIS CONTINUING GUARANTY;
(iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT GUARANTOR
MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING;
(iv) agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in any other
jurisdictions by suit on the judgment or in any other manner provided
by law; and
(v) agrees not to institute any legal action or
proceeding against Lessor or any of Lessor's directors, officers,
employees, agents or property concerning any matter arising out of or
relating to this Continuing Guaranty in any court other than one located
in Maricopa County, Arizona.
(c) Nothing herein shall affect or impair Lessor's right to
serve legal process in any manner permitted by law or Lessor's right to bring
any action or proceeding against Guarantor or its property in the courts of any
other jurisdiction. Wherever possible each provision of this Continuing Guaranty
shall be interpreted as to be effective and valid under applicable law, but if
any provision of this Continuing Guaranty shall be prohibited by or invalid
under such law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Continuing Guaranty.
21. ADVICE OF COUNSEL. GUARANTOR ACKNOWLEDGES THAT GUARANTOR
HAS EITHER OBTAINED THE ADVICE OF COUNSEL OR HAS
8
<PAGE>
HAD THE OPPORTUNITY TO OBTAIN SUCH ADVICE IN CONNECTION WITH THE TERMS AND
PROVISIONS OF THIS CONTINUING GUARANTY.
22. ENTIRE AGREEMENT. This Continuing Guaranty contains the
complete understanding of the parties hereto with respect to the subject
matter herein. Guarantor acknowledges that Guarantor is not relying upon any
statements or representations of Lessor not contained in this Continuing
Guaranty and that such statements or representations, if any, are of no force
or effect and are fully superseded by this Continuing Guaranty. This
Continuing Guaranty may only be modified by a writing executed by Guarantor
and Lessor.
23. CONSIDERATION. Guarantor is a founder of and shareholder in
Lessee, and as such stands to benefit economically and materially from Lessee's
ability to successfully operate its business. The accommodations being provided
by Lessor to Lessee pursuant to the Lease represent Lessee's first acquisition
of the assets necessary to operate it's business. Accordingly, Guarantor
acknowledges the receipt of full and adequate consideration in return for this
Continuing Guaranty through the economic benefits Guarantor expects to derive as
a result of his ownership interest in Lessee.
24. TERMINATION OF CONTINUING GUARANTY. In connection with
the execution and delivery of the Lease, Guarantor acknowledges and agrees
that he has, both on behalf of Lessee and on behalf of himself individually,
petitioned Lessor to enter into the Lease and to provide the financial
accommodations created thereby in order to induce the manufacturer of the
Equipment listed on Lease Schedule No. 4125.01 to the Lease to make such
Equipment available to Lessee at this time, notwithstanding the fact that at
the time the Lease is being entered into, all conditions precedent to
Lessor's commitment to enter into the Lease have not been satisfied. Lessor
has agreed to enter into the Lease at this time, conditioned upon Guarantor's
execution and delivery of this Continuing Guaranty in favor of Lessor. Lessor
hereby agrees that, notwithstanding anything to the contrary contained
herein, but provided that no default under the Lease then exists, this
Continuing Guaranty shall be terminated and released (subject to
reinstatement in accordance with Section 5 hereof) at such time as Lessee has
provided to Lessor documentation substantiating that, with respect to the
specific items of Equipment listed on Schedule 1 to the Lease, Lessee has in
effect signed, valid and enforceable contractual agreements (each of which
must be in form and substance satisfactory to Lessor) with one or more
hospitals (the creditworthiness of which must be satisfactory to Lessor in
all respects), which agreements will provide Lessee with a minimum of
eighty-eight (88) positron emission tomography ("PET") procedures per month,
for a term that shall not expire prior to the date final payment is due under
the Lease, with respect to the items of Equipment listed on Lease Schedule
No. 4125.01 to the Lease. Lessor shall be entitled to perform its own due
diligence with respect to each hospital which is to become party to any such
contract, to determine whether such hospital is satisfactorily creditworthy,
in Lessor's sole discretion.
9
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed this Continuing
Guaranty effective as of the 8th day of April, 1999.
"Guarantor"
PAUL J. CROWE
/s/ Paul J. Crowe
--------------------------------------
Social Security #: ###-##-####
--------------------
Guarantor's address for notices:
955 E Harbor Island Drive
--------------------------------------
San Diego, CA
--------------------------------------
Facsimile:
619-226-6738
----------------------------
Lessor's address for notices:
FINOVA Capital Corporation
311 South Wacker Drive, Suite 4400
Chicago, Illinois 60606
Facsimile: (312) 322-3553
10
`<PAGE>
EXHIBIT 10.5
COLLATERAL ASSIGNMENT OF AGREEMENTS
1. FOR VALUE RECEIVED, the undersigned (hereinafter referred to as
the "Assignor") hereby grants a security interest in and collaterally assigns
and transfers to FINOVA Capital Corporation, a Delaware corporation, having
an office at 311 South Wacker Drive, Suite 4400, Chicago, Illinois 60606
(hereinafter referred to as the "Assignee"), all right, title and interest of
the Assignor in and to, all benefits of the Assignor under, and all monies
due or to become due to the Assignor under or in connection with, those
certain Positron Emission Tomography Mobile Services Agreements (each, an
"Agreement") of various dates by and between Assignor and the various
hospitals, health centers, and other health care service agencies or
providers party thereto (each of which is referred to as "Client" both herein
and in the applicable Agreement to which it is a party), whether now in
effect or hereafter entered into, as the same may exist from time to time
between Assignor and the various Clients (all such Agreements as may now or
hereafter be in effect between Assignor and the various Clients are
collectively referred to herein as the "Agreements"), as collateral security
for any and all of the Assignor's obligations arising pursuant to that
certain Equipment Lease No. 4125 dated of even date herewith, together with
each and every schedule attached to such Equipment Lease, each of which
schedules designates one or more items of equipment that are to be leased to
Assignor by Assignee (Equipment Lease No. 4125, together with each and every
schedule attached thereto, are hereinafter collectively referred to as the
"Lease") between Assignor as "Lessee" and Assignee as "Lessor" (all such
obligations of Assignor under the Lease being referred to herein as the
"Lessee's Obligations"). Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Lease. Attached hereto as EXHIBIT
A is a listing of those particular Agreements which relate to the item or
items of equipment described on Schedule _____ of the Lease.
2. The Assignor further agrees, represents and warrants that:
a. The Agreements, with respect to Assignor, and with respect
to each Client, to Assignor's best knowledge, are each valid and enforceable
in accordance with their respective terms, have not been modified, amended,
altered or changed in any manner, and are in full force and effect, there
being no material default thereunder by Assignor or, to Assignor's best
knowledge, by any Client.
b. Assignor has the right, power and authority to assign its
right, title and interest in and to the Agreements to Assignee. Assignor's
right, title and interest in the Agreements are owned by Assignor free and
clear of all claims, mortages, pledges, liens, encumbrances and security
interests of every nature whatsoever, except this Assignment. Assignor will
not sell, transfer, assign, pledge or grant a security interest in the
Agreements to any person other
<PAGE>
than Assignee. Any other such sale, transfer assignment, mortgage, pledge
or encumbrance without Assignee's consent shall be void and of no force and
effect.
c. Assignor will keep and perform the obligations to be kept
and performed by it under the Agreements.
d. Assignor will not, without the prior written consent of
Assignee, modify, amend, alter or change in any material respect any
Agreement or cancel or terminate any Agreement, and will do all things
necessary and proper to keep the Agreements in full force and effect.
e. Assignor specifically acknowledges and agrees that Assignee
does not assume, and shall have no responsibility for, the payment of any
sums due or to become due under the Agreements or the performance of any
obligations to be performed under or with respect to the Agreements by the
Assignor, and the Assignor hereby agrees to indemnify and hold the Assignee
harmless with respect to any and all claims made by any person relating
thereto. Assignee, in its discretion, may file or record this Assignment.
f. If there shall be a default under any Agreement on the part
of the Assignor, for any reason, the Assignee may, at its option ten (10)
days after requesting that Assignor cure such default, without assuming any
of the obligations of the Assignor under the applicable Agreement and
without waiving or releasing the Assignor from any of the terms hereof or
any of Assignor's obligations to Assignee, cure the default, and the cost of
curing the same (and all necessary and incidental costs and expenses of the
Assignee in connection therewith, including, but not limited to, all
attorneys' fees), with interest at the rate of fourteen percent (14%) per
annum, shall be deemed an advance to Assignor and part of the Lessee's
Obligations, and shall be due and payable by the Assignor to the Assignee
upon demand.
g. If a default under the Lease shall occur (herein, an "Event
of Default") with respect to any of the Lessee's Obligations, in addition to
all other rights and remedies of Assignee pursuant to any agreements of
Assignor in favor of or assigned to and held by Assignee or pursuant to
applicable law or otherwise, Assignee or its successor or designee shall
have all rights and benefits under the Agreements, including, without
limitation, any and all rights to receive all payments accruing to the
benefit of Assignor thereunder, without modifying or discharging any of the
Lessee's Obligations. Upon the occurrence of any Event of Default, Assignor
agrees to execute any and all documents requested by Assignee in its sole
discretion to enable Assignee to exercise all of the rights of Assignor
under the Agreements. The specified remedies to which the Assignee may
resort under the terms of this Assignment are cumulative and are not
intended to be exclusive of any other remedies or means of redress to which
the Assignee may be lawfully entitled in case of any breach or threatened
breach by the Assignor of any
2
<PAGE>
provision hereof or of any of the Lessee's Obligations. Nothing contained
in this Assignment and no act or action taken or done by the Assignee
pursuant to the powers and rights granted it hereunder or under any
instrument ancillary hereto shall be deemed to be a waiver by the Assignee
of any of its rights and remedies against the Assignor in connection with,
or in respect of, any of the Lessee's Obligations of the Assignor to the
Assignee. The right of the Assignee to collect and enforce collection of
the Lessee's Obligations and to enforce any security and collateral held by
it may be exercised by the Assignee either prior to, simultaneously with, or
subsequent to any action taken by the Assignee hereunder.
h. Following the occurrence of an Event of Default, any monies
or other proceeds under or in connection with the Agreements received by the
Assignor shall not be commingled with any other property of the Assignor, but
shall be segregated, held by the Assignor in trust for, and immediately
delivered to, the Assignee for application to the payment of the Lessee's
Obligations.
i. Upon the payment and satisfaction in full of all of the
Lessee's Obligations and the termination of the Lease, this Assignment shall
become null and void and of no further force or effect, but the affidavit,
certificate, letter or statement or any officer, agent or attorney of the
Assignee showing that any part of the Lessee's Obligations remains unpaid or
unsatisfied shall be and constitute evidence of the validity, effectiveness
and continuing force of this Assignment and any person may, and is hereby
authorized to, rely thereon.
j. The Assignee may take, or release, other security which it
may hold for the payment of the Lessee's Obligations, may release any party
primarily or secondarily liable therefor, and may apply any other security
held by it to the satisfaction, or partial satisfaction, of Lessee's
Obligations, without prejudice to any of its rights under this Assignment.
k. This Assignment shall inure to the benefit of the Assignee
and its successors, assigns and designees, and shall be binding upon any
subsequent owner of the Assignor's interest in and to the Agreements.
l. The Assignor covenants to execute and deliver to the
Assignee, upon demand, such additional assurances, writings or other
instruments as may be reasonably required by the Assignee to effectuate the
purpose hereof. This instrument of assignment may not be modified orally
and is to be governed by the local laws of the State of Arizona applicable
to contracts executed and to be performed in such state.
m. The Assignor hereby designates and appoints Assignee and
each of its designees or agents as attorney-in-fact for such Assignor
following an
3
<PAGE>
Event of Default, irrevocably and with power of substitution, for purposes of
carrying out the provisions of this Assignment, with authority to execute and
deliver for and on behalf of the Assignor any and all instruments, documents,
agreements and other writings necessary or advisable for the exercise on
behalf of the Assignor of any rights, benefits or options created or
existing under or pursuant to the Agreements; to endorse the name of the
Assignor on its behalf on any and all notes, acceptances, checks, drafts,
money orders, instruments or other evidences of collateral, that may come into
Assignee's possession; to execute proofs of claim and loss; to execute
endorsements, assignments or other instruments of conveyance and transfer; to
adjust and compromise any claims under insurance policies or otherwise; to
execute releases; and to do all other acts and things necessary and advisable
in the discretion of Assignee to carry out and enforce this Assignment or the
Lessee's Obligations. All acts done by Assignee under the foregoing
authorization are hereby ratified and approved and neither Assignee nor any
designee or agent thereof shall be liable for any acts of commission or
omission (other than acts committed or omitted through gross negligence or
willful misconduct), for any error of judgment, or for any mistake of facts
or law. This power of attorney being coupled with an interest is irrevocable
while any of the Lessee's Obligations shall remain unpaid.
n. If an Event of Default shall occur with respect to any of the
Lessee's Obligations, Assignee may, in its discretion, in its name or
Assignor's or otherwise, notify the Clients under each of the Agreements to make
payment to Assignee of all amounts due or to become due under such Agreements.
o. If an Event of Default shall occur with respect to any of the
Lessee's Obligations, Assignee may, in its discretion, demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of or in exchange for any Agreement, or, with respect to payments
which have become due and payable under any Agreement, make any compromise or
settlement deemed desirable by Assignee.
p. Assignor will pay Assignee for any sums, costs, and expenses
which Assignee may pay or incur pursuant to the provisions of this Assignment
or in negotiating, executing, perfecting, amending, defending, protecting or
enforcing this Assignment or the security interest granted herein or in
enforcing payment of the Lessee's Obligations or otherwise in connection with
the provisions hereof, including but not limited to court costs, collection
charges, travel expenses, and attorneys' fees, all of which, together with
interest at the rate of fourteen percent (14%) per annum, shall be part of
the Lessee's Obligations and be payable on demand.
q. Assignor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the
4
<PAGE>
corporate power and authority to own its properties and to transact the
business in which it is engaged.
r. Assignor has the corporate power and authority to execute and
deliver, and to perform its obligations under, this Assignment, and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Assignment.
s. This Assignment constitutes the legal, valid and binding
obligation of Assignor, enforceable in accordance with its terms.
t. The execution, delivery and performance of this Assignment will
not violate any law or regulation, or any order or decree of any court or
governmental instrumentality, or any provision of the corporate charter or
by-laws of, or any securities issued by, Assignor, and will not conflict
with, or result in the breach of, or constitute a default under, any
indenture, mortgage, deed of trust, agreement or other instrument to which
Assignor is a party or by which it is bound, and will not result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property of Assignor pursuant to the provisions of any of the foregoing.
u. Assignor agrees that any copy of this Assignment signed by
Assignor and transmitted by telecopy (promptly confirmed in writing) for
delivery to Assignee shall be admissible in evidence as the original itself
in any judicial or administrative proceeding, whether or not the original is
in existence.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
executed effective as of the 8th day of April, 1999.
MOBILE PET SYSTEMS, INC., a Delaware
corporation
WITNESS: By: /s/ Paul J. Crowe
---------------------------------
/s/ Thomas G. Brown Name: Paul J. Crowe
- --------------------------- Title: CEO/President
Address: 2240 Shelter Island Drive
----------------------------
San Diego, CA 92106
----------------------------
5
<PAGE>
STATE OF ILLINOIS)
) ss.
County of Cook )
On April 8, 1999 before me, the undersigned notary, personally
appeared Paul Crowe the CEO/PRESIDENT of Mobile PET Systems, Inc., a Delaware
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the
within instrument, and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.
Witness my hand and official seal.
/s/ Joyce M. Woods
---------------------------------
Notary Public
(Seal)
My Commission Expires:
11/9/02
- ---------------------- "OFFICIAL SEAL"
JOYCE M. WOODS
Notary Public, State of Illinois
My Commission Expires 11/9/2002
6
<PAGE>
EXHIBIT A
SCHEDULE OF AGREEMENTS
<TABLE>
<CAPTION>
Client Date of Agreement Number of Committed
------ ----------------- PET Procedures
-------------------
<S> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 10.6
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") is made and entered
into by and among PAUL J. CROWE ("Crowe"), JOHN FLEMING, and BRENT NELSON
("Nelson"; Crowe, Brown, and Nelson are sometimes hereinafter collectively
referred to as the "Directors"), effective as of the 8th day of April, 1999,
for the benefit of FINOVA CAPITAL CORPORATION, a Delaware corporation
("Lessor").
R E C I T A L S
A. Mobile PET Systems, Inc., a Delaware corporation ("Lessee"), is
or will be obligated to Lessor pursuant to that certain Equipment Lease No.
4125, together with each and every Lease Schedule now or hereafter to be
entered into between Lessee and Lessor and attached thereto (as amended,
restated, supplemented or modified from time to time, collectively, the
"Lease"). All obligations of Lessee to Lessor, as evidenced by the Lease, are
collectively referred to herein as the "FINOVA Debt." Except as otherwise
defined herein, all capitalized terms used herein shall have the same
meanings as set forth in the Lease.
B. Each of the Directors is an affiliate of Lessee, and Crowe and
Brown are also officers of Lessee. As such, each of the Directors will or may
be receiving salary, bonuses, compensation and/or other forms of
remuneration, director's fees, and dividends or other forms of capital
distributions, from Lessee (collectively herein, "Distributions"). Such
Distributions, together with any and all indebtedness of Lessee to the
Directors now existing or hereafter incurred (as such concept is more fully
elaborated upon in the following Recital C), are herein collectively referred
to as the "Director Debt."
C. The terms "Debt", "FINOVA Debt" and "Director Debt", as used
herein, mean all debts, obligations and liabilities, now or hereafter
existing, direct or indirect, absolute or contingent, joint or several,
secured or unsecured, due or not due, contractual or tortious, liquidated or
unliquidated, arising by operation of law or otherwise, irrespective of the
person in whose favor such debt may have originally been created and
regardless of the manner in which such debt has been or hereafter may be
acquired by Lessor in respect of the FINOVA Debt or the Directors in respect
of the Director Debt, as the case may be, and include all costs incurred to
obtain, preserve, perfect or enforce any security interest, lien or other
encumbrance securing such debt, or to collect any debt, or to maintain,
preserve, collect and enforce any collateral, and interest on all such
amounts.
D. The FINOVA Debt is secured by, among other things: (i) the lien
of that certain Security Agreement of even date herewith between Lessor and
Lessee pursuant to which Lessee granted in favor of Lessor a security
interest in those items of tangible and
<PAGE>
intangible personal property described on EXHIBIT A attached hereto (the
"Property"), (ii) the rights of Lessor, pursuant to the Lease, with respect to
the various items of equipment leased thereby, and (iii) that certain
Collateral Assignment of Agreements of even date herewith from Lessee in
favor of Lessor, pursuant to which Lessee has collaterally assigned to Lessor
its rights in various beneficial contractual arrangements related to the
Lease.
NOW, THEREFORE, in consideration of Lessor's agreement to enter
into the Lease with Lessee, and for other good and valuable consideration,
the Directors hereby agree as follows:
1. The Director Debt shall at all times be subordinate, and is
hereby made subordinate, to the FINOVA Debt until the FINOVA Debt is paid in
full. Notwithstanding anything to the contrary in the Lessee's organizational
documents and any and all amendments thereto, no payment of any obligation,
principal or interest of any portion of the Director Debt shall be required,
demanded, made or collected until after such time as the FINOVA Debt has been
paid in full, EXCEPT that, in the absence of an event of default under the
Lease (any such default being referred to herein as an "Event of Default"),
Lessee shall be permitted to pay regularly accruing salary, bonus, and other
compensation to Crowe (at an annual level not greater than $150,000 during
the period from the date hereof through June 30, 2000, and for each
subsequent twelve-month period commencing July 1st thereafter, at a level not
greater than 125% of the total compensation paid during the prior
twelve-month period); provided, however, that until such time as Lessee has
achieved a level of Operating Cash Flow (as hereafter defined) to Contractual
Debt Service (as hereafter defined) of not less than 1.0 to 1.0, Crowe and
shall cause twenty-five percent (25%) of the foregoing amounts to be deferred
and accrued. At such time as Lessee has attained a level of Operating Cash
Flow to Contractual Debt Service (herein, the "Debt Service Coverage Ratio")
of greater than 1.0 to 1.0, Lessee shall be permitted to pay, and Crowe and
shall be permitted to receive, payments of accrued deferred compensation to
the extent such payments can be made without causing Lessee's Debt Service
Coverage Ratio to fall below 1.0 to 1.0. "Operating Cash Flow" shall mean,
for any period, Lessee's net income or loss (excluding the effect of any
extraordinary gains or losses) determined in accordance with generally
accepted accounting principles ("GAAP"), PLUS each of the following items, to
the extent deducted from the revenues of Lessee in the calculation of net
income or loss: (i) depreciation; (ii) amortization and other non-cash
charges; (iii) rent paid to Lessor in respect of the Lease; (iv) without
duplication of amounts described in the preceding clause (iii), interest
expense paid or accrued, including, without limitation, interest imputed on
leases which would, in accordance with GAAP, be classified as "capital
leases"; and (v) total federal and state income tax expense determined as the
accrued liability of Lessee in respect of such period, regardless of what
portion of such expense has actually been paid by Lessee during such period,
and AFTER DEDUCTION FOR each of (a) federal and state income taxes, to the
extent actually paid during such period; (b) any non-cash income (but only to
the extent such non-
2
<PAGE>
cash income was included in the revenues of Lessee in the calculation of net
income or loss); and (c) all actual capital expenditures made by Lessee
during such period and not financed (with the qualification that all amounts
expended by Lessee pursuant to the Lease, if considered capital expenditures
under GAAP, shall be deemed financed for purposes of this definition).
"Contractual Debt Service" shall mean, for any period, the sum of payments
made (or, as to clauses (i) and (ii) of this sentence, required to be made)
by Lessee during such period for (i) scheduled payments of rent and any other
amounts due under the Lease, (ii) scheduled interest and principal payments
due on any and all outstanding indebtedness of Lessee, other than indebtedness
described in the following clause (iii), and (iii) interest and principal
payments made on any indebtedness of Lessee the repayment of which has been
subordinated to the payment of Lessee's obligations in respect of the Lease.
2. The Directors will not attempt to foreclose on any collateral
securing any part of the Director Debt until after such time as the FINOVA
Debt has been paid in full. Anything of value received by the Directors from
Lessee not in accordance with this Agreement shall be held by the Directors
in trust and immediately turned over to Lessor in the form received (with any
necessary endorsement attached or affixed thereto), to be applied by Lessor
to the FINOVA Debt.
3. Any time after the delivery by Lessor to the Directors of a
written notice of, and during the existence and continuance of, an Event of
Default, the Directors will not demand or accept from Lessee (and Lessee will
not make) any payment of all or any portion of the Director Debt. At such
time as an Event of Default, the result of which was to prohibit the Lessee
from making payments of the Director Debt, has been cured, all deferred
payments of the Director Debt which were otherwise payable during such time
may be paid to the Directors, PROVIDED that the payment of such amounts will
not result in Lessee's Debt Service Coverage Ratio falling below 1.0 to 1.0
or otherwise give rise to an Event of Default.
4. Until after such time as the FINOVA Debt has been paid in full,
the Directors will not (i) be a party to any action or proceeding against
Lessee to enforce payment of or on the Director Debt; (ii) exercise any
self-help remedies such as setoff or repossession with respect to any
property owned by Lessee; or (iii) foreclose (judicially or otherwise) any
lien on or security interest in real property, personalty or other collateral
with respect to any property owned by Lessee. Without limiting the generality
of the foregoing, until after such time as the FINOVA Debt is paid in full,
the Directors will not assert any claims in any insurance proceeds which may
be payable to Lessee and/or Lessor, and the Directors will not exercise (and
will, upon Lessor's request, specifically waive) any right (in their capacity
as the Directors hereunder) to participate in the negotiation or settlement
of any claim for insurance proceeds.
5. At any time and from time to time, without the Directors'
consent or notice to the Directors, and without liability to Lessor and
without impairing any of Lessor's rights against the Directors created
hereunder or any of the Directors' obligations hereunder,
3
<PAGE>
Lessor may take additional or other security for the FINOVA Debt and may also
release, exchange, subordinate or relinquish any security for the FINOVA
Debt; release any person obligated on the FINOVA Debt; modify, amend or waive
compliance with any agreement relating to the FINOVA Debt; modify or amend the
conditions pursuant to which Distributions may be made by Lessee; increase
the amount of the FINOVA Debt; delay, omit, fail or refuse to take or
prosecute any action for collection of any FINOVA Debt or to foreclose upon
any collateral or take or prosecute any action on any agreement securing any
FINOVA Debt.
6. The Directors represent and warrant that the Director Debt is
not presently secured by any security interests, liens, or deeds of trust.
The Directors and Lessee agree that the Director Debt will not hereafter be
secured by any security interests, liens, or deeds of trust covering property
of the Lessee. The Directors hereby subordinate and make inferior any
security interests, liens, deeds of trust or other encumbrances now or
hereafter securing the Director Debt to all security interests, liens, and
other encumbrances covering property of the Lessee now or hereafter securing
the FINOVA Debt.
7. The Directors will notify Lessor at the address stated below
not less than ten (10) days before any assignment of the Director Debt and
will notify the Directors' assignee of the terms of this Agreement. Any
assignment of the Director Debt shall be subject to the condition that the
proposed assignee acknowledge and agree in writing to be bound by the terms
of this Agreement. Lessor's rights under this Agreement may be assigned in
connection with any assignment or transfer of any FINOVA Debt. This Agreement
is cumulative of all other rights, remedies, and security of Lessor. No
waiver by Lessor of any right under this Agreement shall affect or impair its
rights in any matters thereafter occurring.
8. The Directors shall pay Lessor's attorneys' fees and costs
(including expert witness fees) incurred in enforcing this Agreement whether
or not suit is brought, including any attorneys' fees and costs (including
expert witness fees) incurred by Lessor in proceeding under the Federal
Bankruptcy Code in order to collect any indebtedness hereunder.
9. This Agreement is binding upon and shall inure to the benefit
of the successors and permitted assigns of each of the parties to this
Agreement. The rights and interests of any assignee of any of the undersigned
shall be subject in all respects to the terms of this Agreement.
10. THIS AGREEMENT AND THE RIGHTS, DUTIES AND OBLIGATIONS OF THE
PARTIES THERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF ARIZONA AND TO THE EXTENT THEY PREEMPT THE LAWS
OF SUCH STATE, THE LAWS OF THE UNITED STATES.
4
<PAGE>
11. THE DIRECTORS: (A) HEREBY IRREVOCABLY SUBMIT THEMSELVES TO THE
PROCESS, JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF ARIZONA,
MARICOPA COUNTY, AND TO THE PROCESS, JURISDICTION, AND VENUE OF THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA, FOR THE PURPOSES OF SUIT,
ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE SUBJECT MATTER HEREOF, OR, IF LESSOR INITIATES SUCH ACTION, ANY COURT IN
WHICH LESSOR SHALL INITIATE SUCH ACTION, AND THE CHOICE OF SUCH VENUE SHALL
IN ALL INSTANCES BE AT LESSOR'S ELECTION; AND (B) WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF
MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY CLAIM
THAT ANY DIRECTOR IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE
ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. THE DIRECTORS HEREBY WAIVE THE RIGHT TO COLLATERALLY ATTACK ANY
JUDGMENT OR ACTION IN ANY OTHER FORUM.
12. LESSOR AND THE DIRECTORS ACKNOWLEDGE AND AGREE THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT ANY
LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED BY A JUDGE SITTING
WITHOUT A JURY, AND THE DIRECTORS HEREBY KNOWINGLY AND VOLUNTARILY WAIVE
TRIAL BY JURY IN ANY SUCH PROCEEDING.
PC JF BN
------------ ------------ ------------ the Directors' Initials
as to PARAGRAPHS 9, 10, AND 11
13. All notices required or permitted to be given hereunder shall
be in writing, and shall be deemed delivered (a) one (1) Business Day after
such are deposited for delivery via Federal Express or other nationally
recognized overnight courier service, or (b) three (3) Business Days after
such are deposited in the United States mails, certified or registered mail,
in either case, with all postage prepaid, and addressed as set forth below,
or to such other address as either party may, from time to time, designate in
writing. Written notice may be given by telecopy to the telecopier number
shown below or such other telecopier number as either party may designate,
from time to time, in writing, provided that such notice shall not be deemed
effective unless it is confirmed within twenty-four (24) hours by courier
delivery or mailing of a copy of such notice in accordance with the
requirements set forth above.
5
<PAGE>
If to Lessor: FINOVA Capital Corporation
311 S. Wacker Drive
Suite 4400
Chicago, Illinois 60606
Attention: Vice President - Group Counsel
Telecopy No.: 312-322-3550
If to the MOBILE PET SYSTEMS, INC.
Directors: ------------------------
2240 SHELTER ISLAND DRIVE
------------------------
SUITE 205
------------------------
SAN DIEGO, CA 92106
------------------------
Attention: Paul Crowe
----------------
Telecopy No.: (619) 226-6889
---------------
[SIGNATURE PAGE FOLLOWS]
6
<PAGE>
Executed effective as of the date and year first written above.
/s/ Paul J. Crowe
-------------------------------
Paul J. Crowe
PC
------- check here to confirm that paragraphs 9,
10 and 11 have been initialed.
/s/ John J. Fleming
-------------------------------
John J. Fleming
JF
----------- check here to confirm that
paragraphs 9, 10 and 11 have been initialed.
/s/ Brent Nelson
-------------------------------
Brent Nelson
BN
----------- check here to confirm that
paragraphs 9, 10 and 11 have been initialed.
Accepted:
MOBILE PET SYSTEMS, INC., a
Delaware corporation
By: /s/ Paul J. Crowe
-----------------------------
Name: Paul Crowe
-----------------------
Title: CEO/PRESIDENT
-----------------------
7
<PAGE>
EXHIBIT A
TO SUBORDINATION AGREEMENT
DESCRIPTION OF PROPERTY
(to be attached)
<PAGE>
EXHIBIT 10.7
[LETTERHEAD]
OFFICE SPACE LEASE AGREEMENT
THIS COMMERCIAL SPACE LEASE AGREEMENT ("Lease") is entered into as of
the date set forth in Article I by and between Landlord and Tenant upon the
following terms and conditions at San Diego, San Diego County, California.
LEASE PROVISIONS
1.0 WITNESSETH: Tenant hereby leases to Sublessee, and Sublessee hereby
hires from Tenant, on the terms and conditions set forth herein, the premises
described herein, as follows:
1.1 EFFECTIVE DATE: JANUARY 1, 1999
1.2 MASTER LANDLORD: San Diego Unified Port District
(SDUPD)
1.3 LANDLORD/MASTER TENANT/LESSEE: Shelter Cove Marina, Ltd. (SCM)
2240 Shelter Island Drive, Suite 102
San Diego, CA 92106
1.4 TENANT/SUBLESSE: FLEMING & ASSOCIATES
MOBILE PET SYSTEMS, INC.
2240 SHELTER ISLAND DRIVE #204/205
SAN DIEGO, CA 92106
1.5 MASTER LEASE:
That certain Lease Agreement dated August 25, 1992, by and
between Landlord, as the Master Tenant/Lessee, and the San Diego Unified
Port District, as Master Landlord. This has precedence over this Lease
between Landlord/Master Tenant/Lessee and Tenant/Sublessee.
1.6 BUILDING CONTAINING THE PREMISES:
That certain two-story commercial office building, the underlying
realty located at 2240 Shelter Island Drive, San Diego, California 92106.
1.7 LEASED PREMISES:
Suite 204/205 (Approximately 1,198 sq. ft.)
1.8 SCHEDULED COMMENCEMENT DATE:
JANUARY 1, 1999 for Suite 204/205
2.0 TERM:
The term of this Lease shall be for a period of (2) Two years
commencing on JANUARY 1, 1999, and ending at midnight on DECEMBER 31,
2000
LANDLORD: /s/ Illegible TENANT: /s/ Illegible
------------- -------------
<PAGE>
3.0 RENT, OFFICE:
Tenant shall pay to Landlord as rental for the full term hereof
the sum of $57,504.00 dollars in lawful money of the United States, in
monthly installments of $2,396.00 each, payable in advance on the first
day of each calendar month of the term of this Lease (WITHOUT DEDUCTION,
OFFSET, PRIOR NOTICE OR DEMAND), plus the amount of all excise taxes or
other charges which may be levied by any government body on such
rental or receipt thereof. The rent shall be paid at the address set out
after the signature of Landlord in this Lease, or at such other place as
Landlord shall direct. Rent for partial months shall be prorated.
Receipt of the sum of $7,607.30 is hereby acknowledged by
Landlord. Of said sum, $2,396.00 shall be attributed to the First
Month's Rent (prorated), $239.60 to Port fees, $179.70 to CAM fees, when
the term of this Lease commences and the balance is a Security Deposit.
If Tenant shall pay all rent and observe and perform all of the terms,
covenants and conditions of this Lease during the term, and all
extensions and renewals thereof, Landlord will repay the Security
Deposit to Tenant, without interest within ten (10) days after Tenant
vacates the Premises. If Tenant defaults in any of the terms, covenants
or conditions of this Lease (INCLUDING, BUT NOT LIMITED TO, NONPAYMENT
OF RENT). Landlord may use or apply so much of the Security Deposit as
is required to cure or make good such default, or to indemnify Landlord
for loss or damage arising therefrom. Tenant agrees to restore Security
Deposit to the full original amount immediately upon receipt of demand
from Landlord therefor. The obligation to maintain the Security Deposit
in the full original amount is a rental obligation under this Lease.
3.1 OPTION PERIODS. Tenant shall have the right to extend the term of
this Lease for three (3) terms beyond the initial two (2) years, upon
the terms and conditions set forth herein (singularly, "Extension
Periods"). In the event Tenant elects to exercise the Extension Period,
Tenant must give written notice to Landlord on or before OCTOBER 01,
2000, OCTOBER 01, 2001 and OCTOBER 01, 2002 respectively. In the event
Tenant elects to exercise the Extension Period, Annual Rental for the
Premises shall be renegotiated between Tenant and Landlord on a "fair
market value" basis.
3.2 ASSIGNMENTS/ SUB-SUBLEASES. In the event an assignment of Sublease
is executed by Tenant the prior written consent of the Landlord and the
SDUPD is required in each instance.
3.3 OFFICE DEPOSIT(S). "FIRST RIGHT OF REFUSAL" may be obtained in
order to hold the space desired and to have first rights to that space.
The equivalent of two months rent or $4,792.00 will be deposited with
the Landlord with a letter of intent signed by both prospective Tenant
and acknowledged by Landlord.
"SECURITY DEPOSIT" Consists of two months rent or $4,792.00 and
will be paid to Landlord on execution of this sublease. Two (2) months
rent will be held as a total deposit for security for the duration of
the tenancy. Deposit will be returned provided premises are returned to
Landlord as they were received less normal depreciation. In the event
Tenant has deposited fees for the first Right of Refusal, these fees
will apply as the Security Deposit. Landlord will deduct from deposit
$239.60 (1,198 sq. ft. @ $0.20 per sq. ft.) for cleaning of the carpet at
end of lease.
3.4 MISCELLANEOUS CHARGES.
(a) Security Key Deposit: ($25.00 per key)
Tenant is entitled to one (1) key per owner or employee. Broken
keys may be replaced for a $10.00 fee. If Tenant loses a security key,
Tenant may obtain a replacement key upon tender of an additional deposit
of $25.00.
(b) Utilities (Electrical Power), CAM (Common Area Maintenance)
charges for office only.
Tenant will be provided utility (electrical power) services from 8 AM to
6 PM daily. Service at other times, including use by janitorial service,
will be initiated by Tenant using a metered timer device in the suite.
Real estate taxes (excepting taxes arising from Tenant's business) and
insurance (other than specified in paragraph 14) shall be paid by
Landlord. Utilities and CAM charges will be paid by the Tenant through a
pro-rata assessment based on the SDG&E billings and CAM costs currently
determined as $.15 per square foot of leased space. Square footage
assessment will be reviewed on an annual basis to accurately reflect
true costs.
4.0 POSSESSION:
If Landlord is unable to deliver possession of the Premises to
Tenant at the commencement of the term for any reason whatsoever, this
Lease shall not be void or voidable for a period of ninety (90) days
thereafter, nor shall Landlord be liable to Tenant for any loss or
damage resulting therefrom, but the rent shall abate until Landlord
delivers possession of the Premises to Tenant. The term of this Lease
shall be extended for a period equal to any such delay and Tenant agrees
to pay the rent provided for herein and to perform all of the terms and
conditions of this Lease during such extension.
If Landlord is unable to deliver possession of the Premises to
Tenant within ninety (90) days after the commencement date, this Lease
may be terminated by either Landlord or Tenant by written notice to the
other at any time thereafter prior to the date possession is delivered
to Tenant.
5.0 CONSTRUCTION ON PREMISES:
5.1 Landlord, at its own expense, will perform the work and supply the
material specified in the schedule in Subparagraph 31.1. The goods and
services to be provided by Landlord shall be provided promptly and
diligently, in a first-class, workmanlike manner.
5.2 Tenant shall pay for goods and services, if any, specified in
Subparagraph 31.2 to be provided by Tenant. Except with the prior
written approval of Landlord, all work on the Premises shall be done by
contractors or other persons selected or employed by Landlord. Landlord
shall have the right to designate the time period when any work required
of Tenant is to be performed, subject to not unduly delaying the
completion of any such work by Tenant.
LANDLORD: /s/ Illegible TENANT: /s/ Illegible
------------- -------------
<PAGE>
6.0 USE AND FEES:
Tenant shall use the Premises for general office
purposes and shall not use or permit the Premises to be used
for any other purpose without the prior written consent of
Landlord.
Tenant shall not do or permit anything to be done in
or about the Premises nor bring or keep anything therein
which will in any way increase the existing rate of or
affect any fire or other insurance upon the Building, or any
of its contents, or cause cancellation of any insurance
policy covering said Building or any part thereof or any of
its contents. Tenant shall not do or permit anything to
be done in or about the Premises which will in any way
obstruct or interfere with the rights of the other Tenants
or occupants of the Building or injury or annoy them or use
or allow the Premises to be used for any improper, immoral,
unlawful or objectionable purpose, nor shall Tenant cause,
maintain or permit any nuisance in, on or about the
Premises. Tenant shall not commit or suffer to be committed
any waste in or upon the Premises.
6.1 SPECIFIC USE OF PREMISES. Marine Recreational/
Commercial office.
Specifically Business Consulting Firm
-----------------------------------
The Premises shall be used solely for the use stated above
and for no other use or purpose.
6.2 SDUPD APPROVALS. Tenant must complete San Diego
Unified Port District (SDUPD). SUBLEASE
SUMMARY/QUESTIONNAIRE Application Form No. 618 with leases
five (5) years or less or Form No. 317 with leases in excess
of five (5) years to be filed with Landlord and SDUPD.
Tenant to pay SDUPD application fee (if applicable) to
Shelter Cove Marina, Ltd., (SCM), who will pass on fee to
SDUPD. On approval by the SDUPD, tenant may be required by
SDUPD to pay the appropriate SDUPD fees through Landlord
based on gross incomes from sources of income. SCM will in
turn pay the fees to the SDUPD as required. SDUPD rates to
Landlord/Tenant and Tenant/Sublessee are reviewed every five
(5) years. Sublease is subject to approval of the SDUPD.
6.2.1 INCREASE IN RENT CHARGED TO LANDLORD/SUBLESSOR.
In the event the SDUPD increases/decrease the amount
of percentage/flat rent that Landlord is required to
pay for the Port identified "water dependent" business
covered by the Sublease, and/or as a result of this
Sublease, the percentage/flat rent that Tenant pays
Landlord/Tenant shall automatically increase/decrease
at the same time. This rate will be equal or
proportional to the rate imposed by the SDUPD.
6.3 BUSINESS FEES.
6.3.1 PORT IDENTIFIED "WATER DEPENDENT"
BUSINESSES/FEES: Marine recreational (water dependent)
businesses are required by the Port and Shelter Cove
Marina to pay a percentage of gross revenues or a flat
fee for doing business on the tidelands.
<TABLE>
<CAPTION>
BUSINESS PORT FEE/MONTH SCM FEE/MONTH
<S> <C> <C>
(1) Slip Revenues including LAB, SCM pays N/A
lockers & dock boxes.
(2) Boat Rentals w/Bare boat of 10% 3.5%
24 hrs. or less. $100 Minimum
(3) Boat Chartering of bare boats 6% 3.5%
or boats w/crews in excess of
24 hrs.
(4) Ship Chandlery Retail sales 5% N/A
(5) Sale of New & Used Boats $.36/sq. ft. of leased N/A
space per. brokerage
(6) OFFICE SPACE RENTALS
(TO BUSINESS NOT OTHERWISE 10% N/A
PAYNG A PORT FEE)
(7) Bicycle Rentals 10% 10%
(8) Coin Operated Vending on 25% if Leased 25% if Leased
Service Machines and 5% if Owned 5% if Owned
Telephones
(9) All Other Activities Under 10% 10%
Port Policy
</TABLE>
<PAGE>
6.3.2 TENANT BUSINESS FEES. For all businesses that
are Port identified marine recreational "water
dependent" and located at Shelter Cove Marina, a
percentage of gross revenues or flat fee identified in
paragraph 6.3.1 dictated by the SDUPD will be paid on
a monthly basis to Shelter Cove Marina which will be
"passed through" to the SDUPD.
SDUPD Percentage/Flat Fee: 10% OF GROSS OFFICE RENT
-----------------------------
In addition and according to the fee schedule, a
percentage of gross revenues or a flat fee equal to
the amount charged by the SDUPD will be paid to
Shelter Cove Marina for all Port identified marine
recreational "water dependent" businesses.
SCM Percentage/Flat Fee: N/A
-------------------------------
THESE FEES ARE DUE WITHIN 5 DAYS OF THE END OF THE
MONTH OF DOING BUSINESS.
6.3.3 MISCELLANEOUS PROVISIONS. SAN DIEGO UNIFIED
PORT DISTRICT FEES AS INDICATED IN 6.3 AND CAM CHARGES
AS LISTED IN 3.4.
6.3.4 ACCOUNTING RECORDS. The SDUPD shall have the
right to audit the Tenant accounting records and that
the records will be maintained in a manner satisfactory
to the SDUPD. The Landlord shall have the right to have
its President/General Partner or designated agent inspect
and audit the Tenant accounting records of its operations
at its main business office and that those records will
be maintained in a manner satisfactory to generally
accepted accounting principles.
6.3.5 PARKING. All parking is in the adjacent public
parking lot. Parking is limited to seventy two (72)
hours per SDUPD regulations. All spaces on the marina
building property are for SCM staff.
7.0 WASTE; NUISANCE. COMPLIANCE WITH LAWS:
Tenant shall not commit or allow the commission
of any waste upon the Premises, or any public or
private nuisance, or any other act or thing that may
disturb the quiet enjoyment of any other tenant in the
Building. Tenant shall not use the Premises or allow
their use, in whole or in part, for any purpose or use
that is in violation of any of the laws, ordinances,
regulations or rules of any public authority. A
judgment of any court of competent jurisdiction, or
the admission by Tenant in any action or proceeding
against Tenant, that Tenant has violated any such law,
ordinance, regulation or rule shall be a conclusive
determination of that fact as between Landlord and
Tenant.
8.0 SERVICES AND UTILITIES:
Provided that Tenant is not in default
hereunder, Landlord agrees to furnish to the Premises
during reasonable hours of generally recognized
business days, to be determined by Landlord at his sole
discretion, and subject to the rules and regulations
of the Building of which the Premises are a part,
electricity for normal lighting and fractional
horsepower office machines and heat and air
conditioning required in Landlord's judgment for the
comfortable use and occupation of the Premises.
Landlord shall also maintain and keep lighted the
common stairs, common entries and toilet/shower rooms
in the Building of which the Premises are a part.
Landlord shall not be liable, under any circumstances,
for a loss of or injury to property, however occurring,
through or in connection with or incidental to failure
to furnish any of the foregoing. Whenever heat
generating machines or equipment are used in the
Premises which affect the temperature otherwise
maintained by the air conditioning system, Landlord
reserves the right to install supplementary air
conditioning units in the Premises and the cost
thereof, including the cost of the installation, and
the cost of the operation and maintenance thereof
shall be paid by Tenant to Landlord upon demand by
Landlord.
Tenant will not, without written consent of
Landlord, use any apparatus or device in the Premises,
including, but without limitation thereto, electronic
data processing machines, punch card machines, and
machines using in excess of 120 volts, which will in
any way increase the amount of electricity usually
furnished or supplied for the use of the Premises as
general office space; nor connect with electric
current except through existing electrical outlets in
the Premises, any apparatus or device, for the purpose
of using electrical current. If Tenant shall require
electric current in excess of that usually furnished
or supplied for the use of the Premises as general
office space, Tenant shall first procure the written
consent of Landlord, which Landlord may refuse, to the
use thereof and Landlord may cause an electrical
current meter to be installed in the Premises, so as
to measure the amount of electric current consumed for
any such use. The cost of any such meters and of
installation, maintenance and repair thereof shall be
paid for by the Tenant and Tenant agrees to pay to
Landlord promptly upon demand therefor by Landlord for
all such electric current consumed as shown by said
meters, at the rates charged for such services by the
local public utility furnishing the same, plus any
additional expense insured in keeping account of the
electric current so consumed. If a separate meter is
not installed, such excess cost for such electric
current will be established by an estimate made by a
utility company or electrical engineer.
9. ABANDONMENT:
Tenant will not vacate, abandon or surrender the
premises during the term, and if Tenant does, or is
dispossessed by process of law, or otherwise, any
personal property belonging to Tenant left on the
premises shall be deemed to be abandoned at the option
of Landlord.
10. CONDITION OF PREMISES:
Tenant's taking possession shall be conclusive
evidence as against Tenant that the Premises were in
good order and satisfactory condition when Tenant took
possession. No promise to alter, remodel or improve
the Premises or the Building and no representation
respecting the condition of the Premises or the
Building have been made by Landlord to Tenant, unless
the same is set forth in Paragraph 31.1. Tenant
waives all right to make repairs at the expense of
Landlord, or to deduct the
<PAGE>
cost thereof from the rent, and Tenant waives all rights under Section
1941 and 1942 of the Civil Code of the State of California. At the
termination of this Lease, by lapse of time or otherwise, Tenant shall
surrender the premises in as good a condition as when Tenant took
possession, ordinary wear and loss by fire or other casualty or
condemnation excepted, failing which lessor may restore the Premises to
such condition and Tenant shall pay the cost thereof to Landlord upon
demand.
11. ALTERATIONS AND REPAIRS:
Except for any initial leasehold improvements provided for in
Paragraph 31.1, Tenant shall not make or permit to be made any
alterations, additions, improvements or changes in the premises without
the prior written consent of Landlord. Subject to the services to be
rendered by Landlord as set forth in Paragraph 31.1, Tenant shall, at
Tenant's own expense, keep the Premises in good order, condition and
repair during term, including the replacement of all broken glass with
glass of the same size and quality under the supervision and with the
approval of Landlord. If Tenant does not make repairs promptly and
adequately, Landlord may, but need not make repairs, and Tenant shall
pay promptly the reasonable cost thereof. At any time or times,
Landlord, either voluntarily or pursuant to governmental requirement,
may, at Landlord's own expense, make repairs, alterations or
improvements in or to the Building or any part thereof, including the
Premises, and during such operations, Landlord may close entrances,
doors, corridors, elevators or other facilities, all without any
liability to Tenant by reason of interference, inconvenience or
annoyance; provided that Tenant shall have reasonable access to the
premises.
11.1 TRADE FIXTURES: Any and all improvements made to the Premises
during the term hereof shall belong to the Landlord upon the expiration
of the term, except trade fixtures of the Tenant. The Tenant may, upon
termination hereof, remove all of its trade fixtures, but shall repair
or pay for all repairs necessary for damages to the Premises occasioned
by or incident o the removal such that the premises shall be restored to
the Landlord in the same condition as they were at the time herein let,
regardless of the length of this Lease Term or its extension.
12. LIENS:
Tenant agrees to keep the Premises and the property on which the
premises are located free from any liens arising out of any work
performed, materials furnished, or obligations incurred by Tenant.
Tenant shall keep Landlord fully informed of any work of improvement on
the Premises and shall permit Landlord to post and record notices on
non-responsibility (WHEN APPROPRIATE) within ten (10) days after the
commencement of any work or improvement, so the Landlord's interest in
the premises will not be subject to mechanic's liens.
13. INDEMNIFICATION:
Tenant waives all claims against Landlord for damages to property,
or to goods, wares and merchandise stored in, upon or about the
Premises, and for injuries to the premises in, upon or about the
Premises from any cause arising at any time, and Tenant agrees to
indemnify and hold Landlord exempt and harmless for and on account of
any damages or injury to any person or property arising from the use of
the Premises by Tenant, from the failure of Tenant to keep the Premises
in good condition as herein provided, and from Tenant's failure to keep
the Premises free from liens in accordance with Paragraph 12. Landlord
shall not be liable to Tenant for any damage because of any act or
negligence of any co-sublessee or other occupant of the same building,
or by any owner or occupant of adjoining or contiguous property, nor for
overflow, breakage or leakage of water, steam, gas or electricity from
pipes, wires or otherwise. Tenant will pay for all damages to the
building and to the tenants and occupants thereof caused by Tenant's,
his agents', patients', clients' or invitees' misuse or neglect of said
premises, its apparatus of appurtenances.
14. LIABILITY AND FIRE INSURANCE:
14.1 Tenant agrees to carry and maintain in full force and effect
throughout the term of this Lease, comprehensive public liability and
property damage insurance covering the Premises. The policy of combined
single Limit, Bodily Injury and Property Damage insuring both Landlord
and Tenant against any liability arising out of the ownership, use,
occupancy or maintenance of the Premises in an amount not less than
$1,000,000 for one person $2,000,000 for one occurrence for bodily injury
and $500,000 for property damage. Tenant may comply with its insurance
obligations hereunder by endorsement to any blanket policy of insurance
carried by Tenant.
14.2 Tenant agrees to carry and maintain in full force and effect
throughout the term of this Lease, fire and extended coverage,
vandalism, malicious mischief, special extended perils (all risks), upon
the Premises, including all fixtures and equipment therein installed by
Landlord, for full replacement value thereof, as the same may exist from
time to time without deduction for depreciation, but exclusive of
excavations, foundations and footings. Tenant may comply with its
insurance obligation hereunder by endorsement to any blanket policy of
insurance carried by Tenant. Said insurance shall name Landlord, and, if
applicable, pursuant to sublease, at Landlord's request, the holder of
any first mortgage or first Deed of Trust encumbering the Premises as
additional insured, and, at Tenant's option, any leasehold mortgagee,
as their interests may appear.
If Landlord's insurance rates for the premises are increased at any
time during the term as a result of the nature of Tenant's use or
occupancy of the premises, Tenant agrees to reimburse Landlord for the
full amount of such increase immediately upon receipt of demand from
Landlord therefor. Such increase shall be prorated as of the expiration
of the term, if applicable.
15. SUBROGATION:
Landlord and Tenant hereby waive all rights of subrogation which
their respective insurers might have under all policies of insurance now
existing or hereafter purchased during the term by either Landlord or
Tenant, insuring or covering the premises or any thereof, or Landlord's
leasehold improvements, furniture, fixtures, personal property, business
or operations in or about the premises. To effectuate the subrogation
set forth in section 15, Landlord and Tenant waive any
Landlord: /s/ Illegible Tenant: /s/ Illegible
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<PAGE>
claims for loss or damage against the other to the extent such loss or
damage is covered by insurance maintained by the waiving party.
16. TAXES:
Tenant will pay before delinquency any and all taxes, assessments,
license fees and public charges levied, assessed or imposed or which
become payable during the term hereof upon Tenant's fixtures, furniture
and personal property installed in or located on the premises.
Tenant shall be considered the owner during the term of any
leasehold improvements installed at Tenant's expense, and any such
leasehold improvements shall be assessed to Tenant for property tax
purposes. Except as otherwise provided in Paragraph 11, Tenant shall not
remove from the premises any leasehold improvements installed by Tenant
without Landlord's prior written consent, and the ownership of any such
leasehold improvements shall revert to Landlord upon the expiration of
the term.
17. DESTRUCTION:
In the event of a partial destruction of the Building during the
term by fire or other cause, Landlord shall repair the same, provided
that in Landlord's reasonable estimation such repairs can be made within
ninety (90) days (SUBJECT TO DELAYS BEYOND LANDLORD'S CONTROL AND DELAYS
IN MAKING INSURANCE ADJUSTMENTS BY LANDLORD) and that full cost of such
repairs is insured under Landlord's fire and extended coverage
insurance; and in that event such partial destruction shall not annul or
void this Lease except that the Tenant shall be entitled to a
proportionate reduction of rent while such repairs are being made, such
proportionate reduction to be based upon the extent to which the making
of such repairs interferes with the business carried on by Tenant in the
Premises.
If such repairs cannot be made within the above ninety (90) days,
either Landlord or Tenant may terminate this Lease; or if the cost of
such repairs is not insured as set forth above, Landlord may elect to
terminate this Lease. In either event, such termination shall be
effected by giving notice to the other party within thirty (30) days
after the damage occurs. If the Lease is not so terminated, Landlord
shall make such repairs within a reasonable time with this Lease
continuing in full force and effect and the rent proportionately reduced
while repairs are being made.
In the event the Building is destroyed to the extent of not less
than one-third of the then current replacement cost thereof (excluding
foundation) Landlord may elect to terminate this Lease, regardless of
whether the Premises are damaged, whether the partial destruction is
caused by a casualty which is covered by insurance or whether the
repairs can be made within ninety (90) days. A total destruction of the
Building shall terminate this Lease. In respect to any partial
destruction which Landlord is obligated to repair or may elect to repair
under the terms of this paragraph and which can be made within ninety
(90) days, the provisions of Section 1932, Subdivision 2, and of Section
1933, Subdivision 4, of the Civil Code of the State of California are
waived by Tenant.
Notwithstanding anything to the contrary contained in this Article,
Landlord shall not have any obligation whatsoever to repair, reconstruct
or restore the Premises when the damage resulting from any casualty
covered under this Article occurs during the last twelve (12) months of
the term of this Lease or any extension thereof.
Landlord shall not be required to repair any injury or damage by
fire or other cause, or to make any repairs or replacements of any
panels, decoration, office fixtures, railings, floor covering,
partitions, or any other property installed in the Premises by Tenant.
Tenant shall not be entitled to any compensation or damages from
Landlord for loss of the use of the whole or any part of the Premises.
Tenant's personal property or any inconvenience or annoyance occasioned
by such damage, repair, reconstruction or restoration.
18. EMINENT DOMAIN:
If the whole or any substantial part of the building or appurtenant
real property shall be taken or condemned by any competent authority
for any public use or purpose, the term of this Lease shall end upon,
and not before, the date when the possession of the part so taken shall
be required for such use or purpose; provided, that at Landlord's option
this Lease shall not terminate if Tenant's Premises are not taken and if
Tenant's access to and use of its premises are not materially and
detrimentally affected by the taking. Current rent shall be apportioned
as of the date of such termination, but the entire award shall be the
property of Landlord without apportionment.
19. ASSIGNMENT AND SUBLETTING:
Tenant shall not assign this Lease, or any interest herein, and
shall not sublet the Premises or any part thereof, or any right or
privilege appurtenant thereto, or suffer any other person (THE AGENTS
AND EMPLOYEES OF TENANT EXCEPTED) to occupy or use the premises, or any
portion thereof, without the prior written consent of Landlord, and a
consent to one assignment, subletting, occupation or use by any other
person. Any assignment or subletting without such consent shall be void,
and shall, at the option of the Landlord, terminate this Lease. Any
transfer or assignment of this Lease by operation of law without the
written consent of Landlord shall make this Lease voidable at the option
of lessor.
Every assignment or sublease shall recite that it is and shall be
subject and subordinate to the provisions of this Lease, and the
termination of this Lease shall continue a termination of every such
assignment or sublease.
20. SUBORDINATION:
The rights of Tenant under this Lease shall be and they are subject
and subordinate at all times to the lien of any mortgage or mortgages,
deed of trust or deeds of trust, now or hereafter in force against the
property, and to all advances
Landlord: /s/ Illegible Tenant: /s/ Illegible
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<PAGE>
made or hereafter to be made [illegible] the security thereof, the Tenant
shall execute [illegible] further instruments subordinating this Lease
to the lien or liens of such mortgage or mortgages, deed of trust or
deeds of trust, as shall be requested by Landlord. Tenant hereby
irrevocably appoints Landlord as attorney in fact for Tenant with full
power and authority to execute and deliver in the name of Tenant any such
instrument or instruments.
If any mortgage or beneficiary elects to have this Lease superior to
its mortgage or deed of trust and give notice of such fact to Tenant, then
this Lease shall be deemed superior to the lien of any such mortgage or
deed of trust, whether this Lease or a memorandum thereof is dated or
recorded before or after said mortgage or deed of trust.
21. SIGNS:
Tenant shall not place any signs, lettering, marks, photographs or
any other material whatsoever on the interior or exterior of the doors,
windows, hallways or any other place in, on or about the Premises, the
Building or its appurtenances, without Landlord's prior written approval
of the size, style, design, color, material, manner of applying or
fastening, and location thereof, and the person or firm who shall
install or apply the same.
The prior written consent of the SDUPD and Landlord for changes to
improvements and the design location of any signs is required in each
instance.
Tenant is responsible for paying for allowable signage. A directory
sign located adjacent to Suite 100 and an individual Suite sign and
adjacent of the entry of the suite will be constructed by Landlord
designated sign maker conforming the SDUPD approved signage. Tenant may
need to submit separate sign application for Port approval.
22. DEFAULT:
If Tenant fails to make any payment of any sum due under this Lease
for ten (10) days after notice from Landlord, or fails to perform any
other term, covenant or condition hereof for twenty (20) days after
notice from Landlord, or if Tenant's interest herein, or any part
thereof, is assigned or transferred, either voluntarily or by operation
of law (EXCEPT AS EXPRESSLY PERMITTED BY OTHER PROVISIONS OF THIS
LEASE), including, without limitation, the filing of a petition by
or against Tenant, or any member of Tenant if Tenant is a partnership or
joint venture, under any insolvency or bankruptcy laws, or if Tenant
makes a general or any assignment for the benefit of his creditors,
then, in any such events, Landlord shall have the right, at its option,
in addition to and not exclusive of any other remedy Landlord may have by
operation of law, without any further demand or notice to re-enter the
premises and eject all persons therefrom, using all necessary force to do
so, and either:
(1) Declare this Lease at an end, in which event Tenant shall
immediately pay to Landlord a sum of money equal to the amount, if any,
by which the then cash value of the rent reserved hereunder, for the
balance of the term of this Lease exceeds the then cash reasonable rental
value of the premises for the balance of the term; or
(2) Without terminating this Lease, relet the premises, or any part
thereof, as the agent and for the account of Tenant upon such terms and
conditions as Landlord may deem advisable, in which event the rents
received on such reletting shall be applied first to the expense of such
reletting and collection, including necessary renovation and alterations
of the premises, reasonable attorneys' fees, any real estate commissions
paid, and thereafter toward payment of all sums due or to become due
hereunder, and if a sufficient sum is not thus realized to pay such sums
and other charges, Tenant shall pay Landlord any deficiency monthly,
notwithstanding Landlord may have received rent in excess of the rent
stipulated in this Lease in previous or subsequent months, and Landlord
may bring an action therefor as such monthly deficiency shall arise.
Any such re-entry shall be allowed by Tenant without let or
hindrance, and Landlord shall not be liable in damages for any such
re-entry, or guilty of trespass or forcible entry.
No re-entry and taking of possession of the premises by Landlord
shall be construed as an election on Landlord's part to terminate this
Lease regardless of the extent of renovations and alteration by Landlord,
unless a written notice of such intention is given to Tenant by
Landlord. Notwithstanding any reletting without termination. Landlord
may at any time thereafter terminate this Lease for such previous breach.
23. SURRENDER:
The voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation thereof, shall not work a merger, and shall, at the
option of Landlord, terminate all or any existing sublease or
sub tenancies, or may, at the option of Landlord, operate as an assignment
to Landlord of any or all such subleases of sub tenancies.
24. REMOVAL OF PROPERTY:
Tenant hereby irrevocably appoints Landlord as agent and attorney in
fact of Tenant, to enter upon the premises, in the event of default by
Tenant in the payment of any rent herein reserved, or in the performance
of any term, covenant or condition herein contained to be kept or
performed by Tenant, and to remove any and all furniture and personal
property whatsoever situated upon the premises, and to place such
property in storage for the account of and at the expense of Tenant. In
the event that Tenant shall not pay the cost of storing any such
property after the property has been stored for a period of ninety (90)
days or more, Landlord may sell any or all of such property, at public
or private sale, in such manner and at such times and places as Landlord
in its sole discretion may deem proper, without notice to Tenant or any
demand upon Tenant for the payment of any part of such charges or the
removal of any such property, and shall apply the proceeds of such sale
first to the cost and expenses of such sale, including reasonable
attorney's fees actually incurred: second, to the payment of the costs
of or charges for storing any such property; third, to the payment of
any other sums of money which may then or thereafter be due to Landlord
from Tenant under any of the terms hereof; and fourth, the balance, if
any, to Tenant.
Landlord: [Illegible] Tenant: [Illegible]
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<PAGE>
25. CONVEYANCE OF PROPERTY:
If Landlord sells or otherwise disposes of the Building, or the
Building is sold on foreclosure, Tenant agrees if so requested, to enter
into an attornment agreement, discharging Landlord from all obligations
under this Lease and agreeing to accept the purchaser or other successor
to Landlord's interest as Landlord under this Lease. The provisions of
Section 1951 of California Civil Code shall govern the disposition of
the security deposit; and upon complying with that statute or any
successor or replacement of it, Landlord shall be discharged from any
further liability with respect to the security deposit.
26. WAIVER:
The waiver by Landlord or Tenant of any breach of any term, covenant
or condition herein contained shall not be deemed to be a waiver of such
term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent
acceptance of rent hereunder by Landlord shall not be deemed to be a
waiver of any preceding breach by lessee of any term, covenant or
condition of this Lease other than the failure of Tenant to pay the
particular rent so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such rent.
27. HOLDING OVER:
Any holding over after the expiration of the said term, with or
without the express consent of Landlord, shall be construed as a tenancy
from month to month, and shall be on the terms and conditions herein
specified, so far as applicable. Such holding over shall not constitute
an extension of this Lease. During such holding over, Tenant shall
provide Landlord with written notice at least one month in advance of
the date of termination of such monthly tenancy of his intention to
terminate such tenancy.
28. ATTORNEYS' FEES:
If any action at law or inequity shall be brought to recover any
rent under this Lease, or for or on account of any breach of or to
enforce any of the terms, covenants, agreements or conditions of this
Lease, or for the recovery of the possession of the premises, the
prevailing party shall be entitled to recover from the other party as a
part of the prevailing party's costs a reasonable attorneys fee, the
amount of which shall be fixed by the court and shall be made a part of
any judgment rendered.
29. NOTICES:
All notices to be given to Tenant may be given in writing
personally or by depositing the same in the United States mail, postage
prepaid, and addressed to Tenant at the premises, whether or not Tenant
has departed from, abandoned or vacated the premises. Notice to Landlord
may be given in writing personally or by depositing the same in the
United States mail, postage prepaid, and addressed to Landlord at the
address to which the rent is paid.
30. GENERAL PROVISIONS:
30.1 This Lease contains all terms, covenants and conditions
agreed to by Landlord and Tenant, and it may not be modified orally or
in any manner other than by an agreement in writing signed by all the
parties to this Lease or their respective successor in interest.
Each term and each provision of this Lease performed by Tenant
shall be construed to be both a covenant and a condition.
The covenants and conditions hereof, subject to the provisions as
to subletting and assignment, shall apply to and bind the heirs,
successors, executors, administrators, Sublessee's and assigns of the
parties.
All persons who have signed this Lease shall be jointly and
severally liable hereunder.
When the context of the Lease requires, the masculine gender
includes the feminine, a corporation or a partnership, and the singular
number includes the plural.
The captions of this Lease are for convenience only and are not a
part of this Lease and do not in any way limit or amplify the terms and
provisions of this Lease.
This Lease shall be governed by and construed in accordance with
the laws of the State of California.
Time is of the essence as to all of the provisions of this Lease.
30.2 LATE CHARGES. Tenant hereby acknowledges that late payment
by Tenant to Landlord of rent or other sums due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount
of which will be extremely difficult to ascertain. Such costs include,
but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Landlord by terms of any mortgage or
trust deed covering the Premises. Accordingly, if any installment of
rent or a sum due from Tenant shall not be received by Landlord or
Landlord's designee with five (5) days after said amount is due, the
Tenant shall pay to Landlord a late charge equal to ten percent (10%) of
such overdue Amount. The parties hereby agree that such late charges
represent a fair and reasonable estimate of the cost that Landlord will
incur by reason of the late payment by Tenant. Acceptance of such late
charges by the Landlord shall in no event constitute a waiver of
Tenant's default with respect to such overdue amount, nor prevent
Landlord from exercising any of the other rights and remedies granted
hereunder.
30.3 RULES AND REGULATIONS. Tenant shall faithfully observe and
comply with the rules and regulations that Landlord shall from time to
time promulgate. Landlord reserves the right from time to time to make
all reasonable
Landlord: [Illegible] Tenant: [Illegible]
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<PAGE>
modifications to said rules. The additions and modifications to those
rules shall be binding upon Tenant upon delivery of a copy of them to
Tenant. Landlord shall not be responsible for the nonperformance of any
said rules by any other Tenants or occupants.
31. SCHEDULES
31.1 Landlord, at its own expense, will perform the following work
and supply the following materials (SEE ATTACHMENT IF APPLICABLE)
31.2 Tenant, at its own expense, will perform the following and
supply the following materials (SEE ATTACHMENT IF APPLICABLE)
31.3 Tenant's Insurance (if greater than amounts set forth in
Paragraph 14 (SEE ATTACHMENT IF APPLICABLE)
32. OTHER TERMS AND CONDITIONS:
Cost of Living Index: For the purpose of this Lease, the term
"Index" means the Consumer Price Index as published by the United
States Department of Labor "All Urban Consumers -- All Items" series for
the San Diego Statistical Area (base 1982 - 100) or such successor
index(es) as shall be designated by the United States Department of Labor
and selected by Landlord: "Base Index" means an Index for the
penultimate month preceding the month as of which the rent is to be
increased as hereinafter provided. Landlord has the option of adjusting
the base rent on intervals of twelve (12) calendar months during the
lease term to a current rate which is the product obtained by
multiplying the Base Rent by the adjustment factor hereinafter set
forth. The adjustment factor shall adjust the Base Rent by the inflation
measured by the Index and is defined as the quotient obtained by
dividing the Base Index into the Current Index. In no event shall the
adjustment entitle Tenant to received the benefit of a reduction of the
Current Index below the level of the Base Index. Should the Bureau
discontinue the publication of the above Index, or publish same less
frequently, or alter same in some manner, then Landlord shall adopt a
substitute index or substitute procedure which reasonably reflects and
monitors consumer prices.
The rules and regulations contained in this Lease, as well as such
reasonable rules and regulations, including parking regulations, as may
be hereafter adopted by Landlord for the safety, care and cleanliness of
the premises and the preservation of good order thereon, are hereby
expressly made a part hereof, and Tenant agrees to obey all such rules
and regulations.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT.
LANDLORD/LESSEE: TENANT/SUBLESSEE:
SHELTER COVE MARINA FLEMING & ASSOCIATES
DAMON FLEMING OR JOHN FLEMING
BY: /s/ [Illegible] BY: /s/ John Fleming
------------------------ -------------------------------
TITLE: General Manager TITLE: CFO/Manager
---------------------- ----------------------------
DATE: 12/23/98 DATE: 12/23/98
---------------------- -----------------------------
------------------------------------
------------------------------------
PERSONAL GUARANTEE
The undersigned, hereby guarantees the performance of the terms and
conditions of this Lease on behalf of the Tenant, as additional
consideration for the making and execution of this Lease, and by
execution of this Personal Guarantee, acknowledges, understands and
assumes full responsibility for all obligations of the Tenant including,
but not limited to those obligations calling for the payment of money.
Date: 12/23/98
Damon Fleming
------------------------------
------------------------------
Social Security ####-##-####
Landlord: [Illegible] Tenant: [Illegible]
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<PAGE>
EXHIBIT 10.8
POSITRON EMISSION TOMOGRAPHY
MOBILE SERVICES AGREEMENT
This Agreement is entered into by MOBILE P.E.T SYSTEMS, INC., a Delaware
Corporation ("MOBILE PET"), with its principal place of business at 2240 Shelter
Island Drive, San Diego, California, 92106, and the following party:
-------------------
---------------
---------------
("CLIENT"), with both MOBILE PET and Client collectively referred to as the
"PARTIES."
RECITALS
MOBILE PET desires to provide Mobile Positron Emission Tomography to Client and
Client desires to contract with MOBILE PET to utilize the Mobile Positron
Emission Tomography ("PET") System(s).
By this Agreement, MOBILE PET is only providing the use of a mobile PET imaging
unit and other services described in this Agreement. The technical personnel
necessary to operate such equipment shall be under the supervision of attending
physicians, and other services hereinafter described.
NOW, THEREFORE, in consideration for the mutual promises and convenants
contained herein, and for other good and valuable consideration, the Parties
agree as follows:
ARTICLE I
WARRANTIES
A. MOBILE PET will be the operator of a mobile PET system imaging unit
(the "UNIT,") and provide the services described in Article II.
B. Client desires to use MOBILE PET's imaging services and has those
physicians or medical specialists who are, or will become at the time
services are rendered by MOBILE PET, qualified to medically interpret
and report on PET imaging data.
C. Client has or will obtain all documents, approvals, licenses, and
certifications required for it to use the services provided by MOBILE
PET.
D. MOBILE PET has been duly incorporated and is validly existing as a
corporation in good standing under Delaware law and qualified as a
foreign corporation where required.
E. Client is a validly existing entity entitled to do business in
_________ and where required, or is properly licensed to conduct
business in __________ and where required.
ARTICLE II
SERVICES PROVIDED BY MOBILE PET
A. MOBILE PET will provide Client with PET imaging services on the following
terms and conditions:
1. UNIT DESCRIPTION. The Services shall include the use of the
Unit (a CTI/Siemens ECAT PET system) housed in a mobile coach
environment (collectively the "EQUIPMENT"), as further set
forth in SCHEDULE "A" attached to this Agreement. MOBILE PET
reserves the right to modify final specifications or accept
modifications imposed by the Equipment or the Coach
Manufacturer. Any such modification to the Unit or Equipment
shall not affect the obligations of the Parties under this
Agreement.
<PAGE>
2. MINIMUM AVAILABLE IMAGING TIME. After the Commencement Date,
defined below, MOBILE PET shall be available to provide
services to Client pursuant to the specific terms of this
Agreement.
3. ADDITIONAL IMAGING TIME. MOBILE PET shall use its reasonable
best efforts to provide additional imaging time as required by
Client.
4. STAFFING. MOBILE PET shall provide, at its sole cost and
expense, one (1) trained PET technologist who will operate the
Unit. The number of technologists utilized shall be based on
volume of activity. If MOBILE PET, at its sole discretion,
extends the operating hours of the Unit to provide additional
imaging time, the staffing shall be increased accordingly. The
Unit will operate for a minimum of eight (8) hours per
contracted day, plus set-up time for the Unit. MOBILE PET will
train Clients qualified nuclear medicine technologist to
operate the Unit as is reasonable to do so without
interrupting daily PET exam schedules.
5. TRAINING. MOBILE PET shall provide initial training to
Client's physicians in the use of the Unit at a location to be
determined by MOBILE PET with Client's approval, which shall
not be unreasonably withheld or delayed. Client (or the
attending trainees) shall pay all costs for attending the
training and any additional training, including travel costs,
lodging and meals.
6. PATIENT LOG. MOBILE PET shall maintain a daily log of all
patients who receive PET scans while the Unit is stationed at
Client's site. This log shall be available for inspection by a
duly authorized representative(s) of Client on reasonable
notice to MOBILE PET during normal working hours of the Unit
at Client's site. All patient logs will be maintained for a
period of ninety (90) days on the mobile Unit. After the
initial ninety (90) days, all records will be stored and
notice for the request for records shall be served at MOBILE
PET's principal office.
7. POLICY AND PROCEDURES. MOBILE PET and Client shall mutually
agree upon and maintain a Policy and Procedures Manual on the
premises of the Unit and shall incorporate specific Client
procedures, including "Code Blue" and "Code Red" situations,
Disaster Drill Triage Exercises, and all other emergency
procedures as may arise during the course and scope of
Client's services to third-party patients.
8. SERVICE SCHEDULE. MOBILE PET shall provide Client with PET
equipment and technologist as indicated in SCHEDULE "A"
attached hereto. If either Party desires to change the
schedule, it shall provide the other party with fourteen (14)
days' written notice. If the Unit is inoperable on a scheduled
day of service to Client, MOBILE PET will use best efforts to
arrange a make-up day as required.
9. VALUE ADDED CUSTOMER SUPPORT PROGRAM. MOBILE PET shall provide
the following support services to assist Client in developing
a comprehensive PET program at NO ADDITIONAL COST to Client:
a. STRATEGIC MARKETING PROGRAM
1. Seminar by expert PET Radiologist to educate Clients
physicians on the benefits and indications of PET.
2. "Announcement of Service" letter to medical staff
from radiology and administration departments,
reinforcing the availability of PET service.
3. Mass mailing of marketing materials to all area
physicians on a quarterly basis for the first year of
service.
4. Provide "PET Patient Information Brochure" that will
answer many of the questions that patients ask when
scheduling PET exams
b. LICENSING AND PROTOCOL ASSISTANCE FOR HANDLING
RADIOPHARMACEUTICALS.
c. CONVENIENT AND TIMELY ACCESS TO RADIOPHARMACEUTICALS
THROUGH MOBILE PET'S GROUP PURCHASING AGREEMENT.
2
<PAGE>
d. TRAINING OF CLIENT'S BUSINESS OFFICE PERSONNEL IN PET
BILLING METHODOLOGY, CPT CODES, REIMBURSEMENT DATA AND
COLLECTION PROCEDURES.
ARTICLE III
SERVICES BY CLIENT
Client shall provide, at no cost or expense to MOBILE PET, the following
services, supplies, and facilities for use by MOBILE PET:
A. LOCATION; SITE PREPARATION. Suitable space for the Unit shall be
provided by Client, on a site which is under Client's ownership or
supervision and control, at which the Unit shall be stationed for
imaging purposes. This Site and all modifications to it shall be
subject to the written approval of MOBILE PET and the Equipment
Manufacturer, and it and the use of the Equipment on it as contemplated
by this Agreement shall comply with applicable law. Client will prepare
the site according to MOBILE PET's specifications and the terms and
conditions of this Agreement. MOBILE PET is not required to provide a
Unit at any site which MOBILE PET has not approved in writing. Client
shall pay all site preparation costs and complete this preparation
before MOBILE PET shall be required or obliged to provide services
under this Agreement.
B. POWER. Client shall supply suitable electric service and utility
service to operate the Unit. Electric service shall contain a
three-phase power source via lead-in cable on one dedicated power line
with 60 Hertz and 480 volts of power, located within a 25-foot radius
of the Equipment's imaging location.
C. TELEPHONE. The use of a telephone extension to permit personnel in the
Equipment to make and receive telephone calls and facilitate the
scheduling and movement of patients.
D. MEDICAL SUPPLIES. All necessary medical supplies as may from time to
time be, required to operate and utilize the Unit. Client will also
supply film and processing services.
E. MEDICAL SERVICES AND EMERGENCY CARE. Client shall provide the services
of all physicians, medical technologists and other personnel who are to
assist and care for Client's third-party patients. All such personnel
and medical staff shall be present when any third party patient is
located in or near the Equipment. Client shall provide all medical
supplies, facilities, personnel and physicians necessary to provide
patients with any required emergency care, including oxygen,
aspirator(s) and defrilbrillator(s) when deemed necessary.
F. LICENSING . Client shall provide copies of its contracted facilities
RADIO ACTIVE MATERIALS license and copies of physician(s) Nuclear
Medicine certification and any other pertinent information as may be
required by ________ or other health care regulating authorities.
ARTICLE IV
FEES PAID BY CLIENT TO MOBILE PET
A. FEES. The fees shall be paid in accordance with the terms and
conditions of this Agreement and as specified in SCHEDULE "C", attached
hereto.
B. FEE INCREASE. Basic charges shall remain as listed in the attached
Schedule(s) for the term of this Agreement, except for increases in the
cost of consumables or maintenance costs for the Unit. MOBILE PET shall
give Client one hundred and eighty (180) days' written notice of such
inflationary increases in charges.
C. BILLING AND PAYMENT TERMS. Client shall be billed monthly for PET
services and payment will be due within sixty (60) days after the month
in which the PET service was provided. Additional usage fees,
consumables and adjustments will be included on the monthly invoices as
incurred. Client shall pay MOBILE PET all fees when due. For accounts
not paid per above terms, Client shall pay a finance charge of one and
one-half percent (1.5%) per month on all balances outstanding over five
(5) days from the due date. Such finance charge shall be increased if
the Prime Rate, as stated in the WALL STREET JOURNAL, exceeds sixteen
percent (16%). MOBILE PET's right to collect fees properly invoiced to
Client shall not be subject to any right of set off, subrogation,
counter-claim or other action.
3
<PAGE>
ARTICLE V
TERM, RENEWAL AND TERMINATION
A. TERM. The initial term of this Agreement is five (5) years from the
Commencement Date.
B. SERVICE COMMENCEMENT. MOBILE PET anticipates the beginning of its
services to Client within thirty (30) days after Agreement completion
("COMMENCEMENT DATE") If MOBILE PET is unable to begin service as of
the Commencement Date, Client's obligation to pay any fees, and MOBILE
PET's obligation to provide services, shall be suspended until the Unit
or a comparable alternative system is delivered. This Agreement shall
remain in full force and effect during this period of suspension.
C. RENEWAL. This Agreement shall be automatically renewed unless either
Party shall, not less than ninety (90) days before the expiration of
the term, by registered or certified mail, return receipt requested,
notify the other of its intentions not to renew this Agreement.
D. TERMINATION.
1. Client shall have cause for termination of this Agreement for any
of the following reasons:
(a) If MOBILE PET defaults in the performance of any
material covenant or provision of this Agreement and
such default shall continue for a period of sixty
(60) days after written notice by certified mail,
return receipt requested, to MOBILE PET from Client
stating the specific default.
(b) If PET patient referral base does not provide Client
with an economic justification to continue this
Agreement, with a one hundred and eighty- (180) day
written notice.
(c) If Client elects to install a fixed site PET system,
Client may terminate this Agreement on not less than
one hundred and eighty (180) days prior written
notice to MOBILE PET, delivered to MOBILE PET by
registered or certified mail, return receipt
requested. In addition to the foregoing and as a
condition to Client's right to terminate this
Agreement pursuant to the preceding sentence, Client
shall notify MOBILE PET in writing within thirty (30)
days after Client makes election to install a fixed
site PET system. MOBILE PET shall have a right of
first refusal (for 30 days after receipt of written
notice from Client) for any joint venture or other
collaborative arrangement for a fixed site PET system
that Client wishes to enter.
(d) If MOBILE PET applies for or consent to the
appointment of a receiver, trustee or liquidation of
all or substantially all its assets, files a
voluntary petition in bankruptcy, or is unable to pay
its debts as they come due or make a general
assignment for the benefit of creditors to take
advantage of any insolvency law, or if an order,
judgment, or decree shall be entered by a court of
competent jurisdiction on the application of a
creditor, adjudicating MOBILE PET as bankrupt or
insolvent or approving a petition seeking
reorganization of MOBILE PET or appointing a
receiver, trustee or liquidation of all or a
substantially all MOBILE PET's assets.
2. MOBILE PET shall have cause for termination of this Agreement
for any of the following reasons:
(a) If Client shall default in the performance of any
material covenant or provision of this Agreement and
such default shall continue for a period of sixty
(60) days after written notice by certified mail,
return receipt requested, to Client from MOBILE PET
stating the specific default.
(b) If Client shall apply for or consent to the
appointment of a receiver, trustee or liquidation of
all or substantially all its assets, file a voluntary
petition in bankruptcy, or be unable to pay its debts
as they come due or make a general assignment for the
benefit of creditors to take advantage of any
insolvency law, or if an order, judgment, or decree
shall be entered by a court of competent jurisdiction
on the application of a creditor, adjudicating
4
<PAGE>
Client as bankrupt or insolvent or approving a
petition seeking reorganization of Client or
appointing a receiver, trustee or liquidation of all
or a substantially all Client's assets.
(c) If Client shall fail to make any payment to MOBILE
PET when due and does not make such payment within
ten (10) days after receiving written notice of such
failure from MOBILE PET.
ARTICLE VI
GENERAL PROVISIONS
A. MAINTENANCE AND OPERATIONS. MOBILE PET shall, at its sole cost and
expense, be responsible for the maintenance and operation of the Unit
pursuant to the Manufacturer's recommendations and service contract.
B. PRACTICE OF MEDICINE. Neither MOBILE PET, nor any of its personnel,
shall practice medicine or offer medical advice and/or opinions.
C. MOBILE PET INSURANCE. MOBILE PET shall, at its sole cost and expense,
maintain during the term of the Contract such fire, theft, general
liability and extended insurance coverage with respect to the operation
of the Unit as MOBILE PET deems appropriate or as required by the
Equipment Lender and shall comply with state and local regulatory
requirements. MOBILE PET will provide proof of insurance to Client
before commencement of operations.
D. CLIENT INSURANCE. Client represents and warrants that at all times
during the term of this Agreement, as it may continued from time to
time, Client shall maintain or cause to be maintained suitable general
and professional liability insurance coverage with respect to Client's
activities. All Client insurance shall name MOBILE PET as an additional
insured and shall provide MOBILE PET with thirty (30) days' written
notice before cancellation. Furthermore:
1. GENERAL LIABILITY. Client shall, at its own cost and expense,
during the term of this Agreement, maintain general public
liability insurance against loss arising by way of example and
not by way of limitation, bodily injury, death or damage to
property of others, insurance protection to the limit of not
less than One Million Dollars ($1,000,000.00) per occurrence
combined single limit or such greater amount as MOBILE PET
shall reasonably deem necessary and shall, as consistent with
industry practice, subject to the deductible or self-insurance
provisions which in the aggregate do not exceed Twenty-Five
Thousand ($25,000.00).
2. PROFESSIONAL LIABILITY. The clinicians who interpret and
report on the PET scans and supervise the technicians, and any
other physician who performs any medical services on a patient
while on board the Unit shall, at all times during the term of
this Agreement, as extended from time to time, maintain
suitable professional liability insurance with respect to
their activities. Physician shall provide MOBILE PET with a
copy of certification of insurance that evidences this
coverage.
E. AVAILABILITY OF UNIT. MOBILE PET warrants that the Unit will be
available for a minimum of eight (8) hours of diagnostic time per
contracted day, not including set-up time for the Unit. MOBILE PET will
make every reasonable effort to ensure that all equipment maintenance
occurs during non-contracted hours.
F. PERSONNEL. MOBILE PET will provide the PET technologists and other
personnel reasonable necessary to set-up and operate the Unit for the
purposes as specified in this Agreement. If Client is dissatisfied with
any of MOBILE PET on-site personnel, Client shall promptly notify
MOBILE PET in writing, setting forth the specific basis for Client's
dissatisfaction. On receipt of such notification, MOBILE PET will
promptly review the situation and take such action as MOBILE PET shall
reasonably determine to be necessary to remedy the difficulty;
provided, however, MOBILE PET at all times retains sole authority to
employ, terminate or discipline its personnel.
G. IMAGING QUALITY. MOBILE PET warrants that the Unit's imaging
performance during the term of this Agreement will meet or exceed the
performance as accepted by Client at the time of Service Commencement.
5
<PAGE>
H. INDEMNIFICATION AND HOLD HARMLESS. Each Party shall hold the other
harmless for the Party's acts, errors or omissions and those of their
respective agents, employees and/or guests, against all claims,
liabilities, damages, losses, fees (including attorneys' fees), costs,
and litigation arising from the representations by or conduct of one
party to the other.
I. FORCE MAJEURE. MOBILE PET's failure to perform under this Agreement
will be excused because of any delay or prevention, directly or
indirectly, caused by any condition beyond MOBILE PET's control,
including: fires; floods; earthquakes; snow; disasters; other acts of
God; accidents; riots; wars; operation of law; strikes; governmental
action or regulation; shortage of labor, fuel, power, materials,
supplies or transportation; or supplier delay.
J. EXCLUSIVITY. Throughout the term of this Agreement, all PET services
performed on Client's site shall be performed exclusively by MOBILE
PET. If Client utilizes other PET services in violation of Article VI,
Section J., MOBILE PET shall be reimbursed by Client for each PET study
performed by such third party PET service in accordance with the terms
and set forth in exhibit C.
K. RIGHT OF FIRST REFUSAL. If Client identifies an opportunity to develop
a fixed site PET system installation at one of its site locations,
MOBILE PET shall have the right to participate as part owner in said
opportunity, at its sole discretion
L. CONFIDENTIALITY. All information regarding MOBILE PET's customer
support programs, contract terms and conditions shall be considered
confidential and is intended only for those individuals within Clients
organization who are authorized to access it for purposes economic and
clinical evaluation of the Agreement.
M. NON-SOLICITATION OF MOBILE PET'S EMPLOYEES. Client shall not attempt
to hire away, employ or in any other manner retain the services of
MOBILE PET's employees in any capacity whatsoever without the prior
written consent of MOBILE PET.
N. AUTHORIZATION. This Agreement has been duly authorized, executed,
and/or delivered by and on behalf of the Parties.
O. NOTICES. Except as otherwise provided in this Agreement, any notice or
other communication required or permitted by any provision of this
Agreement shall be in writing and shall be deemed to have been given or
served for all purposes if delivered personally, or sent by registered
or certified mail, return receipt requested, postage prepaid, addressed
to the Parties as follows:
To MOBILE PET: MOBILE PET SYSTEMS, INC.
2240 Shelter Island Drive, Suite 205
San Diego, California 92106
With copy to:
Evan Mead Stone, Esq.
Kolodny & Pressman, A.P.C.
11975 El Camino Real, Suite 201
San Diego, CA 92130
To Client: _______________________
_________________
_________________
P. VENUE AND CHOICE OF LAW. This Agreement shall be governed and
interpreted under California law. The venue for any and all disputes
arising under this Agreement shall be the County of San Diego.
Q. ASSIGNMENT. This Agreement may not be assigned by Client to any third
party without MOBILE PET's express written consent, which may be
withheld in its sole discretion. If such consent is given, MOBILE PET
may require reimbursement for reasonable costs associated with such an
assignment.
R. ACCESS TO BOOKS AND RECORDS. MOBILE PET shall make this Agreement and
its books, documents, and records available to the Secretary of Health
and Human Services, to the Comptroller General, or to their
6
<PAGE>
duly authorized representatives to the extent required by Section 952
of the Omnibus Budget Reconciliation Act of 1980.
S. VALIDITY AND BINDING, COMPLETE AGREEMENT. The validity and
enforceability of any provision of this Agreement shall in no way
affect the validity or enforceability of any other provision herein.
This Agreement sets forth the entire understanding of the Parties and
supersedes all prior or contemporaneous oral or written agreements,
understandings, arrangements, negotiations or communications between
the Parties. This Agreement shall be binding on and inure to the
benefit of the Parties' successors, heirs, and assignees.
T. AMENDMENTS. This Agreement shall not be modified or amended except on
the written agreement of the Parties.
U. ATTORNEYS' FEES AND COSTS. If it is necessary to enforce or interpret
the terms and conditions of this Agreement, the prevailing party to any
judicial proceeding or arbitration shall be entitled to all attorneys'
fees, costs of suit, and expenses therein, in addition to any other
relief to which such party is entitled.
V. INTERPRETATION. As the context requires, any gender includes all
others, the singular number includes the plural, and vice-versa.
Captions are inserted for convenience of reference and do not describe
or limit the scope or intent of this Agreement. Any recitals above, and
any exhibits or schedules referred to and/or attached hereto, are
incorporated by reference into this Agreement. "PERSON" includes any
legal entity. "INCLUDING" means including without limitation. No
inference, assumption or presumption shall be drawn if a party or a
party's attorney prepared and/or drafted this Agreement; it shall be
conclusively presumed that the parties participated equally in its
preparation and/or drafting. This Agreement may be executed in
counterparts, each of which shall be deemed an original. An executed
counterpart of this Agreement transmitted by fax shall be equally as
effective as a manually executed counterpart. Each party shall take all
reasonable steps, and execute, acknowledge and deliver all further
instruments necessary or expedient to implement this Agreement.
We, the undersigned Parties, and each of them, have executed this Agreement and
agree to be bound by its terms and conditions.
MOBILE PET:
MOBILE P.E.T. SYSTEMS, INC.
A Delaware Corporation
___________________________________ Date:_____________________
By:
Client:
______________________________________
_____________________
___________________________________ Date:_____________________
By:
SCHEDULES:
"A": The Equipment & Service Schedule
"B": Patient Information/Authorization Sheet
"C": Compensation
7
<PAGE>
SCHEDULE A
1. SYSTEM DESCRIPTION
The ECAT-Registered Trademark- EXACT-TM- is a whole-body positron emission
tomography system providing volume measurements of metabolic and
physiologic processes.
The system includes the ECAT EXACT tomograph, an integrated workstation, 3D
Advanced Computational System (ACS II), and the patient handling system.
The tomograph field of view is 16.2 cm (6.38 in.) with 47 image planes.
Simultaneous acquisition, image reconstruction, processing, and data
analysis can be performed to generate high patient throughput and prompt
results.
2. DETECTOR ASSEMBLY
<TABLE>
<S> <C>
Detector Material Bismuth Germanate
Crystal Dimension 6.75mm x 6.75mm x 20mm deep (0.27in. x 0.27in. x 0.79in)
Crystal per Detector Block 64
Photomultiplier Tubes 4 per block
Detector Ring Diameter 824mm (32.4 in.)
Number of Detector Rings 24
Total Number of Detectors 9,216
Axial Field of Vision 162mm (6.38 in.)
Number of Contiguous Image Planes 47
Plane Spacing 3.375mm (0.133 in.)
</TABLE>
3. DATA ACQUISITION/PROCESSING
<TABLE>
<S> <C>
Coincidence Time Resolution -6 nsec
Coincidence Window 12 nsec (prompt and delayed window)
Acquisition Modes Static, Dynamic and Gated (option)
Reconstruction Time 128 x 128 Matrix 2D less than2 min/frame (47 slices)*
3D less than7 min/frame (47 slices)**
4D less than10 min/frame (47 slices)***
Reconstruction Filters Shepp-Logan, Hanning, Hamming, Parzen, Ramp,
Butterworth
</TABLE>
* INCLUDES CORRECTIONS FOR NORMALIZATION, DEADTIME, ATTENUATION, SCATTER
AND DECAY.
** USING PROMIS RECONSTRUCTION AND INCLUDING CORRECTIONS FOR NORMALIZATION,
DEADTIME, ATTENUATION, AND DECAY.
*** INCLUDES 3D MODEL-BASED SCATTER CORRECTION.
4. PERFORMANCE SPECIFICATION
The following represent average performance values measured in accordance
with NEMA Standards Publication Nu-2 1994, PERFORMANCE MEASUREMENTS OF
POSITRON EMISSION TOMOGRAPHS. Acceptance specifications may vary.
<TABLE>
<CAPTION>
PARAMETER 2D 3D
--------- -- --
<S> <C> <C>
Transaxial Resolution
FWHM at 1 cm 6.0 mm 6.0 mm
FWHM at 10 cm 6.7 mm 6.7 mm
Axial Resolution
FWHM at 0 cm 4.5 mm 4.6 mm
FWHM at 10 cm 5.9 mm 6.5 mm
Sensitivity @ 350 keV 180 kcps/muCi/cc 780 kcps/muCi/cc
<CAPTION>
UNIFORMITY LESS THAN 10% LESS THAN 10%
---------- ------------- -------------
<S> <C> <C>
County Rate Correction plus or minus5% up to 3.0muCi/cc plus or minus5% up to 0.5muCi/cc
(111 kBq/cc) (18.5 kBq/cc)
</TABLE>
8
<PAGE>
Schedule A
Page Two(2)
5. GANTRY/PATIENT BED
<TABLE>
<S> <C>
Patient Port Diameter 562 mm (22.1in.)
Patient Couch Patient bed with full-body horizontal scan
range of 195 cm (76.8in.) and vertical
travel from 57 mm (22in.) to 93 cm
(37in.). Low attenuation head holder.
Maximum patient 158 kg (350lb.).
Patient Alignment Nine laser lines
define field of view for
precise patient
positioning.
Transmission Source Three retractable, self-storing rod sources.
Septa Motorized retractable septa enabling 2D or
3D acquisition.
Gantry Cooling Chilled water for maximum detector stability
and quiet patient environment.
</TABLE>
6. DATA MANAGEMENT
<TABLE>
<S> <C>
Data Storage 2.0 Gbyte acquisition disk and DAT
drive for archiving sinogram data.
Acquisition Processor 3D ACS II with SPARC-Registered Trademark- CPU,
four 80 MFLOP array processors and 64 Mbyte
real-time sorter memory.
Operator's Console Integrated workstation with 1.0 Gbyte internal disk.
Communications Ethernet with TCP/IP protocols.
Video Display 41 cm (16in.) 1152 x 900-pixel color display.
Patient Data Storage 2.6 Gbyte erasable optical disk.
Laser Printer Black and white, 600 dpi.
</TABLE>
7. ELECTRICAL REQUIREMENTS
<TABLE>
<S> <C>
Electrical Service 480 VAC//3 Phase//85KVA fused at 100 Amps
Electrical Customer Receptacle Russell Stoll #DF2504FRAB
Configuration Three phase, 5 wire, 3 phases, neutral & 1 ground.
Frequency 60 Hz
</TABLE>
9
<PAGE>
SCHEDULE B
PATIENT INFORMATION
<TABLE>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------
Patient Name _____________________________ Appointment Date ____________ Time: _________A.M. P.M.
Age: _________ DOB: ____________ M _____ F _____ Height _______ Weight _______ Dexterity: Left ____ Right ____
Referring Physician(s): ______________________________________________________________________________________________
Insurance Carrier: __________________________ Policy ID#: _____________________________________________________
CLINICAL DATA
List Previous Operations:
/X/ ______________________________________ Date: ___________ What Body Region? ________________________________
/X/ ______________________________________ Date: ___________ What Body Region? ________________________________
Have you had Radiation Therapy? ______Yes ______No
If Yes, please describe:
/X/ ______________________________________ Date: ___________ What Body Region? ________________________________
/X/ ______________________________________ Date: ___________ What Body Region? ________________________________
Have you had Chemotherapy? ______Yes ______No
If Yes, please describe:
/X/ ______________________________________ Date: ___________ Drug: ____________________________________________
/X/ ______________________________________ Date: ___________ Drug: ____________________________________________
Are you Diabetic: ______Yes ______No
If Yes, please describe Insulin therapy:
/X/ Date: ___________ Drug: ____________________________________________________________________________________
/X/ Date: ___________ Drug: ____________________________________________________________________________________
Have you had Vaccine Therapy: ______Yes ______No
If yes, please describe:
/X/ Date: ___________ Injection Site: __________________________________________________________
/X/ Date: ___________ Injection Site: __________________________________________________________
Date of last Vaccination: _______________________________________________________________________________________
Do you have:
Colostomys? ______Yes ______No If yes, describe location: _____________________________________________
Ileostomy? ______Yes ______No If yes, describe location: _____________________________________________
Indwelling/External Catheters? ______Yes ______No
Drains/Open Wounds? ______Yes ______No
Present Infections? ______Yes ______No If yes, describe: ___________________________________________
Artificial joints or implants? ______Yes ______No If yes, describe: ________________________________
Have you had any recent injuries? ______Yes ______No
If yes, please describe:
/X/ ______________________________________ Date: ___________ What Body Region? ________________________________
/X/ ______________________________________ Date: ___________ What Body Region? ________________________________
Are you Pregnant? ______Yes ______No
Have you consumed any liquids or food today? ______Yes ______No
If yes, please describe:
/X/ ______________________________________ Time: _______________________________________________________________
/X/ ______________________________________ Time: _______________________________________________________________
Have you used any chewing gum today? ______Yes ______No
I do hereby testify that the foregoing information is true and accurate to the
best of my knowledge.
Signed: ________________________________________ Date: ___________________________________________________________
Witness: ________________________________________ Date: ___________________________________________________________
</TABLE>
10
<PAGE>
SCHEDULE C
(CONFIDENTIAL)
SCHEDULED SERVICE DAYS:
ONE day per WEEK
FEES: FEE FOR SERVICE SCHEDULE
First Four (4) PET Exams per day of service ---
$_______ per Exam
Next Four (4) PET Exams per day of service ---
$_______ per Exam
Additional PET Exams per day of service ---------
$______ per Exam
A minimum of four (4) exams per day of service is
required.
** Minimum per day will be waived for the first
_______(___) days that Contract is in effect.
Above prices include FDG.
DEPOSIT: SECURITY DEPOSIT
Client shall provide to MOBILE PET a ____________
security deposit based upon the required number of
days
By:__________________________________ Date:_________________
For:_________________________________
By:__________________________________ Date:_________________
For: Mobile P.E.T Systems, Inc.
11
<PAGE>
EXHIBIT 10.9
PROMISSORY NOTE
US$ 137,319.09 San Diego, California July 30, 1999
FOR VALUE RECEIVED, on October 28, 1999, the undersigned, THE LONDON
RADIOSURGICAL CENTRE, LTD. (the Maker), a company organized under the laws
of the United Kingdom of Great Britain and Ireland, whose address is
154 Harley Street, London WIN 1HH, England, hereby promises to pay to the order
of MOBILE PET SYSTEMS, INC. (the Payee), a corporation organized under the
laws of the State of Delaware, United States of America, at the Payee's
principal office located at 2240 Shelter Island Drive, Suite 205, San Diego,
California 92106, the principal sum of ONE HUNDRED THIRTY SEVEN THOUSAND
THREE HUNDRED NINETEEN DOLLARS AND NINE CENTS (US$ 137,319.09), in lawful
money of the United States of America and in immediately available funds,
together with interest on the unpaid principal of this Note from the date
hereof until paid at the rate of EIGHT PERCENT (8%) per year until paid.
If the Maker shall default in prompt and full payment of the principal or
interest on this Note when due, then the Maker promises to pay the payee or
other holder of this Note all cost of collection, including reasonable
attorney fees.
The Maker hereby irrevocably consents to the exclusive jurisdiction and venue
of the United States District Court for the Southern District of California
to hear and decide any action to enforce or construe this Note. If for any
reason that court does not have or will not accept or retain jurisdiction,
then the Maker hereby irrevocably consents to the exclusive jurisdiction and
venue of the Superior Court of California for the County of San Diego to hear
and decide any action to enforce or construe this Note. This Note shall be
construed and enforced in accordance with the substantive laws of the State
of California, without reference to its laws relating to conflicts of law.
Executed on September 1, 1999, at San Diego, California, effective as of
July 30, 1999.
THE LONDON RADIOSURGICAL CENTRE, LTD.
By: /s/ Paul Crowe
-----------------------------------
Paul J. Crowe
Chairman and Director
<PAGE>
EXHIBIT 10.10
THE LONDON RADIOSURGICAL CENTRE LTD
154 HARLEY STREET, LONDON, W1N 1HH TEL: +44 (0)171 486 6969 FAX: 486 1991
Registered in England & Wales Registered Number 3047508
February 7th, 1999
To:
Mobile PET Systems, Inc.
2240 Shelter Island Drive, #205
San Diego, CA, 92106
RECEIPT LETTER AGREEMENT/TERMS OF INVESTMENT
Mobile PET Systems, Inc. has purchased a subordinated equity participation in
The London Radiosurgical Centre Ltd., pursuant to the terms defined in this
receipt letter.
The following terms apply to all investors and are stated in US $.
Subordinated Equity Participation: Maximum Investment $2.5 Million
Investors will have their investment
returned from 100% of the net income
to distribute. After which the total
participation of the investors will
be 60% of net income to distribute.
Net Income to Distribute: After operating costs including;
equipment financing payments, all
operating expenses, reserve capital
and taxes. To be distributed annually.
TOTAL RECEIVED FROM MOBILE PET SYSTEMS, INC. $200,000.00
Best regards and we look forward to a profitable future.
Paul Crowe, Chairman/Director, The London Radiosurgical Centre Ltd
<PAGE>
EXHIBIT 10.11
MOBILE P.E.T. SYSTEMS, INC.
EMPLOYMENT AGREEMENT
SECTION ONE
PARTIES
1. This Employment Agreement (this "Agreement") is effective as of
January 1,1999 (the "Effective Date"), between Mobile P.E.T. Systems, Inc. (the
"Company"), a Delaware corporation, whose address is 2240 Shelter Island Drive,
San Diego, California 92160,, and Paul J. Crowe ("the Executive"), a California
resident, whose address is 955 East Harbor Island Drive, San Diego, California
92103.
SECTION TWO
RECITALS
2.1. This Agreement is made with reference to the following facts and
circumstances:
(a) The Executive is the Company's Chairman of the Board and Chief
Executive Officer. He has outstanding and special skills and abilities and
an extensive background in and knowledge of the Company's business and the
industry in which it is engaged.
(b) The Company desires assurance of the continued association and
services of the Executive in order to retain his experience, skills,
abilities, background and knowledge, and is therefore willing to engage his
services, on the terms and subject to the conditions set forth below.
(b) The Executive desires to continue in the Company's employ, and
to obtain the benefits conferred on him by this Agreement, and he is
willing to do so on those terms and conditions.
2.2. In consideration of these recitals and the mutual promises set
forth below, the Company hereby employs the Executive, and the Executive hereby
accepts this employment, on the terms and subject to the conditions set forth in
this Agreement.
SECTION THREE
THE EXECUTIVE'S DUTIES AND AUTHORITY
3.1. POSITION. The Company shall employ the Executive as the Company's
Chief Executive Officer.
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3.2. DUTIES. The Executive shall be the Company's chief executive
officer, with full power and authority to manage and conduct all of the
Company's business in accordance with the policies, directives, business plans,
and budgets established from time to time by the Company's board of directors
(the "Board"). The Executive shall not, however, take any of the following
actions on behalf of the Company without the Board's authorization and approval:
(a) Borrow or obtaining credit in any amount or executing any
guaranty (on behalf of the Company as guarantor).
(b) Purchase or lease capital assets, offices or facilities in
excess of those contained in an annual, quarterly or monthly budget
approved by the Board.
(c) Sell, transfer or otherwise dispose of capital assets other
than in the ordinary course of business.
(d) Sell, transfer or other dispose of, or discontinue, any
existing lines of business; or purchase or otherwise acquire, or engage in,
new lines of business.
(e) Exercise any discretionary authority or control over the
management of any employee welfare or pension benefit plan or over the
disposition of the assets of any such plan.
3.3. FULL TIME EMPLOYMENT. The Executive shall devote his full
energies, interest, abilities and productive time to the performance of his
duties under this Agreement and shall not, without the Company's prior written
consent, render to others services of any kind for compensation or engage in any
other business activity that would, in either case, substantially and materially
interfere with the performance of his duties under this Agreement.
3.4. COMPETITION DURING EMPLOYMENT. During the term of his employment,
the Executive shall not, directly or indirectly, whether as a partner,
employee, 10% or more shareholder, investor or otherwise, promote,
participate or engage in any activity or other business that directly
competes with the Employer's business of operating mobile PET Systems. The
Executive's engagement and participation in the establishment of Gamma Knife
surgical centers in the United States and worldwide are permissible
activities under this paragraph. In addition, the Executive, while employed,
shall not take any action without the Employer's prior written consent to
establish, form or become employed by a competing business on termination of
his employment by the Company. The Executive's failure to comply with the
provisions of the preceding sentence shall give the Company the right (in
addition to all other remedies the Company may have) to terminate any
benefits or compensation to which the Executive may be otherwise entitled
following termination of this Agreement.
3.4. PLACE OF EMPLOYMENT. The Executive shall perform the services he
is required to perform under this Agreement at the Company's executive offices
as established from time to time by the Board; provided, however, that the
Executive may be required from time to time to travel temporarily to other
locations or on the Company's business. If the Company should change the
location of its executive offices to a location that is not within reasonable
commuting distance to the Executives residence, then the Company shall pay the
Executive's reasonable relocation expenses
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incurred in moving to a residence that is within reasonable commuting
distance to the Company's new executive offices.
SECTION FOUR
TERM OF EMPLOYMENT
4.1. TERM. The term of this Agreement (the "Term") shall be for a
period of five years beginning on January 1, 1999, and ending on December 31,
2004, unless terminated as provided in section eight.
SECTION FIVE
COMPENSATION
5.1. BASE SALARY. The Company shall pay the Executive a base annualized
salary ("Salary") of $150,000. The Company shall pay the Executive Salary in
arrears in semi-monthly installments, or in accordance with the Company's
standard payroll payment practices in effect from time to time. For each
calendar year during the Term, beginning in calendar year 2000, the Employee's
Salary shall be increased by 10% if the average market price of the Company's
common stock for the month of December of the preceding year (December 1999 in
the case of calendar year 2000) has increased by at least 10% above the average
market price for the month of December of the second preceding year (December
1998 in the case of calendar year 2000).
5.2. STOCK OPTIONS. Any stock options made available to employee are
to be determined at the next Company Board Meeting.
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5.3. DISCRETIONARY BONUS. The Board shall, at least annually, review
and evaluate the Executive's performance, and consider awarding him a
discretionary bonus based upon that evaluation, and any other factors that the
Board, in its discretion, deems appropriate.
SECTION SIX
EXECUTIVE BENEFITS
6.1. GENERAL. The Company shall provide the Executive with the same
Executive benefits (such as vacation, health insurance, sick leave, disability
insurance) that it provides its other Executives, as and when he becomes
eligible for them.
6.2. EXPENSE REIMBURSEMENT. The Company shall reimburse the Executive
for his reasonable and necessary out-of-pocket expenses incurred in the
performance of his duties under this Agreement, upon his timely submission of
written requests therefore together with such receipts and documentation as the
Company may reasonably request, all in accordance with the Company's policies
and procedures in effect from time to time.
SECTION SEVEN
OWNERSHIP OF INTANGIBLES
7.1. All processes, inventions, patents, copyrights, trademarks, and
other intangible rights that may be conceived or developed by the Executive,
either alone or with others, during the term of his employment by the Company,
whether or not conceived or developed during his working hours, and with respect
to which the Company's equipment, supplies, facilities or trade secret
information was used, or that relate at the time of conception or reduction to
practice of the invention to the Company's business or to its actual or
demonstrably anticipated research and development, or that result from any work
performed by the Executive for the Company, shall be the sole property of the
Company. The Executive shall disclose to the Company all inventions conceived
during the Term of this Agreement and for one year thereafter, whether or not
the property of the Company under the preceding sentence, provided that such
disclosure shall be received by the Company in confidence. The Executive shall
execute all documents, including patent applications and assignments, required
by the Company to establish its rights under this paragraph 7.1.
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SECTION EIGHT
TERMINATION
8.1. TERMINATION BY THE COMPANY, FOR CAUSE. The Company may terminate
this Agreement at any time without notice if at any time from and after the
Effective Date the Executive is convicted of a felony, or of a misdemeanor
involving fraud or other moral turpitude; or is guilty of gross carelessness or
willful misconduct that has a direct, substantial and materially adverse effect
on the Company's business or operations.
8.2. TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may
terminate this Agreement at any time without cause, by giving the Executive
written notice of its election to do so. If the Company terminates this
Agreement other than for the reasons set forth in paragraphs 8.1, then the
Company shall immediately pay the Executive a lump sum amount equal to four
(4) months' salary, prorated, for each year of this agreement completed with
a minimum payment equal to 6 months' salary of the Executive's salary at the
time of termination.
8.3. TERMINATION BY RESIGNATION. The Executive my terminate this
Agreement by giving the Company not less than 30 days' prior written notice of
resignation. The Executive shall not be entitled to any Salary accruing after
the effective date of his resignation under paragraph 8.2 if he terminates this
Agreement.
8.4. TERMINATION ON DISABILITY. If, at the end of any calendar month
during the Term, the Executive is and has been for the four consecutive calendar
months then ending, or for 80% or more of the normal working days during the six
consecutive full calendar months then ending, unable due to mental or physical
illness or injury to perform his duties under this Agreement in his normal and
regular manner, this Agreement shall then terminate, subject to the Executive's
right to receive any disability benefits then provided by the Company.
8.5. TERMINATION BY DEATH. This Agreement shall terminate upon the
Executive's death.
8.5. MERGER, ASSET SALE. In the event of a merger in which the Company
is not the surviving entity, or of a sale of all or substantially all of the
Company's assets, the Company may assign this Agreement and all rights and
obligations under it to any business entity that succeeds to all or
substantially all of the Company's business.
8.6. RIGHTS AND OBLIGATIONS AFTER NOTICE OF TERMINATION. If either the
Company or the Executive gives notice of termination of this Agreement, or if it
becomes known that this Agreement will otherwise terminate in accordance with
its provisions, the Company may, in its sole discretion and subject to its other
obligations under this Agreement, relieve the Executive of his duties under this
Agreement.
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SECTION NINE
CONFIDENTIAL INFORMATION
9.1. CONFIDENTIAL INFORMATION. During the period of time that the
Company has been in business, it has acquired, created and developed, and will
continue to acquire, create and develop certain confidential and proprietary
information, which the Executive has been and will continue to be exposed to,
and he has had and will continue to have an opportunity to learn about the
Company's customers (including records and information pertaining to its
customers and to the relationship between these customers and the Company),
operations, methods of doing business, research and development, know-how,
formulas, processes, trade secrets, computer programs, algorithms, finances
(including all non-public financial statements and information), and other
confidential and proprietary information belonging to the Company (collectively,
"Confidential Information"). The term, "Confidential Information," includes all
documents, materials, and information concerning the Company that are furnished,
made available, or otherwise disclosed to the Executive, except information that
was or becomes generally available to the public other than as a result of a
disclosure by or through the Executive. All such information is considered
secret and is disclosed to the Executive in Confidence.
9.2. DISCLOSURE OF CONFIDENTIAL INFORMATION. Except as required in the
course of his employment by the Company, the Executive shall not directly or
indirectly disclose to any third person any of the Company's Confidential
Information without the Company's prior written consent. This covenant shall
survive the termination of this Agreement.
9.3. UNFAIR COMPETITION. The Executive understands, acknowledges and
agrees that the Company is engaged in the business of providing and operating
mobile Positron Emission Tomography services in the United States, and is
expanding those services worldwide. For so long as the Executive is an
Executive of the Company, and for a period of 24 (twenty-four) months from
the date that he is no longer an Executive of the Company ( the "Restricted
Period"), the Executive agrees that he will not directly or indirectly
compete with the Company in the business of providing and operating mobile
Positron Emission Tomography services in the United States. As used in the
preceding sentence, "compete" means, but is not necessary limited to, the
Executive's engaging in or carrying on, either for himself or as an officer.
director, Executive, shareholder, partner, member, agent, associate,
consultant or affiliate of, or investor in any other person or entity that is
engaged in any activity described in the first sentence of this paragraph.
The Executive also agrees that for so long as the Executive is an Executive
of the Company and for the Restricted Period, he will not directly or
indirectly recruit, hire, assist others in recruiting or hiring, or refer to
others concerning employment, any person who is an Executive of the Company
or an affiliate of the Company. The provisions of this paragraph shall not
apply to the Executive if the Company terminates his employment or this
Agreement for any reason other than for one or more of the reasons set forth
in paragraph 8.1 above.
9.4. EQUITABLE ENFORCEMENT. The Executive represents and agrees that
he finds the restrictions contained in sections 9.2 and 9.3 to be fair and
reasonable. He also understands,
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acknowledges and agrees that if he were to breach any of his obligations
contained in sections 9.2 or 9.3, the Company would suffer immediate and
irreparable harm, and that an award of money damages would not be adequate to
fully compensate the Company for such harm. Accordingly, if the Executive
breaches or threatens to breach any of his obligations contained in
sections 9.2 or 9.3, the Company shall be entitled to a temporary restraining
order and a preliminary or temporary injunction, from any court having
jurisdiction, until the issue of such breach or threatened breach is finally
determined by arbitration pursuant to article ten. If such court determines
that it is reasonably likely that an arbitrator or arbitrator will find that
any of those obligations are not enforceable, in whole or in part, due to any
unreasonable restriction of duration, geographical area or activity, or any
combination thereof, such court shall nevertheless enjoin the breach thereof
as to such duration, geographical area and activity that the court determines
is fair and reasonable, pending arbitration proceedings to settle any
controversy or claim relating to the enforceability of the Executive's
obligations under sections 9.2 or 9.3. The court shall not require the
Company to post any bond or other surety as a condition to granting and
maintaining any temporary restraining order or preliminary injunction
pursuant to this paragraph 9.4.
SECTION TEN
DISPUTE RESOLUTION
10.1. BINDING ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or a breach of this Agreement, shall be settled by
arbitration, at San Diego, California, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, before a panel of
three arbitrators, one appointed by each of the Company and the Executive, and
the third chosen by the two so appointed. The decision of the arbitrators shall
be final, and judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction. The prevailing shall be awarded reasonable
attorneys and arbitration costs.
10.2. INTERIM RELIEF FROM A COURT. In additional to the interim
equitable enforcement provisions of paragraph 9.4, any party may request a court
to provide interim or provisional relief, and such request shall not be deemed
incompatible with this agreement to arbitrate or as a waiver of that agreement.
10.3. EQUITABLE ENFORCEMENT. The parties acknowledge and agree that in
the event of a breach or threatened breach of this Agreement, or a party's
failure to perform any provision hereof to be performed by that party, damages
would be extremely difficult if not impossible to determine, and that the other
parties to this Agreement would not have any adequate remedy at law. The parties
agree that an arbitrator may grant injunctive relief and specific performance in
his or her award, and that any court having jurisdiction my enforce such
equitable relief.
10.4. REFORMATION. In any arbitration proceedings relating to The
Executive's obligations under sections 9.2 or 9.3 above, if the arbitrators
should find that any of the restrictions contained in those paragraphs or any of
the Executive's obligations thereunder to be unenforceable, in whole
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or in part, due to any unreasonable restriction of duration, geographical
area or activity, or any combination thereof, then the arbitrators shall have
the Executive's and the Company's express authority to reform those
restrictions and obligations to reasonable restrictions and obligations, and
to grant the Company any other legal or equitable relief reasonably necessary
to protect the Company's interest in its Confidential Information, and to
prevent the Executive from unfairly competing with the Company.
ARTICLE ELEVEN
INDEMNIFICATION
11.1. The Company shall defend and indemnify the Executive against, and
hold him harmless from, all claims (whether or not well-founded) and liability
of any nature whatsoever that may be asserted by him by third parties (including
derivative claims asserted by third parties on behalf of the Company) that arise
out of, or are related to, or are in any way connected with his employment by
the Company or his service as a director of the Company, to the fullest extent
permitted by applicable law. Without limiting the generality of the foregoing,
the Company shall defend and indemnify the Executive, and hold him harmless from
any claim or liability as a guarantor or surety of any obligation of the
Company. The Company's obligations under this paragraph shall survive the
termination of this Agreement.
ARTICLE TWELVE
MISCELLANEOUS PROVISIONS
12.1. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties and supersedes all prior oral and written agreements,
understandings, commitments and practices between them, including all prior
employment agreements, whether or not fully performed before the date of this
Agreement. No amendments to this Agreement may be made except by a writing
signed by both parties.
12.2. LAW GOVERNING. This Agreement shall be construed and enforced
in accordance with the laws of California.
12.3. NOTICES. All notices, consents and other communications under
this Agreement shall be in writing (including facsimile transmissions) and shall
be deemed given on the earliest of (i) the day of actual receipt; (ii) the day
sent by facsimile transmittal with electronic confirmation of receipt, if sent
on a business day before 5:00 p.m., the recipient's time, otherwise the next
business day after the day sent; (iii) the next business day after delivery to a
national delivery service for overnight delivery, with delivery receipt
requested; and (iv) the fifth business day after deposit in the United States
mail, certified or registered with postage prepaid, return receipt requested, in
any such case addressed to the parties as set forth below or at such other
address as a party may specify by notice given pursuant to this Section 12.3:
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IF TO THE COMPANY: IF TO THE EXECUTIVE:
Mobile P.E.T. Systems, Inc. Paul J. Crowe
2240 Shelter Island Drive 955 East Harbor Island Drive
San Diego, California 92160 San Diego, California 92103
Facsimile No. (619) 226-3540 Facsimile No. (619) 296-3540
12.4. SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable, the remainder of this Agreement shall nevertheless remain in
full force and effect. If any provision is held invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full force
and effect in all other circumstances.
12.5. BINDING EFFECT. This Agreement shall bind and accrue to
the benefit of the parties and their respective successors in interest.
12.5. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be binding and enforceable, but all of which, taken
together, shall constitute one agreement.
IN WITNESS WHEREOF the parties have executed this Agreement as of
the date set forth in paragraph 1.1 above.
THE COMPANY: THE EXECUTIVE:
MOBILE P.E.T. SYSTEMS, INC.,
by direction of its Board of Directors,
By /s/ Brent Nelson /s/ Paul J. Crowe
-------------------------------- ------------------------------------
Paul J. Crowe
Name Brent Nelson, Director
------------------------------
Date signed: 5/1/99 Date signed: 5/1/99
---------------------- -----------------------
CONSENT OF THE BOARD OF DIRECTORS
The undersigned, being all of the directors of Mobile P.E.T.
Systems, Inc. (the "Company"), hereby consent to the Company's execution of
the foregoing Employment Agreement (the "Agreement") with Paul J. Crow,
ratify, confirm and approve all of the Agreement's provisions, and direct any
officer of the Company to execute the Agreement on the Company's behalf.
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/s/ Paul J. Crowe /s/ Brent Nelson
- ----------------------------------- ------------------------------------
Paul Crowe, President and CEO Brent Nelson, Director
Date signed 5/1/99 Date signed 5/1/99
----------------------- ------------------------
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EXHIBIT 10.12
EMPLOYMENT AGREEMENT
This Employment Agreement ("this Agreement") is made effective as of
January 6, 1999, by and between MOBILE PET SYSTEMS, INC., a Nevada
Corporation, ("the Employer"), of 2240 Shelter Island Drive, San Diego,
California 92106, and Jim Corlett, ("the Employee"), of 25392 Village Road,
Dana Point, California 92629.
A. Employer is engaged in the business of providing Mobile Positron
Emission Tomography Systems, Inc.
B. Employer desires to have the services of Employee.
C. Employee is willing to be employed by Employer.
Therefore, the parties agree as follows:
1. EMPLOYMENT. Employee shall provide to Employer the following services:
Any and all services connected with the duties of the Chief Executive
Officer and the President of Mobile PET Systems, Inc.;
2. BEST EFFORTS OF EMPLOYEE. Employee agrees to perform faithfully,
industriously, and to the best of Employee's ability, experience, and
talents, all of the duties that may be required by the express and
implicit terms of this agreement, to the reasonable satisfaction of
Employer. Such duties shall be provided at San Diego, California and at
such other place(s) as the needs, business, or opportunities of the
Employer may require from time to time;
3. COMPENSATION OF EMPLOYEE. As compensation for the services provided by
Employee under this Agreement, Employer will pay Employee an annual
salary of $85,000.00 payable in semi-monthly installments payable on the
first day and fifteenth of each month; commissions of 1/2 percent of
sales from $0.00 to $6 million and 1% of sales above $6.1 million (A draw
against commissions of $3,000 for the first six months of this
agreement); 100,000 of restricted common stock - Signing Bonus; Stock
Options of 100,000 common shares per year at the following prices -- 1st
year $1.10, 2nd year $1.50 and 3rd year at $1.90; and company 401k
retirement plan as directed under the established company plan. Upon
termination of this Agreement, payments under this paragraph shall
cease; provided, however, that the Employee shall be entitled to payments
for periods or partial periods that occurred prior to the date of
termination and for which the Employee has not yet been paid;
4. REIMBURSEMENT FOR EXPENSES IN ACCORDANCE WITH EMPLOYER POLICY. The
Employer will reimburse Employee for "out-of-pocket" expenses in
accordance with Employer policies in effect from time to time;
5. TERMINATION DUE TO DISCONTINUANCE OF BUSINESS. If the Employer
discontinues operating its business at 2240 Shelter Island Drive, San
Diego, California 92106, or at any other address then this Agreement
shall terminate upon notice of termination as provided in this
Agreement;
<PAGE>
6. CONFIDENTIALITY. Employee recognizes that Employer has and will have
information regarding the following:
- inventions
- machinery
- products
- prices
- apparatus
- costs
- discounts
- future plans
- business affairs
- processes
- trade secrets
- technical matters
- customer lists
- product design
- copyrights
and other vital information (collectively, "Information") which are
valuable, special and unique assets of Employer. Employee agrees that
the Employee will not at any time or in any manner, either directly or
indirectly, divulge, disclose, or communicate in any manner any
Information to any third party without the prior written consent of the
Employer. Employee will protect the Information and treat it as
strictly confidential. A violation by Employee of this paragraph shall
be a material violation of this Agreement and will justify legal and/or
equitable relief;
7. UNAUTHORIZED DISCLOSURE OF INFORMATION. If it appears that Employee has
disclosed (or has threatened to disclose) information in violation of
this Agreement, Employer shall be entitled to an injunction to restrain
Employee from disclosing, in whole or in part, such Information, or from
providing any services to any party to whom such Information has been
disclosed or may be disclosed. Employer shall not be prohibited by this
provision from pursuing other remedies, including a claim for losses and
damages;
8. CONFIDENTIALITY AFTER TERMINATION OF EMPLOYMENT. The confidentiality
provisions of this Agreement shall remain in full force and effect for a
1 year period after the termination of Employee's employment. During such
1 year period, neither party shall make or permit the making of any
public announcement or statement of any kind that Employee was formerly
employed by or connected with Employer;
9. NON-COMPETE AGREEMENT. Recognizing that the various items of Information
are special and unique assets of the company, Employee agrees and
covenants that for a period of 1 year following the termination of this
Agreement, whether such termination is voluntary or involuntary,
Employee will not directly or indirectly engage in any business
competitive with Employer. This covenant shall apply to the geographical
area that includes in the United States Directly or indirectly engaging
in any competitive business includes, but is not limited to:
(i) engaging in a business as owner, partner, or agent becoming
<PAGE>
an employee of any third party that is engaged in such
business, becoming interested directly or indirectly in any
such business, or (iv) soliciting any customer of Employer for
the benefit of a third party that is engaged in such business;
10. OTHER BENEFITS. Employee shall be entitled to insurance benefits,
including:
- health insurance
- disability insurance
- life insurance
as such benefits are provided in accordance with Employer policies in
effect from time to time;
11. TERM/TERMINATION. Employee's employment under this Agreement shall be
for an unspecified term;
12. TERMINATION FOR DISABILITY. Employer shall have the option to terminate
this Agreement, if Employee becomes permanently disabled and is no longer
able to perform the essential functions of the position with reasonable
accommodation. Employer shall exercise this option by giving 60 days
written notice to Employee;
13. COMPLIANCE WITH EMPLOYER'S RULES. Employee agrees to submit to all of
the rules and regulations of Employer;
14. RETURN OF PROPERTY. Upon termination of this Agreement, the Employee
shall deliver all property (including keys, records, notes, data,
memorandum, models, and equipment) that is in the Employee's possession or
under the Employee's control which is Employer's property or related to
Employer's business;
15. NOTICES. All notices required or permitted under this Agreement shall
be in writing and shall be deemed delivered when delivered in person or
deposited in the United States mail, postage paid, addressed as follows:
Employer:
Mobile PET Systems, Inc., a Nevada Corporation
2240 Shelter Island Drive,
San Diego, California 92106
Employee:
Jim Corlett
25392 Village Road
Dana Point, California 92629
Such addresses may be changed from time to time by either party by
providing written notice in the manner set forth above;
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties and there are no other promises or conditions in any other
agreement whether oral or written. This Agreement supersedes any
<PAGE>
prior written or oral agreements between the parties;
17. AMENDMENT. This Agreement may be modified or amended, if the amendment
is made in writing and is signed by both parties;
18. SEVERABILITY. If any provisions of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a court finds that any provision
of this Agreement is invalid or unenforceable, but that by limiting such
provision it would become valid or enforceable, then such provision shall
be deemed to be written, construed, and enforced as so limited;
19. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver or
limitation of that party's right to subsequently enforce and compel strict
compliance with every provision of this Agreement; and
20. APPLICABLE LAW. This Agreement shall be governed by the laws of the
State of California;
Employer:
Mobile PET Systems, Inc., a Nevada Corporation
By: /s/ Paul Crowe
-----------------------------------------------------
Mobile PET System, Inc., a Nevada Corporation
Employee:
By: /s/ Jim Corlett
-----------------------------------------------------
Jim Corlett
<PAGE>
AMENDMENT
TO
EMPLOYMENT AGREEMENT BETWEEN
MOBILE P.E.T. SYSTEMS, INC.
AND
JIM CORLETT
WHEREAS, MOBILE P.E.T. SYSTEMS, INC. ("Mobile PET") and JIM CORLETT
("Employee") (hereinafter referred to as the "Parties") have entered into an
Employment Agreement; and,
WHEREAS, the Parties agree to amend said Agreement.
THEREFORE, said Agreement shall be amended, in part, by the Amendment dated
January 16, 1999, as follows.
Mr. Corlett will be the Vice President of Mobile Operations.
Mr. Corlett is to receive a salary of $85,000 per year. No commissions
will be paid in addition to the salary.
Executed this 16th day of January, 1999.
MOBILE P.E.T. SYSTEMS, INC.
a Delaware Corporation
/s/ Paul J. Crowe
----------------------------
By: Paul J. Crowe
JIM CORLETT
VICE PRESIDENT - MOBILE OPERATIONS
/s/ Jim Corlett
----------------------------
By: Jim Corlett
<PAGE>
EXHIBIT 10.13
CONSULTING AGREEMENT
1. Parties
1.1. This consulting agreement (this "Agreement") is made and entered
into effective as of April 1, 1999 (the "Effective Date") by and between Mobile
PET Systems, Inc. (the "Company"), a Delaware corporation, with its principal
office located at suite 205, 2240 Shelter Island Drive, San Diego, California
92106, and Thomas G. Brown (the "Consultant"), a California resident, whose
address is Suite 500, 19800 MacArthur Boulevard, Newport Beach, California
92612.
2. Recitals
2.1. The Company wishes to engage the services of the Consultant as an
independent contractor to perform the functions of chief financial officer of
the Company, and the Consultant wishes to except this engagement, on the terms
and subject to the conditions set forth in this Agreement.
2.2. In consideration of these premises and the mutual agreements set
forth below, the Company and the Consultant are entering into this Agreement.
3. Engagement
3.1. ENGAGEMENT. The Company hereby engages the services of the
Consultant, as an independent contractor, to perform the functions of the
Company's chief financial officer for the term set forth in paragraph 3.2 below,
and the Consultant hereby accepts this engagement.
3.2. TERM. The term of this engagement shall be for the two year period
beginning on April 1, 1999, and ending on March 31, 2001 (the "Term"), unless
sooner terminated as provided in paragraph 7.1 below.
3.2. RELATIONSHIP. The relationship between the Company and the
Consultant created by this Agreement is that of independent contractors, and the
Consultant is not and shall not be deemed to be an employee of the Company for
any purpose.
3.4. SERVICES. The services that the Consultant shall render to the
Company under this Agreement (the "Services") are and shall be limited to those
functions customarily performed by the chief financial officer of a company of
substantially the same size and in the same or similar business as the Company.
The Services do not include the functions of comptroller or treasurer.
3.5. TIME; NON-EXCLUSIVE. The Consultant shall devote as much time
to the performance of the Services as is reasonably necessary, which shall
not exceed (i) the Consultant being present at the Company's principal office
approximately two to three days per week (one of which shall include meetings
of the Company's board of directors) that the Consultant shall select, and
(ii) the Consultant being available at other reasonable and mutually
agreeable times, as may be needed, for
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consultation with the Company's chief executive officer. The Consultant is
not required to devote any fixed number of hours or days to the performance
of the Services. The Company recognizes that the Consultant has and will
continue to have other clients and business, and agrees that this engagement
is non-exclusive.
3.6. SUPPORT STAFF. The Company shall provide the Consultant with
reasonable support staff at the Company's principal office for the performance
of the Services, including an office and non-exclusive secretarial services.
4. Compensation and Expenses.
4.1. MONTHLY CASH COMPENSATION. The Company shall pay the Consultant
for the Services under this Agreement the sum of $7,500 per month during the
Term, in advance on the first day of each month beginning April 1, 1999.
4.2. STOCK GRANT. Contemporaneously with the execution of this
Agreement, the Company shall issue and deliver to the Consultant 100,000 shares
of the Company's common stock (the "Grant Shares"). The Consultant's right to
these shares shall be fully earned in consideration of his execution of this
Agreement, and shall vest on December 31, 1999. The Grant Shares shall be
unrestricted securities, or if they are restricted securities, then by August 1,
1999, the Company shall have either (i) filed and caused a registration
statement under the Securities Act of 1933 covering the Grant Shares to become
effctive, or (ii) exchanged the restricted Grant Shares for unrestricted shares
of the Company's common stock.
4.3. STOCK OPTION. Contemporaneously with the execution of this
Agreement, the Company shall execute and deliver to the Consultant a written
option (the "Option"), in the form of Exhibit A to this Agreement (with
appropriate insertions), to purchase 250,000 additional shares of the Company's
common stock (the "Option Shares"), at a price per share equal to the average
closing bid price of the Company's common stock quoted by Nasdaq on its OTC
Bulletin Board for the 5 trading days immediately preceding the Effective Date.
The Option shall be for a term of three years from the Effective Date.
4.4. OFFSET; WITHHOLDING; TAXES. The Company shall pay the cash
compensation to the Consultant provided in paragraph 4.1 above, and shall issue
and deliver the Grant Shares the Option and the Option Shares to the consultant,
all without offset, deduction or withholding of any kind or for any purpose. The
Consultant shall pay any federal, state and local income, social security,
Medicare, and similar governmental taxes payable by him with respect to the
compensation paid to him, by the Company pursuant to paragraphs 4.1, 4.2 and 4.3
of this Agreement, and shall indemnify the Company against and hold it harmless
from any such taxes.
4.5. EXPENSES. The Company shall pay, or shall promptly reimburse the
Consultant to the extent that he pays, all of the Consultant's expenses
reasonably incurred in his performance of the Services, including (by way of
example and not limitation) travel, lodging, meals, entertainment, telephone,
courier and delivery costs and charges. The Consultant shall submit
statements to the Company, in reasonable detail, for expenses for which he
claims reimbursement.
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5. Representations, Warranties and Covenants:
5.1. The Company represents and warrants to and covenants with the
Consultant that:
(a) INCORPORATION, GOOD STANDING, AND DUE QUALIFICATION. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; has the
corporate power and authority to own its assets and to transact the
business in which it is now engaged and proposes to be engaged in; and is
duly qualified as a foreign corporation and in good standing under the laws
of each other jurisdiction in which such qualification is required.
(b) CORPORATE POWER AND AUTHORITY. The execution, delivery and
performance by the Company of this Agreement, including the issuance of the
Grant Shares and the Option, have been duly authorized by all necessary
corporate action and do not and will not (i) require any consent or
approval of the Company's shareholders; (ii) contravene the Company's
charter or bylaws; (iii) violate any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award presently in effect having applicability to the Company; (iv) result
in a breach of or constitute a default under any agreement or other
instrument to which the Company is a party.
(c) LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and the
Option, when delivered under this Agreement will be, legal, valid and
binding obligations of the Company, enforceable against it in accordance
with their respective terms, except to the extent that such enforcement may
be limited by applicable bankruptcy, insolvency and other similar laws
affecting creditors' rights generally.
(d) THE SHARES. The Grant Shares are duly and validly issued,
fully paid and nonassessable. The Option Shares will be duly and validly
issued, and upon the payment of the purchase price therefore will be fully
paid and nonassessable.
(e) FINANCIAL STATEMENTS. The Company's financial statements for
its most recent two fiscal years, and from the end of its most recent
fiscal year to date, are true, accurate and complete in all material
respects, and have been prepared in accordance with generally accepted
accounting principles.
(f) COMPLIANCE WITH SECURITIES LAWS. All of the Company's
outstanding common stock, any outstanding rights, options, warrants and
agreements to acquire common stock of the Company, and any securities
issued by the Company that are convertible into common stock of the
Company, have been issued in material compliance with all applicable
federal and state securities laws and regulations. The Company has not
committed a material violation of any federal or state securities laws or
regulations applicable to it or to the issuance of any of its securities or
to trading or other transactions in any of its securities.
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6. Conditions Precedent.
6.1. The Consultant's obligation to perform this Agreement is subject
to the conditions precedent that the Company shall have issued and delivered the
Grant Shares and the Option to the Consultant.
7. Termination.
7.1. This Agreement may be terminated prior to the expiration of the
Term by either party:
(a) By giving the other not less than 60 days' prior notice of
its election to do so; or
(b) By giving the other party written notice of its election to do
so, if any representation or warranty of the other party contained in this
Agreement is materially inaccurate as of the Effective Date, or if the
other party (i) has breached any warranty, covenant or other provision of
this Agreement in any material respect; or (ii) has committed an unlawful
act or gross negligence or wilful misconduct in the performance of this
Agreement.
7.2. The Option, and the Consultant's right to exercise the same, shall
survive the termination of this Agreement.
8. General Provisions.
8.1. ENTIRE AGREEMENT; MODIFICATION; WAIVERS. This Agreement contains
the entire agreement of the parties, and supersedes any prior agreements with
respect to its subject matter. There are no agreements, understandings or
arrangements of the parties with respect to the subject matter of this Agreement
that are not contained herein. This Agreement shall not be modified except by an
instrument in writing signed by the parties. No waiver of any provision of this
Agreement shall be effective unless made in writing and signed by the party
making the waiver. The waiver of any provision of this Agreement shall not be
deemed to be a waiver of any other provision or any future waiver of the same
provision.
8.2. NOTICES. All notices given under this Agreement shall be in
writing, addressed to the parties as set forth below, and shall be effective on
the earliest of (i) the date received, or (ii) if given by facsimile transmittal
on the date given if transmitted before 5:00 p.m. the recipient's time,
otherwise it is effective the next day, or (iii) on the second business day
after delivery to a major international air delivery or air courier service
(such as Federal Express or Network Couriers):
IF TO THE COMPANY: IF TO THE CONSULTANT:
Mobile PET Systems, Inc. Mr. Thomas G. Brown
2240 Shelter Island Drive Suite 205 Suite 500
San Diego, California 92106 19800 MacArthur Boulevard
Attention: Mr. Paul Crowe Newport Beach, California 92612
President and CEO Facsimile: (949) 362-8477
Facsimile No. 619 226 3540
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8.3. INDEMNIFICATION. The Company, for itself and its shareholders,
directors, officers, employees, agents, affiliates, predecessors and successors
in interest (collectively, the "Indemnifying Parties"), hereby agrees to
indemnify the Consultant and his employees, agents, affiliates, predecessors and
successors in interest (collectively, the "Indemnified Parties"), and hold each
of them harmless from and against, any liability, damage, claim (whether or not
well-founded) and expense (including reasonable attorneys' fees), whether in
tort or in contract, or both, arising out or in any way related or incidental to
(i) the acts or omissions of any Indemnifying Party, and (ii) the acts and
omissions of any Indemnified Party in the performance of this Agreement, except
for such Indemnified Party's gross negligence or wilful misconduct. The
provisions of this paragraph 8.3 shall survive the termination of this
Agreement.
8.4. DISPUTE RESOLUTION. Any controversy or claim arising out of or
relating to this Agreement (whether in contract or tort, or both) shall be
determined by binding arbitration at Newport Beach, California, in accordance
with the commercial arbitration rules of the American Arbitration Association,
by a panel of three arbitrators, one chosen by each of the parties and the third
by the two so chosen. If the two arbitrators cannot agree on a third, then the
third shall be appointed in accordance with such rules. The prevailing party in
any arbitration proceeding shall be awarded reasonable attorneys fees and costs
of the proceeding. The arbitration award shall be final, and may be entered in
and enforced by any court having jurisdiction.
8.5. LAW GOVERNING. This Agreement shall be construed and enforced in
accordance with the laws California
8.6. BINDING EFFECT. This Agreement shall be binding on, and shall enure
to the benefit of the parties and their respective successors in interest.
8.7. CONSTRUCTION, COUNTERPARTS. This Agreement shall be construed as a
whole and in favor of the validity and enforceability of each of its provisions,
so as to carry out the intent of the parties as expressed herein. Heading are
for the convenience of reference, and the meaning and interpretation of the text
of any provision shall take precedence over its heading. This Agreement may be
signed in one or more counterparts, each of which shall constitute an original,
but all of which, taken together shall constitute one agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set forth after their respective signatures, effective as of the Effective
Date
THE COMPANY: THE CONSULTANT:
Mobile PET System, Inc.
By /s/ Paul Crowe /s/ Thomas G. Brown
----------------------------- -----------------------------
Paul Crowe, President and CEO Thomas G. Brown
Date signed 3/26/99 Date signed 3/26/99
-------------------- -----------------
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EXHIBIT 10.14
CONSULTING AGREEMENT
This Agreement is made and entered into this 15th day of December, 1998,
between Mobile PET Systems, Inc. (the "Company") and Northwest Capital
Partners, L.L.C. (the "Consultant"), and sets forth the terms and conditions
upon which the Consultant will act as financial advisor to the Company in
connection with the completion of the financing described in Exhibit "A"
attached hereto (the "Financing").
In consideration for the mutual promises and covenants contained herein, and
for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. PURPOSE. The Company hereby engages the Consultant during the term hereof
to arrange financing, as a finder, for the Company upon terms and conditions
as set forth herein and in accordance with the requirements set forth in
Exhibit "A" (the "Financing"). Consultant shall also have a right of first
refusal to consult with the Company regarding appropriate financings
subsequent to the Financings set forth in Exhibit "A" for a period of three
years following the term of this Agreement.
2. TERM. The term of this Agreement shall be for a period of 36 months,
provided that the first Interim Financing shall be completed no later than
January 31, 1999. An offering pursuant to Rule 504 or other applicable Rule
adopted pursuant to the Securities Act of 1933, as amended (the "Act"), shall
be completed within 30 days of the Company's approval and, following the
quotation of the Company's common stock on the NASD OTC Bulletin Board and a
third round of financing, shall be completed within the 90 day period
following the date the Company's common stock is quoted on the NASD OTC
Bulletin Board.
3. DUTIES OF THE CONSULTANT. During the term hereof, Consultant shall provide
the Company with the benefit of its best judgment and efforts to complete the
Financing on a reasonable business basis in accordance with the requirements
set forth in Exhibit "A." It shall be Consultant's duty to suggest and
evaluate from the standpoint of financial soundness, the Company's business
plans and programs, corporate financial structures, and corporate
organization, and any other financial matters involving the Company. In
connection with the financing contemplated by this Agreement, Consultant
agrees that it will advise and work with the Company to complete the
Financing successfully in accordance with Rule 504 or other applicable Rule
under the Act and the related and applicable Blue Sky laws of the states in
which the financing is completed. Consultant shall advise the Company of each
proposed broker or other financing or referral source identified by
Consultant prior to authorizing any participation in the Financing.
Consultant shall use its best efforts, after receiving information from
Company sufficient to comply with the informational requirements of Rule
15c2-11 under the Securities Exchange Act of 1934 (the "1934 Act"), to
arrange for the shares of common stock of the Company to
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be quoted on the NASD OTC Bulletin Board either by direct application and
approval through the NASD or by reverse merger. The Company and the
Consultant shall review the potential filing of a Form 10 (1934 Act form)
with the U.S. Securities and Exchange Commission following the Second Stage
Financing. Company agrees that it will accept Financing amounts at each
closing contemplated by Exhibit "A" which are in excess of the amounts in
Exhibit "A" if Consultant is able to raise such additional amounts in
accordance with the appropriate disclosure and the securities registration
exemption provisions of the Act and the relevant Blue Sky laws. Consultant's
duties shall also include, but not be limited to:
3.1 Assist the Company's management in the development and execution of
a strategic short-term, intermediate term and long-term financial
plan;
3.2 Assist the Company in the negotiation of the terms of the
Financings;
3.3 Assist the management of the Company in connection with inquiries
made by or on behalf of any proposed brokers and investors;
3.4 Assist the management of the Company in the preparation of
presentation materials for the purpose of pursuing the Financing;
3.5 Using its best efforts, on terms acceptable to the Company, to
arrange the Financings as described in Exhibit "A" attached hereto.
3.6 If the Company and the Consultant determine that a direct
application to the NASD is not in the best interest of the
Company and determine that the Company go public by way of a
reverse merger with an existing publicly traded company the
Consultant will be responsible for the location and acquisition
of such public company including all costs associated with its
acquisition.
4. CONSULTANT'S COMPENSATION.
4.1 The Company shall pay Consultant a fee of $5,000 for each month or
partial month this Agreement has been in effect, providing that
such payment shall be paid, as accrued, at the closing of the
Interim Financing and then continuing through the closing of the
Second and Third Stage Financings, as described in Exhibit "A," by
the Consultant. Upon the closing of the Third Stage of Financing,
the fee of $5,000 per month will be extended for an additional 36
months, for duties to be mutually agreed upon by the parties.
4.2 The Company agrees that, at the closing of the first Interim
Financing, as described in Exhibit "A," by the Consultant or at
the time the Company goes public, the Company will issue to the
Consultant
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1,200,000 shares of common stock of the Company at value of $0.01
per share. The Consultant's shares shall be held in escrow by the
Company's lawyer pursuant to an escrow agreement that releases the
Consultant's shares to the Consultant based upon the following terms
and conditions:
Upon the completion of the Interim Financing, as described in
Exhibit "A", the Consultant shall have earned 600,000 shares of the
Company and such shares will be delivered to the Consultant. Upon
the completion of the Second Stage Financing, as described in
Exhibit "A", the Consultant shall have earned an additional 600,000
shares of the Company and such shares will be delivered to the
Consultant. Upon the Company's receipt of the aggregate amount of
$1,000,000 through any combination of the Interim, Second or Third
Stage financings as described in Exhibit "A", the Consultant shall
have earned all 1,200,000 shares of the Company and such shares will
be delivered to the Consultant. In the event that the Company
terminates this agreement the Company retains the right to purchase
all of the Consultant's shares that remain in escrow for $0.01 per
share.
4.3 The Company agrees to issue the Consultant an additional 1,000,000
shares at a value of $0.01 per share if the Company's market
capitalization achieves the value of $100,000,000.00 or more. These
shares will be issued by the company as restricted shares at a value
of $0.01 per share and will be granted "piggy-back" rights so that
the shares will be registered upon the Company's first registration
after the share's issuance.
4.4 The Company agrees that it shall reimburse Consultant for
reasonable, out-of-pocket expenses incurred by Consultant in
performing the services provided pursuant to this Agreement,
provided that such out-of-pocket expense reimbursement shall not
exceed $3,000 in any calendar month or partial month, and provided
that any expenses in excess of $500 in any calendar month shall
require advance approval by the Company. Such reimbursement shall be
paid upon the within 15 days of the Company's receipt of the
Consultant's invoice. Such reimbursement may be claimed for any
month commencing with the signing of this Agreement and monthly
thereafter to the date of each closing, payable within 15 days of
receipt.
4.5 If the Consultant is unsuccessful in introducing investors to the
Company (either directly or through a broker) who would be willing
to fund the Financings contemplated in Exhibit "A" within the time
periods set forth, this Agreement may be terminated at the Company's
discretion, unless otherwise extended by mutual consent. Such consent
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will be implied should the Company be in or continue negotiation
with investors which should reasonably result in successful
Financing or should the Company accept funds from one of the sources
introduced to the Company by the Consultant during this period.
Following termination, however, Consultant will be entitled to the
consideration above as to those stages of the Financing completed
and in the event that after termination a financing of any kind or
amount is consummated with any party introduced to the Company by
the Consultant during a period of twelve months after termination of
this Agreement.
5. INDEMNIFICATION.
5.1 The Company agrees to indemnify the Consultant, its agents and
employees against any and all claims, lawsuits, and litigation
arising from representations of the Company made to Consultant or
prospective investors concerning its business plan and financial
condition. Such indemnification shall include reasonable attorney's
fees to defend any such actions or claims.
5.2 The Consultant agrees to indemnify the Company, its agents and
employees against any and all claims, lawsuits, and litigation
arising from representations of the Consultant made to prospective
investors concerning the Company except for those representations
constituting information provided by the Company. Such
indemnification shall include reasonable attorney's fees to defend
any such actions or claims.
5.3 Promptly after receipt by an indemnified party of notice of any
claim or commencement of any action in respect of which indemnity
may be sought, the indemnified party will notify the indemnifying
party in writing of the receipt or commencement thereof and the
indemnifying party shall have the right to assume the defense of any
such claim or action (including the employment of counsel reasonably
satisfactory to the indemnified party and the payment of fees and
expenses of such counsel), after which the indemnifying party shall
not be liable to the indemnified party for any legal fees incurred
by the indemnified party in connection with the defense of such
claim or action. Notwithstanding the prior sentence, the indemnified
party shall have the right to control its defense if, in the opinion
of it counsel, the indemnified party's defense is unique or separate
to it, as the case may be, as opposed to a defense pertaining to the
indemnifying party. In such event, the indemnified party shall have
the right to retain counsel reasonably satisfactory to the
indemnifying party at the indemnifying party's expense, to represent
it in any claim or action in respect of which indemnity may be
sought and agrees to cooperate with the indemnifying party and the
indemnifying party's counsel on the defense of any such
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claim of action, it being understood, however, that the indemnifying
party shall not, in connection with any such claim or action or
separate but substantially similar or related claim or action in the
same jurisdiction arising out of the same general circumstances, be
liable for the reasonable fees and expenses of more than one
separate firm of attorneys, unless the defense of one indemnified
party is unique or separate from that of another indemnified party
subject to the same claim or action. No party shall be liable for
any settlement of any claim or action effected without its written
consent.
6. REPRESENTATION AND WARRANTIES. Company represents and warrants as follows:
6.1 The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Nevada
and is qualified as a foreign corporation where required.
6.2 The shares of common stock of the Company which will be delivered to
the investors and Consultant will be duly authorized and validly
issued and fully paid and nonassessable.
7. ADDITIONS PRECEDENT. Consultant's duties to use its best efforts to
complete the Financing contemplated herein shall be subject to:
7.1 The Company will not change or modify the Company's capital
structure without the prior written consent of Consultant, which
consent shall not be unreasonably withheld.
7.2 The Company will submit quarterly budgets to Consultant during the
period of the Financing and for one year after successful completion
of the Financing.
7.3 The Company will provide all pertinent information in connection
with the Company's assets, including, but not limited to, all
tangible and intangible assets, and all copyright and trademark
information.
7.4 The Company shall have received executed employment agreements from
each of its officers and directors and other key individuals in a
form reasonably appropriate in accordance with industry standards.
7.5 The Company will provide Consultant with all information and
verifications thereof which Consultant or its legal counsel may
reasonably request from the Company in a manner and form
satisfactory to Consultant and its legal counsel.
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7.6 Receipt by Consultant of suitable financial statements of the
Company that are in form and substance satisfactory to Consultant,
in its sole discretion. The Company shall provide financial
statements consisting of a balance sheet and a related statement of
income for the period then ended, which fairly present the financial
condition of each as of their respective dates and for the periods
involved, and such statements shall be prepared in accordance with
generally accepted accounting principles consistently applied or
upon such other basis as the parties shall mutually agree and for
the periods mutually agreed upon among the parties.
7.7 All existing shares of the Company have or will be issued in
accordance to Rule 4(2) of the 1933 Act and consequently, such
securities will be "Restricted Securities" as such term is defined
in Rule 144 as promulgated under the 1933 Act and thus will be
subject to certain resale limitations as contained in Rule 144 and
the certificates shall bear the following restrictive legend
limiting their resale under Rule 144 of the Act.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
PURSUANT TO A TRANSACTION EFFECTED IN RELIANCE UPON SECTION 4(2) OF THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAVE NOT BEEN THE
SUBJECT OF A REGISTRATION STATEMENT UNDER THE ACT OR ANY STATE
SECURITIES ACT. THESE SECURITIES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR APPLICABLE EXEMPTION
THEREFROM UNDER THE ACT OR ANY APPLICABLE STATE SECURITIES ACT."
8. CONDITIONS SUBSEQUENT.
8.1 For a period of three years from the date of closing of a Financing
arranged by Consultant pursuant to this Agreement, the Company will
provide Consultant, at its expense, following a reasonable request
by Consultant for the purpose of reviewing and/or protecting the
Company's shareholder's interests, with copies of stock transfer
sheets from the Company's Transfer Agent, as well as weekly DTC
Reports from the Depository Trust Company to the extent such reports
can be made available to a party that is not an affiliate of the
Company, and will provide Consultant with all publicly available
financial reports and publicly available reports of material
developments regarding the Company and its compliance with laws and
regulations applicable thereto.
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8.2 For a period of three years after the date that the Company's shares of
common stock commence trading on the NASD OTC Bulletin Board, the
Company's executive officers and directors who own at least five percent
(5%) of the Company's common stock ("Principal Stockholders") and the
Company shall provide the Company with the right of first refusal with
respect to any offering (public or private) of the Company's securities by
either the Company or the Principal Stockholders involving more than
1000 shares of stock.
For a period of three years after the date that the Company's shares of
common stock commence trading on the NASD OTC Bulletin Board, the
Company's executive officers and directors who own at least five percent
(5%) of the Company's common stock ("Principal Stockholders") and the
Company shall provide the Consultant with the second right of first
refusal with respect to any offering (public or private) of the
Company's securities by either the Company or the Principal Stockholders
involving more than 1000 shares of stock.
For a period of three years after the date that the Company's shares of
common stock commence trading on the NASD OTC Bulletin Board, the
Company's executive officers and directors who own at least five percent
(5%) of the Company's common stock ("Principal Stockholders") and the
Company shall provide the other Principal Stockholders of the Company
with the third right of first refusal with respect to any offering
(public or private) of the Company's securities by either the Company or
the Principal Stockholders involving more than 1000 shares of stock.
8.3 The Company's officers and directors will use their best efforts to
cause each Principal Shareholder and each other holder of 5% or more of
the Company's common stock to enter into an agreement with Consultant
pursuant to the terms of which each such person shall agree not to sell
any shares owned by such person on the NASD OTC Bulletin Board, for a
period of twelve months after the date that the Company's shares of
common stock commence trading on the NASD OTC Bulletin Board, without
Consultant's prior written consent, which consent will not be
unreasonably withheld. Provided that each such person may sell up to
1,000 shares every three months after the first 180 days has passed
after the date that the Company's shares of common stock commence
trading on the NASD OTC Bulletin Board.
8.4 Consultant shall be entitled for a period of five years to nominate a
director for the Company's board of directors which the Company's
existing directors will support. Such director shall be paid the same
salary as other directors (for director's duties performed) and shall
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participate in all bonus programs granted to the Company's board of
directors.
9. TERMINATION OF RELATIONSHIP. This Agreement shall terminate upon the
happening of any one of the following events:
9.1 Either party may terminate this Agreement upon ten days written
notice to the other that a material breach by the other of the terms
or covenants of this Agreement shall have occurred and such breach
shall not have been cured within ten days after such notice.
9.2 Either party shall have the right (but not the obligation) to
terminate this Agreement upon written notice to the other party if
such terminating party reasonably determines that the other party or
any of its directors, officers or controlling shareholders has
engaged in any unlawful, wrongful, or fraudulent act against the
Company or its shareholders.
9.3 Either party shall have the right (but not the obligation) to
terminate this Agreement upon written notice to the other party if
such terminating party shall determine that any material fact
concerning the other party represented to them during the course of
performing their undertakings under this Agreement are misstated or
untrue or that the other party has intentionally failed to provide
the terminating party with material facts concerning the other party.
9.4 Either party may terminate this Agreement at any time: (i) in the
event of war; (ii) in the event of any material adverse change in
the business, property or financial condition of the Company (of
which terminating party shall be the sole judge); (iii) in the event
of any action, suit or proceeding at law or at equity against the
Company or Consultant, or by any Federal, State or other commission
or agency where any unfavorable decision would materially adversely
affect the business, property, financial condition or income of a
party; (iv) in the event of adverse market conditions of which event
the terminating party is to be the sole judge. Further, Consultant's
commitment will be subject to receipt by Consultant of all
information and verifications thereof which Consultant or their counsel
may reasonably request from the Company in a manner and form
satisfactory to Consultant.
In the event of Termination by Consultant, upon grounds stated
herein above, Consultant shall be entitled to accrued fees and
expense reimbursements and shares otherwise payable shall be paid as
though this Agreement was not terminated.
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10. MISCELLANEOUS.
10.1 Authorization. This Agreement has been duly authorized, executed
and delivered by and on behalf of the Company and the Consultant.
10.2 Notices. Any notice or other communication required or permitted
by any provision of this Agreement shall be in writing and shall
be deemed to have been given or served for all purposes if
delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid, addressed to the
parties as follows:
To Consultant: Northwest Capital Partners, L.L.C.
Mr. Brent Nelson
10900 NE 8th Street, Suite 900
Bellevue, Washington 98004
To the Shareholders
and to the Company: Mobile PET Systems, Inc.
Mr. Paul Crowe
2240 Shelter Island Drive
San Diego, California 92106
10.3 Validity; Complete Agreement. The validity and enforceability of
any provision hereof shall in no way affect the validity or
enforceability of any other provision hereof. This Agreement sets
forth the entire understanding and embodies the entire agreement
of the parties with respect to the subject matter covered hereby
and supersedes all prior or contemporaneous oral or written
agreements, understandings, arrangements, negotiations or
communications among the parties hereto.
10.4 Amendment. This Agreement shall not be modified or amended except
by written agreement of the parties hereto.
10.5 Governing Law. This Agreement shall be governed by the laws of the
state of Washington giving effect to that state's conflict of laws
principle.
-9-
<PAGE>
In witness whereof, the parties hereto have executed this Agreement as of
the date first above written.
NORTHWEST CAPITAL PARTNERS, L.L.C.
By: /s/ Brent Nelson
-------------------------------------------
Brent Nelson, President
MOBILE PET SYSTEMS, INC.
By: /s/ Paul Crowe
-------------------------------------------
Paul Crowe, President & CEO
-10-
<PAGE>
EXHIBIT "A"
Mobile PET Systems, Inc.
Financing Requirements
Attached hereto and made a part hereof the
Agreement between Mobile PET Systems, Inc.
and Northwest Capital Partners, L.L.C.
Dated December 15, 1998
<TABLE>
<CAPTION>
MINIMUM AMOUNT APPROXIMATE DATE
<S> <C>
$700,000 Interim Financing January 31, 1999
$1,000,000 Interim Financing (1) June 30, 1999
Third Stage financings as required (2)
</TABLE>
(1) The price per share of common stock shall be determined by the Company
following consultation with Consultant.
(1) The term "Interim Financing" as used in the Agreement shall include
segment 1 above.
(2) Within 6 months after the date the Company's common stock is quoted on
the NASD OTC Bulletin Board, provided that the Company has subsequently
filed with the U.S. Securities and Exchange Commission a Form 10
pursuant to Section 12(g) of the 1934 Act.
-11-
<PAGE>
MOBILE PET SYSTEMS, INC.
APPROVAL OF CAPITAL RESTRUCTURE
The undersigned hereby agree to revise the Capital Structure of Mobile PET
Systems, Inc. as indicated below. Furthermore, the undersigned agree to
allow the Mobile PET Systems, Inc. Compensation Committee to grant stock
options from those shares of stock reserved in the Employee Pool to new or
existing hires, in accordance with the option package structure guidelines to
be determined by the Mobile PET Systems, Inc. Compensation Committee, and at
the Committee's discretion.
Signed this 15th day of December, 1998 by:
/s/ Brent Nelson
- -------------------------------------
Brent Nelson
President, Northwest Capital Partners, L.L.C.
Paul Crowe
- -------------------------------------
Paul Crowe
Chairman & CEO, Mobile PET Systems, Inc.
NUMBER OF SHARES OF COMMON STOCK
<TABLE>
<CAPTION>
Shareholder After Restructuring
<S> <C>
Paul Crowe 5,000,000
John Fleming 800,000
Stock Options 1,000,000
Northwest Capital 1,200,000
---------
TOTAL 8,000,000
<CAPTION>
FINANCING REQUIRED Dollars Received # of Shares to be Issued
<S> <C> <C>
January 31, 1999 $ 700,000
June 30, 1999 $1,000,000
----------
TOTAL $1,700,000
TOTAL $1,700,000 LESS THAN or = 5,900,000 or approx. 45%
</TABLE>
-12-
<PAGE>
EXHIBIT 10.15
CONSULTING AGREEMENT
- -------------------------------------------------------------------------------
THIS CONSULTING AGREEMENT ("AGREEMENT") is made as of January 29, 1999,
by Mobile PET Systems, Inc., a Delaware corporation, 2240 Shelter Island
Drive, San Diego, California 92108 ("COMPANY") and Michael Baybak and
Company, Inc., a California corporation, 4515 Ocean View Blvd., Suite 305, La
Canada, California 91011 ("CONSULTANT").
RECITALS
A. Consultant conducts the business of providing national media
consulting services and financial community investor relations consulting
services for emerging companies.
B. Company desires to retain Consultant's consulting services on
a fixed term basis, and Consultant has agreed to serve Company as an
independent contractor on the terms and conditions set forth in this
Agreement.
NOW THEREFORE, the parties agree as follows:
TERMS
1. CONSULTANT'S SERVICES. Consultant shall provide major media
consulting services to Company, such duties to include establishment of a
national News Bureau, major news feature development, relations with
newsletter writers and with trade media interested in Company and its mobile
technology Consultant shall also provide an investor relations program of
communications to the U.S. institutional, brokerage and retail investor
publics. This work is SUBJECT ALWAYS to the control and direction of
Company's CEO and Board of Directors. Consultant shall also consult and
advise the CEO and Company on a variety of corporate matters on an on-going
basis, as these may relate to the above programs. Consultant shall well and
faithfully serve Company or any subsidiary as aforesaid during the
continuance of its employment hereunder and use its best efforts to promote
the Company's interests. Consultant shall submit a written report to Company
by the tenth (10th) day of each month regarding Consultant's activities on
Company's behalf during the prior calendar month.
2. COMPANY LITERATURE. Company shall provide to Consultant
copies of all proposed Company literature before the dissemination of such
literature to any third parties. Consultant shall not disseminate any such
materials or documents without Company's prior approval.
3. TERM. The term of this Agreement shall be for fifteen (15)
months from the date of this Agreement. Company may elect to terminate this
Agreement at any time after the first 90 days on 30 (thirty) days' written
notice. This Agreement can be renewed at Company's option for a further
twelve (12) months on written notice to Consultant at least thirty (30) days
before the end of the initial term.
4. FEE. Consultant's remuneration for its services hereunder
shall issue to Consultant a corporate stock option for an aggregate maximum
150,000 shares set at market price ($2.50 per share) as of the date of this
Agreement.
This option shall be exercisable on or before January 29, 2004 for the
150,000 shares. If Consultant wishes to exercise this option, it shall do so
by tendering the purchase price (i.e., $375,000.00) to Company in cash or
wired funds on or before the exercise date. If this option is not exercised
by its deadline, it shall lapse. Consultant shall not be entitled to any
other fee under this Agreement.
Page 1
<PAGE>
5. TAXES. Consultant shall be responsible for payment of its
income taxes as required by any governmental entity with respect to any
compensation paid by Company to Consultant.
6. SERVICE PROVIDERS. During the term of this Agreement,
Consultant shall provide its services to Company primarily through Michael
Baybak and George Duggan, and Consultant shall ensure that Michael Baybak
and/or George Duggan will be available to provide such services to Company in
a timely manner subject to their availability at the time of the request;
provided that they shall provide Company not less than fifty (50) hours each
month in the aggregate.
7. CONSULTANT'S EXPENSES. Consultant shall bear all its expenses
under this Agreement. The only form of payment to be made by Company to
Consultant under this Agreement is the option set forth Section 4.
8. CONFIDENTIALITY. Company has in its possession certain
confidential and proprietary devices, ideas, programs, know-how, business
plans and other information in written, oral, electronic and physical/sample
form, including all information, documentation, photographs, services and
demonstrations of any nature whatsoever regarding Company's affairs,
products, and/or services (collectively "CONFIDENTIAL DATA").
8.1 TREATMENT OF CONFIDENTIAL DATA. Consultant shall keep
and maintain all Confidential Data in the strictest confidence and undertake
the following additional obligations: (a) use the Confidential Data for the
sole purpose of furthering Company's interests; (b) not disclose Confidential
Data to persons not affiliated with Company; (c) limit discrimination of
Confidential Data to only those employees of Consultant who have a need to
know and then only if those employees sign a counterpart of this
Agreement; (d) not copy, duplicate, transmit, communicate, disclose and/or
publish Confidential Data or any portion thereof; (e) return the Confidential
Data and all documents, notes or physical evidence thereof to Company on the
termination of this Agreement; (f) maintain the Confidential Data secret at all
times; (g) protect the Confidential Data with the same degree of care as
Consultant uses to protect its own such data, but in all events use at least a
reasonable degree of care; (h) not in any way otherwise transfer the
Confidential Data to any other person; and (i) not incorporate or in any way
use any part of the Confidential Data (disclosed separately or embodied in any
of Company's products or equipment) in its or any other party's products or
businesses. Consultant's employees who have access to the Confidential Data
will be bound by all the terms of this Agreement.
8.2 TRADE SECRETS. Consultant acknowledges that all
Confidential Data is proprietary and confidential and constitutes Company's
trade secrets. Consultant shall not disclose any such trade secrets,
directly or indirectly, voluntarily or involuntarily, to any other person or
use it in any way, at any time hereafter, except as expressly authorized by
Company in writing. All files, records, documents, equipment and similar
items relating to Company's business, whether prepared by Consultant or
others, are and shall remain exclusively Company's property.
8.3 PROPERTY RIGHTS. Company shall solely own and have
exclusive rights to all the Confidential Data, and all modifications and
derivative works thereof, and to all United States and foreign patents,
trademarks, copyrights, mask works, trade secrets, and other intellectual
property rights related thereto. Consultant is not granted any license or
other interest in the Confidential Data.
8.4 SCOPE; TERM. The Confidential Data disclosed to
Consultant is to be reviewed only for the limited purpose set forth above and
for no other purpose. Company is not obligated to enter into
Page 2
<PAGE>
any further agreement or business relationship with Consultant. The restrictions
in this Agreement will survive and continue in force until five (5) years after
the date of this Agreement.
8.5. EXCEPTIONS. These obligations and restrictions shall not apply
to Confidential Data that falls within any of the following exceptions, provided
Consultant proves and produces credible written evidence to establish one of the
exceptions: (a) is or becomes part of the public domain without breach of this
Agreement by Consultant; (b) is lawfully in Consultant's possession before a
disclosure and not subject to an existing agreement between the parties; (c) is
independently developed by or for Consultant completely apart from the
disclosures hereunder; (d) is received from a third party who lawfully acquired
such information without restriction, and without a breach of this Agreement by
Consultant; and/or (e) is released pursuant to a binding court order or
government regulation, provided that Consultant delivers a copy of such order
or action to Company and cooperates with Company if it elects to contest such
disclosure.
8.6. REMEDIES. The remedy at law for breach of this Agreement being
inadequate, Company shall be entitled, in addition to such other remedies as it
may have, to temporary or injunctive relief for any breach or threatened breach
of any provision of this Agreement without proof of actual damages that have
been or may have been caused to it by such breach. All provisions hereof shall
survive the end of the term of this Agreement.
8.7. NON-COMPETE. Consultant shall not, either directly or
indirectly, carry on, participate, or engage in, either as employee, employer,
principal, agent, consultant, owner, part-owner, co-venturer, officer, director,
shareholder, partner, manager, operator, financier, employee, salesman, or in
any other individual, representative or participating capacity, any business
which is in any way competitive with or similar to Company's business for so
long, not exceeding five (5) years from the date hereof, as Company, or any
person deriving title to its goodwill, carries on a like business. The area in
which Consultant shall be so restrained shall be throughout the United States,
and this Agreement shall be deemed to be a separate non-compete covenant for
each and every county therein. IF ANY PORTION OR PROVISION OF THIS NON-COMPETE
IS FOUND BY A COURT OF COMPETENT JURISDICTION TO BE OVERLY BROAD, IT IS THE
PARTIES' EXPRESS INTENT THAT THE PROVISIONS SHALL NEVERTHELESS BE ENFORCED TO
THE MAXIMUM EXTENT PERMITTED BY LAW AND SHALL GOVERN AND APPLY TO AS MUCH
GEOGRAPHICAL AREA AND/OR TIME DURATION, NOT TO EXCEED THAT WHICH IS SET FORTH
ABOVE, AS POSSIBLE.
8.8. SURVIVAL OF OBLIGATIONS. The restrictions and obligation of
this Agreement shall survive any expiration, termination or cancellation of this
Agreement or any business relationship or opportunity entered into or negotiated
by the parties hereto.
9. INDEMNITY.
9.1. Company shall indemnify and hold Consultant harmless from any
loss, costs or expenses incurred as a result of or arising out of Consultant's
dissemination or publication of any documents or literature issued or approved
in writing by Company in accordance with Section 2, above, if it is established
by a Court of competent jurisdiction that such documents contain material
misrepresentations or false or misleading information, or omit to state a
material fact necessary to prevent a statement that is made from being false or
misleading. Company shall be solely responsible for all required
registrations/exemptions for its securities at the federal and state levels.
9.2. Consultant shall indemnify, defend and hold Company harmless
from all losses, liabilities, damages, fees (including attorneys' fees), costs
and suits arising from or relating to any negligent or other wrongful act of
Consultant or any breach of this Agreement.
Page 3
<PAGE>
10. TERMINATION. This Agreement may be terminated forthwith by
Company without prior notice if at any time: (a) Consultant shall commit any
breach of any of provision of this Agreement; (b) Consultant shall be guilty of
any misconduct or neglect in the discharge of its duties hereunder;
(c) Consultant shall become bankrupt or make any arrangements or composition
with its creditors; or (d) Michael Baybak shall become of unsound mind or be
declared incompetent to handle his own personal affairs.
11. CONFLICTING ACTIVITIES. Company is aware that Consultant has
now and will continue to have business interests in other companies. Company
recognizes that these companies will require a certain portion of Consultant's
time. Consultant may continue to devote time to such outside interests, provided
that such interests do not conflict with, in any way, the time required for
Consultant to perform its duties under this Agreement.
12. PERSONAL SERVICES. The services to be performed by Consultant
pursuant hereto are personal in character, and neither this Agreement nor any
rights or benefits arising thereunder are assignable by Consultant without
Company's prior written consent.
13. GENERAL TERMS.
13.1. NOTICES. Unless otherwise provided in this Agreement or by
law, all notices required or permitted by this Agreement or by law to be served
on or delivered to a party shall be in writing and deemed duly served,
delivered, and received when personally delivered to the party to whom directed,
or instead, three (3) business days after deposit in the U.S. mail, certified or
registered, return receipt requested, first-class postage prepaid, addressed to
the address indicated in this Agreement. A party may change this address by
giving written notice of the change to the other party. Fax transmission to a
fax machine specified in such a notice shall constitute personal delivery.
13.2. CONSTRUCTION OF AGREEMENT. Whenever the context requires, any
gender includes all others, the singular number includes the plural, and
vice-versa. Captions are inserted for convenience of reference and do not
describe or limit the scope or intent of this Agreement. Any recitals above, and
any exhibits or schedules referred to and/or attached hereto, are incorporated
by reference into this Agreement. "PERSON" includes a corporation, limited
liability company, partnership, trust, or any other legal entity. "INCLUDING"
means including without limitation.
13.3. INTERPRETATION OF AGREEMENT. This Agreement contains the
entire agreement between the parties regarding its subject matter. Any prior
oral or written representations, agreements and/or understandings shall be of no
effect. No waiver, amendment or discharge of this Agreement shall be valid
unless it is in writing and signed by the party to be obligated. This Agreement
shall be governed by California law. Subject to any provision of this Agreement
that may prohibit or curtail assignment of rights, this Agreement shall bind and
inure to the benefit of the parties and their heirs, assigns, representatives
and successors. If any term, covenant or condition of this Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall remain in full effect. No inference, assumption or
presumption shall be drawn if a party or a party's attorney prepared and/or
drafted this Agreement; it shall be conclusively presumed that the parties
participated equally in its preparation and/or drafting.
13.4. JURISDICTION; VENUE; ATTORNEYS' FEES. In any proceeding
(including arbitration) involving this Agreement, (a) the proper place of trial
or hearing shall be San Diego County, California, and the parties irrevocably
submit to the jurisdiction of the federal and California courts within San Diego
Page 4
<PAGE>
County, and (b) the prevailing party shall be entitled to recover actual
attorney's fees and all litigation-related costs (including expert witnesses'
fees) incurred in addition to all other items of recovery permitted by law.
13.5. EXECUTION OF THIS AND OTHER INSTRUMENTS. The parties have
signed below voluntarily after having been advised by their respective counsel
of all provisions hereof, and, in signing below, they are not relying on any
inducements, promises, and representations made by or on behalf of the other
party except as set forth herein. This Agreement may be executed in
counterparts, each of which shall be deemed an original. Each party shall take
all reasonable steps, and execute, acknowledge, and deliver all further
instruments necessary or expedient to implement this Agreement.
13.6. ARBITRATION. If a dispute arises involving this Agreement, the
parties shall submit the matter to JAMS/Endispute for binding arbitration under
its rules for commercial matters. The parties shall equally split fees and costs
of the arbitration. The arbitrator may award the prevailing party its costs and
reasonable attorney's fees. The parties shall have all discovery rights as
provided in the California Code of Civil Procedure.
INTENDING TO BE LEGALLY BOUND, the parties have executed this Agreement
as of the date first written above.
"COMPANY"
Mobile PET Systems, Inc., A Delaware Corporation
By: /s/ Paul Crowe
----------------------------
President
"CONSULTANT"
Michael Baybak and Company, Inc., A California Corporation
By: /s/ Michael Baybak
----------------------------
President
By: /s/ Michael Baybak
----------------------------
Secretary
Page 5
<PAGE>
EXHIBIT 10.16
Dated the 9th day of September 1999
CONSULTANCY AGREEMENT
BETWEEN
(1) Mobile P.E.T. Systems, Inc.
(2) Dr. Piers Nicholas Plowman
Monier-Williams & Boxalls
71 Lincoln's Inn Fields
London WC2A 3JF
Tel. 0171 405 6195
<PAGE>
THIS AGREEMENT is made the _______________ day of _____________ 1999
BETWEEN:
1. MOBILE P.E.T. SYSTEMS, INC., a Company Incorporated in the State of
Delaware (EIN Number 33-0831137) with its Principal Offices located at
2240 Shelter Island Drive, San Diego, California 92106, United States of
America ("the Company"); and
2. DR. PIERS NICHOLAS PLOWMAN of 14 Harmont House, 20 Harley Street, London
W1N 1AN ("the Consultant").
1. DEFINITIONS
The following terms shall have the following meanings:
<TABLE>
<S> <C> <C>
1.1 "Board" The Board of Directors of the Company.
1.2 "Commencement Date" The 1st day of September 1999.
1.3 "Term" From the Commencement Date to 31st
December 2000 and unless and until
this Agreement is determined by either
party in accordance with clause 7.
</TABLE>
2. APPOINTMENT
The Company appoints the Consultant as a consultant of the business of
the Company for the Term to provide the services set out herein.
3. THE OBLIGATIONS OF THE CONSULTANT
3.1 During the Term the Consultant shall unless prevented by ill-health
devote such of his time, attention and abilities in the business of the
Company as the Consultant and the Company shall deem reasonably
necessary provided that the Consultant shall not act as an advisor,
consultant or employee of or for any other Positron Emission Tomography
(P.E.T.) Service.
3.2 The Consultant's obligations shall be to oversee on behalf of the
Company the clinical operations of the P.E.T. services provided in
London at the London P.E.T. Centre, located at 154 Harley Street.
<PAGE>
London W1 or such other premises as may be provided by the Company after
consultation with the Consultant. The Consultant may be titled Clinical
Director of the London P.E.T. Centre but shall not be a Director or act
as a shadow Director of the Company. The services of the Consultant will
include the clinical marketing of P.E.T. to physicians and expanding the
UK clinical operation of the Company and in order to carry out his
obligations the Consultant shall have with the approval of the Company
power to employ or engage the services of administrative and clinical
staff in the name of and on behalf of the Company and shall monitor the
quality reporting of scans by nuclear isotope physicians so employed or
engaged and shall liaise with potential referring physicians.
3.3 In carrying out his services to the Company the Consultant shall not be
required to carry out any routine office administration of the London
P.E.T. Centre or be involved in the pricing or billing of work carried
out at the Centre, nor the supply of physics or isotopes or the day to
day working and quality control of the P.E.T. scanner.
3.4 The Consultant shall not be required to be present at the London P.E.T.
Centre on a routine basis but will be available for consultation to the
office staff.
3.5 As part of his services the Consultant will be appointed and serve as a
member of the Medical Advisory Board of the Company and shall assist the
promotion of the business of the Company in the United States and in
Europe.
3.6 The Consultant will participate with other clinicians on the Medical
Advisory Board and provide input to the management of the Company with
regard to technology, clinical utilisation and other medical trends of
which the Company should be made aware.
3.7 In connection with his services the Consultant shall report to the Board
through the Chief Executive Officer of the Company.
3.8 All services of the Consultant shall be provided in London and the
Consultant shall not be required to travel overseas in order to provide
services to the Company other than attending one meeting of the Medical
Advisory Board each year in the United States of America.
<PAGE>
4. CONSIDERATION
4.1 In consideration for the services to be rendered by the Consultant
under this Agreement the Company shall:
4.1.1 On the signing of this Agreement grant the Consultant the
options to acquire
(a) 50,000 shares (the "First Option") and
(b) 25,000 Shares ("the Second Option") in the Company in
accordance with the terms of the Share Option Deed set
out in the First Schedule hereto.
4.1.2 Pay to the Consultant a Management Fee equal to 5% of the
net profit of the operations of the Company in the United
Kingdom in accordance with the provisions set out in the
Second Schedule hereto.
4.2 In addition to the consideration payable under clause 4.1 above the
Company shall on each anniversary of the date of this Agreement
grant to the Consultant an option to acquire 10,000 shares in the
Company ("the Third Option") in accordance with the term of the
Share Option Deed set out in the First Schedule hereto provided
that the Third Option shall only be granted if at each relevant
anniversary of the date of this Agreement the Consultant was a
member during the preceding year of the Medical Advisory Board of
the Company or any similar Board or Committee that may have
replaced the Medical Advisory Board.
4.3 In addition to the considerations payable under clause 4.1 and 4.2
above, the Company shall grant to the Consultant an option to
acquire 10,000 shares on 31st December 1999, 30,000 shares on 31st
December 2000, 30,000 shares on 31st December 2001, 30,000 shares on
31st December 2002 and 30,000 shares on 31st December 2003 ("the
Fourth Option") in accordance with the terms of the Share Option
Deed set out in the First Schedule hereto provided that this share
option ("the Fourth Option") shall only be exercisable if at the
relevant date set out above the Consultant was a member of the
Medical Advisory Board of the Company or any similar board or
committee that may have replaced the Medical Advisory Board.
<PAGE>
5. ADMINISTRATIVE ARRANGEMENTS
5.1 The Company shall reimburse to the Consultant all reasonable travelling
and other expenses properly incurred by him in the performance of his
services under this Agreement provided that the Company may require any
such expenses to be duly vouched by written evidence where procurable.
5.2 The Company shall procure that the London P.E.T. Centre shall be
provided with such sufficient funds as the Consultant shall advise is
necessary for the remuneration of staff employed or engaged to provide
services at the London P.E.T. Centre and all costs incurred in
administering the Centre including expenses incurred by the Consultant.
5.3 The Consultant shall be empowered to draw on such funds by signing
cheques or other payment authorities on behalf of the Company up to a
total of L5,000 on any one cheque or authority, provided that all
payments in favour of the Consultant shall be authorised in advance in
writing by the chief executive officer of the Company or a member of the
Board.
5.4 The Consultant or his personal representatives shall be entitled to a
rateable proportion of the sum or sums payable to the Consultant under
clause 4 for any broken portion of any year during which his engagement
under this Agreement subsists and shall be entitled to exercise his
share options in accordance with the provisions set out in the Share
Option Deed set out in the First Schedule.
6. VALUE ADDED TAX
6.1 All sums payable under this Agreement unless otherwise stated are
exclusive of VAT or other duties or taxes.
6.2 Any VAT or other duties or taxes payable in respect of such sums shall
be payable in addition to such sums.
7. TERMINATION
7.1 This Agreement may be terminated:
7.1.1 By either party serving on the other six months written notice of
termination of this
<PAGE>
Agreement to expire on 31st December in any year.
7.1.2 By either party by immediate written notice if the other party
shall have committed a serious or fundamental breach of this
Agreement not capable of remedy within thirty days.
7.1.3 By 90 days notice in the event that either party shall have
committed a breach of this Agreement which is capable of remedy
and such breach has not been remedied within thirty days of the
giving of such notice.
7.1.4 By 90 days notice by either party in the event that the
Consultant shall be unable to provide consultancy services to the
Company due to ill-health for a consecutive period of more than
three months.
7.2 Any notices given under this clause shall be given in accordance with
the provisions of clause 10.2 below.
7.3 The appointment of the Consultant to the Medical Advisory Board of the
Company may be terminated by 90 days notice by either party hereto
expiring on the anniversary of the date of this Agreement. The
resignation or removal of the Consultant from the Medical Advisory Board
shall not determine this Agreement provided that in the event that the
appointment of the Consultant to the Medical Advisory Board is
terminated by the Company the Consultant shall be entitled to give 90
days notice of termination of this Agreement.
8. LIABILITY AND INDEMNITY
8.1 The Company shall maintain full insurance cover in relation to any
claims against the Company or the Consultant in relation to the business
of the London P.E.T. Centre and all services to be provided by the
Company or the Consultant in the United Kingdom and by any staff
employed by or engaged to provide services for the Company and the
Company authorises the Consultant to procure such insurance cover in the
name of the Company as the Consultant deems necessary.
8.2 The Company shall indemnify and keep indemnified the Consultant from and
against all and any claims, loss, damage or liability and any legal fees
and costs or expenses incurred in respect of any
<PAGE>
claim against the Consultant or the Company in relation to the services
referred to in clause 8.1.
8.3 All business carried out and services provided by or on behalf of the
Company in the United Kingdom shall be in accordance with all laws and
regulations applying in the United Kingdom and the Company shall
indemnify the Consultant from and against all and any loss, damage or
liability arising from any breach of this provision.
9. SECRECY
The Consultant shall not at any time during the Term divulge and shall
use his best endeavours to prevent the divulging to any person any
confidential information relating to the business or affairs of the
Company other than with the consent of the Company or as may be required
by law.
10. GENERAL
10.1 This Agreement contains the whole agreement between the parties and
supersedes any prior agreement between the parties whether written
or oral and no variation of this Agreement shall be made except by a
document in writing signed by both parties.
10.2 Any notice to be served on either party by the other shall be sent
by facsimile transmission or electronic mail or by prepaid
registered post to the address of the relevant party shown at the
head of this Agreement and shall be deemed to have been received by
the addressee seven days after the same has been posted or
twenty-four hours after dispatch if sent by facsimile transmission
or by electronic mail to the correct facsimile number or electronic
mail address of the addressee.
10.3 This Agreement shall be governed by English law in every
particular, including formation and interpretation, and shall be
deemed to have been made in England and the parties hereto submit to
the non-exclusive jurisdiction of the English Courts.
10.4 During the Term the Consultant shall be an independent contractor
and not an employee of the Company and in such capacity the
Consultant shall bear exclusive responsibility for the
<PAGE>
payment of National Insurance Contributions as a self-employed
person and for the discharge of any income tax and (subject to
clause 5) VAT liability arising out of remuneration for the services
provided by him under this Agreement.
10.5 The Consultant shall not be subject to directions from the Company
as to the manner in which he shall perform the services to be
provided by him.
10.6 The Company shall not assign or sub-contract any of its rights or
duties under this Agreement without the consent in writing of the
Consultant and the Consultant shall not delegate or assign or
sub-contract any of his rights or duties under this Agreement.
10.7 The Consultant shall upon termination of his engagement as a
Consultant immediately deliver up to the Company all documents,
specifications and property belonging to the Company which may be in
his possession or under his control.
10.8. If before the end of the Term the engagement of the Consultant shall
be terminated by reason of the winding up of the Company for the
purpose of amalgamation or reconstruction or the Company is a party
to any arrangement for amalgamation not involving winding up and the
Consultant shall be offered an engagement with the amalgamated or
reconstructed company for a period not less than the unexpired part
of the Term and on terms identical (mutatis mutandis) to the terms
of this Agreement the Consultant shall have no claim against the
Company in respect of such termination.
SIGNED by the Consultant and on behalf of the Company on the above date.
<PAGE>
THE FIRST SCHEDULE
(THE SHARE OPTION DEED)
This Deed is made the 9th day of September 1999
BETWEEN:
1. MOBILE P.E.T. SYSTEMS, INC., a Company Incorporated in the State of
Delaware (EIN Number 33-0831137) with its principal offices located at
2240 Shelter Island Drive, San Diego, California 92106, United States of
America ("the Company"); and
2. DR. PIERS NICHOLAS PLOWMAN of 14 Harmont House, 20 Harley Street, London
W1N 1AN ("the Consultant").
RECITALS
The Consultant has been appointed a Consultant to the Company and it is
proposed that the Company will grant options to the Consultant in respect of
the Option Shares on the terms and conditions set out in this Deed.
NOW IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATIONS
In this Agreement the following expressions have the meanings set out
below (unless the context otherwise requires):
<TABLE>
<C> <C> <S>
1.1 "the First Option" means the option granted to the Consultant by clause 2.
1.2 "the Second Option" means the option granted to the Consultant by clause 3.
1.3 "the Third Option" means the option granted to the Consultant by clause 4.
1.4 "the Fourth Option" means the option granted to the Consultant by clause 5.
1.5 "the Option Shares" means the number of Shares in respect of which the Options have been
granted but subject to variation pursuant to clause 8.
</TABLE>
<PAGE>
<TABLE>
<C> <C> <S>
1.6 "the Options" means together the First Option, the Second Option, the Third Option and
the Fourth Option.
1.7 "the Shares" means the Common Shares of the Company.
1.8 "the Subscription Price" means the prices set out in clauses 2, 3, 4 and 5 below in respect of the
Options subject to variation pursuant to clause 8.
</TABLE>
2. GRANT OF THE FIRST OPTION
In consideration of the sum of US$1 (the receipt of which is acknowledged
by the Company) the Company grants the Consultant the right to subscribe
for 50,000 (Fifty thousand) Shares or any of them at a price of US$3.0
per Share.
3. GRANT OF THE SECOND OPTION
In consideration of the sum of US$1 (the receipt of which is
acknowledged by the Company) the Company grants the Consultant the right
to subscribe for 25,000 (Twenty-five thousand) Shares or any of them at
a price of US$1 per Share.
4. GRANT OF THE THIRD OPTION
4.1 In consideration of the sum of US$1 (the receipt of which is
acknowledged by the Company) the Company grants the Consultant the right
to subscribe for 10,000 (Ten thousand) Shares in the Company on the 1st
day of January 2000 and on the 1st day of January in each subsequent
year provided that the Consultant was a member of the Medical Advisory
Board of the Company during the year preceding each such date.
4.2 The price payable by the Consultant shall be an amount per Share equal
to the average weighted price for the Shares of the Company quoted on
the NASD-OTC Bulletin Board or such other market or stock exchange in
the United States upon which the Shares are traded or listed during the
year from the 1st day of January 1999 to 1st January 2000 and each
subsequent year.
<PAGE>
4.3 Within fourteen days of the 1st day of January 2000 and each
subsequent anniversary of that date the Company shall notify the
Consultant of the average weighted price of the Shares in the
Company during the preceding year which shall be the Subscription
Price for the Third Option for that year. The notification by the
Company shall include a certificate by the auditors of the
Company that the Subscription Price has been accurately
calculated and such notification shall be binding on the Company
and the Consultant save where manifestly incorrect.
5.1 GRANT OF THE FOURTH OPTION
In consideration of the sum of US$1 (the receipt of which is
acknowledged by the Company) the Company grants the Company
the right to subscribe for
5.1.1 10,000 Shares on the 31st day of December 1999 at a price
of US$1 per Share;
5.1.2 30,000 Shares on the 31st day of December 2000 at a price
of US$1.50 per Share;
5.1.3 30,000 Shares on the 31st day of December 2001 at a price
of US$2 per Share;
5.1.4 30,000 Shares on the 31st day of December 2002 at a price
of US$2.50 per Share; and
5.1.5 30,000 Shares on the 31st day of December 2003 at a price of
US$3 per Share.
5.2 The options granted in this clause are conditional upon the
Consultant being a member of Medical Advisory Board of the
Company on the relevant dates when the options become
exercisable.
6. EXERCISING THE OPTIONS
6.1 The Options may be exercised at any time after the Options shall have
been granted provided that the Options shall be exercised in any
event not later than two years after the dates upon which such Option
of part of such Option shall have become exercisable.
6.2 The Options shall be exercisable by the Consultant or in the event of
the Consultant's death by personal representatives of the Consultant
within six months of his death.
6.3 The Options shall be exercisable in respect of all or part of the
Option Shares or the balance of the
<PAGE>
Shares comprised in the Options by notice in writing given
by the Consultant to the Company.
6.4 The notice of exercise of the Options shall be accompanied
by a remittance for the aggregate of the Subscription Price
payable.
6.5 Within thirty days of the receipt of the notice of
exercise the Company shall allot the Shares in respect of
which the Options have been validly exercised and shall
issue a definitive certificate in respect of the Shares
allotted.
6.6 Save for any rights determined by reference to a date on
or before the date of the notice to exercise the Options
the Shares allotted under this clause shall rank pari
passu and as one class with the other issued Shares of the
Company at the time of exercise of the Options.
7. TAKEOVERS, MERGERS AND WINDING-UP
7.1 If any person, firm or corporation obtains control of the Company as a
result of making a general offer to acquire the whole of the issued
ordinary Share Capital of the Company which is made on condition that
if it is satisfied the person, firm or corporation making the offer
will have control of the Company or a general offer to acquire all the
Shares in the Company then the Options which are exercisable at that
time may be exercised within one month of the date when the Company
notifies the Consultant that the person making the offer has obtained
control of the Company and any conditions subject to which the offer
is made have been satisfied and to the extent that the Options have
not been exercised by the end of such period they shall lapse.
7.2 If there shall be a reconstruction of the Company or its
amalgamation with another company or companies as a result
of which the shares in the Company shall cease to be
listed or the Company goes into liquidation, the Options
then exercisable may be exercised within one month after
the Company has notified the Consultant of such event and
to the extent that the Options have not been exercised by
the end of such period they shall lapse.
7.3 In the event that the Options shall lapse under the
provisions of clause 7.1 or 7.2 above the Company shall
pay to the Consultant a sum equal to the value of the
Option Shares less the
<PAGE>
Subscription Price which would have been payable by the Consultant if
the Consultant had exercised the Options in full.
8. VARIATION OF SHARE CAPITAL
8.1 In the event of any capitalisation, consolidation, sub-division or
reduction of the share capital of the Company or any rights issue or
other variation of capital taking place after the date of this Deed, the
number of Shares comprised in the Options and the Subscription Price may
be varied in such manner as the Directors of the Company shall determine
and as the Auditors of the Company shall certify in writing to be in
their opinion fair and reasonable.
8.2 The Company shall notify the Consultant of any such variation under
clause 8.1.
9. GENERAL
9.1 The Company will at all times keep available sufficient unissued Shares to
satisfy the exercise to the full extent still possible of the Options
taking account of any other obligations of the Company to issue Shares.
9.2 This Deed shall not form part of any contract for the provision of
services by the Consultant to the Company and the rights and obligations
of the Consultant under any such agreement with the Company shall not be
affected by this Deed or any right he may have under it and the rights
granted by this Deed shall not be dependent upon the performance of any
such agreement.
9.3 No variation to the terms of this Deed shall be effective unless agreed
in writing by the parties.
9.4 Any notice or communication to be given by either party to the other
shall be sent by facsimile transmission or electronic mail or by
pre-paid registered post to the address of the relevant party shown at
the head of this Deed and shall be deemed to have been received by the
addressee seven days after the same has been posted or 24 hours after
despatch if sent by facsimile transmission or by electronic mail to the
correct facsimile number or electronic mail address of the addressee.
9.5 The Consultant hereby authorises James Capel Investment Management
Limited or such other
<PAGE>
stockbrokers as he may notify to the Company from time to time to give
notice of exercise of the Options to the Company and the Company shall
accept any such notice given on behalf of the Consultant.
9.6 This Deed shall be governed by English law in every particular, including
formation and interpretation, and shall be deemed to have been made in
England and the parties hereto submit to the non-exclusive jurisdiction
of the English Courts.
Signed as a Deed by the Consultant and on behalf of the Company the day and
year first above written.
<PAGE>
THE SECOND SCHEDULE
(The Management Fee Payable to the Consultant)
1. The Management Fee payable to the Consultant under clause 4.1.2 shall be
five per cent of the Net Profits made by the Company in respect of the
Company's PET business in the United Kingdom.
2. "Net Profits" shall mean the profits of the business operations of the
Company in the United Kingdom less all expenses properly incurred in
relation to the operations of the Company in the United Kingdom but
excluding
(a) any administration costs or expenses incurred outside the United
Kingdom attributable to the United Kingdom operations; and
(b) any interest payments and financing costs and any taxation whether
payable in the United Kingdom or elsewhere.
3. The Net Profits shall be calculated as of January 15th of each year and
if not agreed by the Company and the Consultant within 21 days
thereafter the calculation of the Net Profits shall be referred to an
independent expert for determination (who shall be a Chartered
Accountant agreed by the parties or in the absence of agreement selected
by the President for the time being of the Institute of Chartered
Accountants) whose decision shall be final and binding on the parties
and whose costs shall be borne equally by the Parties.
4. If the Net Profits are agreed by the parties payment shall be made to the
Consultant not later than one month after the end of the relevant year
and if referred to the independent expert shall be paid seven days after
the expert's decision has been delivered.
5. For the period to the 15th January 2000 the fee payable to the Consultant
shall be five per cent of the Net Profits for the period from the
commencement of the UK operations of the Company to 15th January 2000
notwithstanding the fact that the Consultant has not acted as Consultant
during the whole of that period.
<PAGE>
Signed for and on behalf of
P.E.T. SYSTEMS INC
/s/ Paul J. Crowe
- ---------------------------
Director
Signed by the said
DR PIERS NICHOLAS PLOWMAN
/s/ Piers N. Plowman
- ---------------------------
<PAGE>
EXHIBIT 10.17
MOBILE PET SYSTEMS, INC.
1999 STOCK OPTION PLAN
SECTION 1. PURPOSE. The purpose of this 1999 Stock Option Plan (the
"PLAN") is to enable Mobile PET Systems, Inc., (the "COMPANY") to attract and
retain the services of people with training, experience and ability, and to
provide additional incentive to such persons by granting them an opportunity to
participate in the ownership of the Company.
SECTION 2. STOCK SUBJECT TO PLAN. The stock subject to this Plan shall
be the Company's common stock, $.01 par value per share (the "COMMON STOCK")
presently authorized but unissued. The aggregate amount of Common Stock reserved
for issuance or delivery upon exercise of all options granted under this Plan
shall not exceed 1,000,000 shares of Common Stock, subject to adjustment
pursuant to Section 10 below. If any option granted under this Plan shall expire
or terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto shall be returned to the Plan and become
available for future grant under the Plan.
SECTION 3. ADMINISTRATION. The Plan shall be administered by the Board
of Directors of the Company or any committee of the Board of Directors delegated
such authority pursuant to Section 3.3 (the "PLAN ADMINISTRATOR"), in accordance
with the following terms and conditions:
3.1 GENERAL AUTHORITY. Subject to the express provisions of
the Plan, the Plan Administrator shall have the authority, in its sole
discretion, to determine all matters relating to options granted under the Plan,
including, without limitation, the selection of individuals to be granted
options, the number of shares to be subject to each option, the fair market
value of the shares and the exercise price, the term, whether such options shall
be immediately exercisable or shall become exercisable in increments over time,
and all other terms and conditions thereof, and to make all other determinations
necessary or advisable in the administration of the Plan. Grants under this Plan
to persons eligible need not be identical in any respect, even when made
simultaneously. The Plan Administrator may from time to time adopt, amend and
rescind rules and regulations relating to the administration of the Plan. The
interpretation and construction by the Plan Administrator of any terms or
provisions of this Plan or any option issued hereunder, or of any rule or
regulation promulgated in connection herewith shall be conclusive and binding on
all interested parties. The Plan Administrator in its sole discretion may grant
incentive stock options ("INCENTIVE STOCK OPTIONS") as such term is defined in
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "CODE"),
and/or nonqualified stock options ("NONQUALIFIED STOCK OPTIONS"). A Nonqualified
Stock Option is a stock option, which is not an Incentive Stock Option. The term
"OPTION" when used in this Plan refers to Incentive Stock Options and
Nonqualified Stock Options, collectively.
3.2 DIRECTORS. A member of the Board of Directors may be
eligible to participate in or receive or hold options under this Plan; provided,
however, that no member of the Board of Directors shall vote with respect to the
granting of an option hereunder to himself or herself.
3.3 DELEGATION TO A COMMITTEE. The Board of Directors, if it
so determines, may delegate to one or more committees of the Board of Directors
(each consisting of not less than two members of the Board of Directors) any or
all authority for the administration of the Plan, subject to such terms and
conditions the Board of Directors may prescribe. If, and so long as, the Company
has a class of equity securities registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the
-1-
<PAGE>
"EXCHANGE ACT"), the Board of Directors in determining the membership of any
such committee shall, with respect to option grants to any persons subject to
or likely to become subject to Section 16 of the Exchange Act, give due
consideration to the provisions regarding (a) "outside directors" as
contemplated by Section 162(m) of the Code and (b) "nonemployee directors" as
contemplated by Rule 16b-3 under the Exchange Act. Thereafter references to
the Plan Administrator in this Plan shall be deemed to be references to such
committee to the extent such authority is so delegated.
3.4 REPLACEMENT OF OPTIONS. Without limiting the authority
granted to the Plan Administrator under Section 3.1, the Plan Administrator, in
its sole discretion, shall have the authority, among other things, to (a) grant
options subject to the condition that options previously granted at a higher or
lower exercise price under the Plan be canceled or exchanged in connection with
such grant (the number of shares covered by the new options, the exercise price,
the term and the other terms and conditions of the new option, shall be
determined in accordance with the Plan and may be different from the provisions
of the canceled or exchanged options), and (b) amend or modify outstanding and
unexercised options, with the consent of the holder of the option, to, among
other things, reduce the exercise price per share, establish the exercise price
at the then-current fair market value of the Common Stock or accelerate or defer
the exercise date, vesting schedule or expiration date of any option.
3.5 LOANS TO OPTIONEES. The Plan Administrator, in its sole
discretion, may provide that the Company loan to any Optionee sufficient funds
to exercise any option granted under the Plan and/or to pay withholding tax due
upon exercise of such option. The Plan Administrator shall have the authority to
make such determinations at the time of grant or exercise and shall establish
repayment terms thereof, including installments, maturity, interest rate and
security for repayment.
SECTION 4. ELIGIBILITY. Options may be granted only to persons who, at
the time the option is granted, are employees, directors, consultants or
advisors of the Company or any of its then-existing parent or subsidiary
corporations (hereafter a "PARENT" or "SUBSIDIARY"). Any person to whom an
option is granted under this Plan shall be referred to hereinafter as
"OPTIONEE." Any Optionee may receive one or more grants of options as the Plan
Administrator shall from time to time determine, and such determinations may be
different as to different Optionees and may vary as to different grants.
Optionees who are not employees will only be eligible to receive Nonqualified
Stock Options. An "employee" shall be any person, including officers and
directors, employed by the Company or any Parent or Subsidiary, with the status
of employment determined based upon such minimum number of hours or periods
worked as shall be determined by the Board of Directors in its discretion,
subject to any requirements of the Code.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS. Options granted under this
Plan shall be evidenced by written agreements which shall contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with this Plan. Each option agreement
shall clearly indicate whether the option granted thereby is an Incentive Stock
Option or a Nonqualified Stock Option. Notwithstanding the foregoing, all such
options shall include or incorporate by reference the following terms and
conditions:
5.1 NUMBER OF SHARES AND EXERCISE PRICE. The maximum number of
shares that may be purchased pursuant to the exercise of each option and the
price per share at which such option is exercisable (the "EXERCISE PRICE") shall
be as established by the Plan Administrator, provided that the exercise price
for any Incentive Stock Option shall not be less than the fair market value per
share of the Common Stock at the time the option is granted and subject further
to Section 7.2 below. The exercise
-2-
<PAGE>
price of Nonqualified Stock Options may be less than, equal to or greater
than the fair market value per share of the Common Stock at the time the
option is granted.
a. LIMITATION ON NUMBER OF SHARES UNDERLYING OPTIONS. Subject
to adjustment from time to time as provided in Section 10 below, the Plan
Administrator shall not grant options to any person in any one fiscal year of
the Company in an amount that exceeds, in the aggregate, [250,000] shares of
Common Stock. This limitation shall be applied in a manner consistent with the
requirements of, and only to the extent required for compliance with, the
exclusion from the limitation on deductibility of compensation under Section
162(m) of the Code.
b. DETERMINATION OF FAIR MARKET VALUE. For the purposes of
this Plan, fair market value of Common Stock, as of any date, shall be
determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation The
Nasdaq National Market, its fair market value shall be the closing
sales price for such stock (or the closing bid, if no sales were
reported), as quoted on such system or exchange, or the system or
exchange with the greatest volume of trading in Common Stock, for the
last market trading day prior to the time of determination, as reported
in The Wall Street Journal or such other source as the Plan
Administrator deems reliable;
(ii) If the Common Stock is quoted on The Nasdaq SmallCap
Market, on the over-the-counter system, or regularly quoted by a
recognized securities dealer but selling prices are not reported, its
fair market value shall be the last trade reported for the Common Stock
on the last market trading day prior to the time of determination, as
reported in The Wall Street Journal or such other source as the Plan
Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the fair market value thereof shall be determined in good faith
by the Plan Administrator.
5.2 DURATION OF OPTIONS. Subject to the restrictions contained
in Section 9, the term of each option shall be established by the Plan
Administrator and, if not so established, shall be ten years from the date it is
granted, but in no event shall the term of any Incentive Stock Option exceed ten
years.
5.3 EXERCISABILITY. Each option shall prescribe the
installments or vesting schedule, if any, under which an option granted under
the Plan shall become exercisable. In the absence of a defined vesting schedule
in an option agreement, the option covered by such agreement shall vest annually
over four years from the date of grant, at the rate of 25 percent per year on
each anniversary of the date of grant. The Plan Administrator, in its absolute
discretion, may waive or accelerate any vesting requirement contained in
outstanding and unexercised options. Only whole shares shall be issued pursuant
to the exercise of any option.
SECTION 6. RESTRICTIONS ON TRANSFERABILITY
6.1 Options granted under this Plan and the rights and
privileges conferred hereby shall not be subject to execution, attachment or
similar process and may not be assigned, alienated, pledged, sold, or
transferred in any manner (whether by operation of law or otherwise) other than
by will or by the laws of descent and distribution.
-3-
<PAGE>
6.2 Notwithstanding Section 6.1 above, in the case of a
Nonqualified Stock Option, an Optionee may transfer such option either (a)
pursuant to a "domestic relations order" as defined in Section 414 of the Code
or Section 206 of the Employment Retirement Income Security Act, or the rules
thereunder, or (b) by transfer without the receipt of consideration by an
Optionee, subject to such rules as the Plan Administrator may adopt to preserve
the purposes of the Plan (including limiting such transfers to transfers by
Optionees who are directors or senior executives), to
(i) a member of his or her Immediate Family or, in the case of
an Optionee that is a corporation, partnership or limited liability
company, holders of equity ownership interest of Optionee;
(ii) a trust solely for the benefit of the Optionee and/or
his or her Immediate Family, or
(iii) a partnership, corporation or limited liability company
whose only partners, shareholders or members are the Optionee and/or
(y) his or her Immediate Family members or (z) holders of equity
ownership interest of Optionee (in the case of an Optionee that is a
corporation, partnership or limited liability company).
(each transferee described in 6.2(a) and (b) is hereafter referred to as a
"PERMITTED TRANSFEREE"), provided that the Plan Administrator is notified in
advance in writing of the terms and conditions of any proposed transfer
described in (a) or (b) and it determines that the proposed transfer complies
with the requirements of the Plan and the applicable option agreement. For this
purpose, "Immediate Family" means, with respect to a particular Optionee, the
Optionee's spouse, children and grandchildren (including adopted and
stepchildren and grandchildren).
6.3 Upon any attempt to transfer, assign, pledge, hypothecate
or otherwise dispose of an option granted under the Plan or any right or
privilege conferred hereunder contrary to the provisions of the Plan, or upon
the sale, levy or any attachment or similar process upon the rights and
privileges conferred by an option granted under the Plan, the option shall
thereupon terminate and become null and void.
6.4 The terms of options granted under this Plan and
transferred in accordance with this Section 6 shall apply to the beneficiaries,
executors and administrators of the Optionee and of the Permitted Transferees of
the Optionee (including the beneficiaries, executors and administrators of the
Permitted Transferees), including the right to agree to any amendment of the
applicable option agreement, except that Permitted Transferees shall not
transfer any option other than by will or by the laws of descent and
distribution.
6.5 Options granted under this Plan, or options transferred in
accordance with this Section 6, are exercisable during Optionee's lifetime only
by Optionee or Permitted Transferee, as applicable (or his or her attorney in
fact or guardian). In the event of the death of an Optionee or Permitted
Transferee, options may be exercised by such Optionee's or Permitted
Transferee's executor or administrator. In no event shall the Company issue
shares of Common Stock upon exercise of an option unless Optionee or Permitted
Transferee makes sufficient payment, as determined by the Company, to meet
withholding tax obligations on such exercise or other arrangements satisfactory
to the Plan Administrator to provide for such payment.
-4-
<PAGE>
SECTION 7. CERTAIN LIMITATIONS REGARDING INCENTIVE STOCK OPTIONS. The
grant of Incentive Stock Options shall be subject to the following special
limitations:
7.1 LIMITATION ON AMOUNT OF GRANTS. To the extent that an
Optionee is granted Incentive Stock Options that in the aggregate (together with
all other Incentive Stock Options granted by the Company or any Parents or
Subsidiaries) entitle the Optionee to purchase, in any calendar year during
which such options first become exercisable, stock of the Company, any Parent or
any Subsidiary having a fair market value (determined as of the time such
options are granted) in excess of $100,000, such options in excess of the
$100,000 threshold shall be treated as Nonqualified Stock Options. No limitation
shall apply to Nonqualified Stock Options.
7.2 GRANTS TO TEN PERCENT SHAREHOLDERS. Incentive Stock
Options may be granted to a person who, at the time the option is granted, owns
more than ten percent of the total combined voting power of all classes of stock
of the Company and any Parent or Subsidiary only if (i) the exercise price is at
least 110 percent of the fair market value of the Common Stock at the time of
grant, and (ii) the option is not exercisable more than five years from the date
of grant.
7.3 TAXATION OF INCENTIVE STOCK OPTIONS. In order to obtain
certain tax benefits afforded to Incentive Stock Options under Section 422 of
the Code, the Optionee must hold the shares issued upon the exercise of an
Incentive Stock Option for a minimum of two years after the date of grant of the
Incentive Stock Option and one year from the date of exercise. An Optionee may
be subject to the alternative minimum tax at the time of exercise of an
Incentive Stock Option. The Plan Administrator may provide in any option
agreement evidencing an Incentive Stock Option granted under this Plan that the
Optionee under such agreement be required to give the Company prompt notice of
any subsequent disposition of shares acquired on exercise of such Incentive
Stock Option prior to the expiration of the above holding periods.
SECTION 8. EXERCISE OF OPTIONS. Options shall be exercised in accordance
with the following terms and conditions:
8.1 PROCEDURE. Options shall be exercised by delivery to the
Company of written notice of the number of shares with respect to which the
option is exercised.
8.2 PAYMENT. Payment of the exercise price shall be made in
full within five business days of the notice of exercise of the option and shall
be in cash or bank-certified, cashier's or personal check. If the Company's
Common Stock is registered under Section 12 of the Exchange Act, then, to the
extent permitted by applicable laws and regulations (including, but not limited
to, federal tax and securities laws and regulations) and unless the Plan
Administrator determines otherwise, an option also may be exercised by (a)
delivery of shares of Common Stock of the Company that have been held by the
Optionee for at least six months having a fair market value equal to the
exercise price, such fair market value to be determined in good faith by the
Plan Administrator (such payment in stock may occur in the context of a single
exercise of an option or successive and simultaneous exercises, sometimes
referred to as "pyramiding," which provides that, rather than physically
exchanging certificates for a series of exercises, bookkeeping entries will be
made pursuant to which the Optionee is permitted to retain his existing stock
certificate and a new stock certificate is issued for the net shares), or (b)
delivery of a properly executed exercise notice together with irrevocable
instructions to (i) a broker to promptly deliver to the Company the amount of
sale or loan proceeds to pay the exercise price and any withholding tax
obligations that may arise in connection with such exercise, and (ii) the
Company to
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<PAGE>
deliver the certificates for such purchased shares directly to such broker,
all in accordance with the requirements of the Federal Reserve Board.
In addition, the exercise price for shares purchased under an option
may be paid, either singly or in combination with one or more of the alternative
forms of payment authorized by this Section 8.2, by (y) a promissory note
delivered pursuant to Section 3.5 or (z) such other consideration as the Plan
Administrator may permit.
8.3 RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such shares,
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the shares acquired on exercise, notwithstanding the
exercise of the option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the option and payment of the
exercise price. In the event that the exercise of an option is treated in part
as the exercise of a Nonqualified Stock Option pursuant to Section 7.2, the
Company shall issue a stock certificate evidencing the shares treated as
acquired upon the exercise of an Incentive Stock Option and a separate stock
certificate evidencing the shares treated as acquired upon the exercise of a
Nonqualified Stock Option, and shall identify each such certificate accordingly
in its stock transfer records. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 10 of this Plan.
8.4 FEDERAL WITHHOLDING TAX REQUIREMENTS. Upon exercise of an
option, the Optionee shall, upon notification of the amount due and prior to or
concurrently with the delivery of the certificates representing the shares, pay
to the Company amounts necessary to satisfy applicable federal, state and local
withholding tax requirements or shall otherwise make arrangements satisfactory
to the Company for such requirements. If permitted by the Plan Administrator,
such arrangements may include payment of the appropriate withholding tax in
shares of stock of the Company having a fair market value equal to such
withholding tax, either through delivery of shares held by the Optionee or by
reduction in the number of shares to be delivered to the Optionee upon exercise
of such option.
SECTION 9. TERMINATION OF EMPLOYMENT, DISABILITY AND DEATH
9.1 GENERAL. If the employment of the Optionee by the Company,
a Parent or a Subsidiary shall terminate by retirement or for any reason other
than death or disability (as hereinafter provided), the option may be exercised
by the Optionee, or its Permitted Transferee, at any time prior to the
expiration of three months after the date of such termination of employment
(unless by its terms the option sooner terminates or expires), but only if and
to the extent the Optionee was entitled to exercise the option at the date of
such termination.
9.2 DISABILITY. If the employment of the Optionee by the
Company, a Parent or a Subsidiary is terminated because of the Optionee's
disability (as herein defined), the option may be exercised by the Optionee, or
its Permitted Transferee, at any time prior to the expiration of one year after
the date of such termination (unless by its terms the option sooner terminates
or expires), but only if and to the extent the Optionee, or its Permitted
Transferee, was entitled to exercise the option at the date of such termination.
For purposes of this section, an Optionee will be considered to be disabled if
the Optionee is unable to engage in any substantial gainful activity by reason
of any medically determinable mental or physical impairment which can be
expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months.
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<PAGE>
9.3 DEATH. In the event of the death of an Optionee while in
the employ of the Company, a Parent or a Subsidiary, the option shall be
exercisable on or prior to the expiration of one year after the date of such
death (unless by its terms the option sooner terminates and expires), but only
if and to the extent the Optionee was entitled to exercise the option at the
date of such death and only by the Optionee's personal representative if then
subject to administration as part of the Optionee's estate, or by the person or
persons to whom such Optionee's rights under the option shall have passed by the
Optionee's will or by the applicable laws of descent and distribution or by
Optionee's Permitted Transferee.
9.4 WAIVER OR EXTENSION OF TIME PERIODS. The Plan
Administrator shall have the authority, prior to or within the times specified
in this Section 9 for the exercise of any such option, to extend such time
period or waive in its entirety any such time period to the extent that such
time period expires prior to the expiration of the term of such option. In
addition, the Plan Administrator may modify or eliminate the time periods
specified in this Section 9 with respect to particular option grants. However,
no Incentive Stock Option may be exercised after the expiration of ten years
from the date such option is granted. If an Optionee holding an Incentive Stock
Option exercises such option, by permission of the Plan Administrator, after the
expiration of the time periods specified in this Section 9, the option will no
longer be treated as an Incentive Stock Option under the Code and shall
automatically be converted into a Nonqualified Stock Option.
9.5 TERMINATION OF OPTIONS. To the extent that the option of
any deceased Optionee or of any Optionee whose employment is terminated shall
not have been exercised within the limited periods prescribed in this Section 9,
all further rights to purchase shares pursuant to such option shall cease and
terminate at the expiration of such period.
9.6 NON-EMPLOYEE OPTIONEES. Options granted to Optionees who
are not employees of the Company, a Parent or a Subsidiary at the time of grant
shall not be subject to the provisions of this Section 9, except as specifically
provided in the written option agreement for such Optionee.
SECTION 10. OPTION ADJUSTMENTS
10.1 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The aggregate
number and class of shares on which options may be granted under this Plan, the
number and class of shares covered by each outstanding option and the exercise
price per share thereof (but not the total price), and all such options, shall
each be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock of the Company resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification or any like
capital adjustment, or any other increase or decrease in the number of shares of
Common Stock of the Company without the receipt of consideration by the Company.
10.2 EFFECT OF CERTAIN TRANSACTIONS. Except as otherwise
provided in the option agreement, in the event of a merger, consolidation,
disposition of all or substantially all of the assets, separation,
reorganization or liquidation of the Company, as a result of which the
shareholders of the Company receive cash, stock or other property in exchange
for their shares of Common Stock, or upon the acquisition by a person (as
defined in Section 3(a)(9) and 13(d)(3) of the Exchange Act as in effective as
of the date hereof) of a majority of the Company's outstanding voting securities
(whether directly or indirectly, beneficially or of record) (each, a "Corporate
Transaction"), all outstanding and unexercised options granted under this Plan
shall automatically accelerate so that each option shall, immediately prior to
any such Corporate Transaction, become 100 percent vested (except that such
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<PAGE>
acceleration shall not occur if, in the opinion of the Company's accountants,
such acceleration would render unavailable "pooling of interest" accounting for
a Corporate Transaction that would otherwise qualify for such accounting
treatment). Provided further, however, that an option shall not so accelerate if
and to the extent that such option is, in connection with a Corporate
Transaction, either to be assumed by the successor corporation or its parent or
to be replaced with a comparable option for the purchase of shares of capital
stock of such successor corporation or its parent. Immediately following the
consummation of any Corporate Transaction, all options shall terminate and cease
to remain outstanding, except to the extent assumed by a successor corporation.
Any such options that are assumed or replaced in a Corporate Transaction and do
not otherwise accelerate at that time shall be accelerated in the event the
Optionee's employment or services should subsequently terminate within two years
following such transaction.
10.3 FURTHER ADJUSTMENT OF OPTIONS. The Plan Administrator
shall have the discretion, exercisable at any time before a sale, merger,
consolidation, reorganization, liquidation or change in control of the Company,
as defined by the Plan Administrator, to take such further action as it
determines to be necessary or advisable, and fair and equitable to Optionees,
with respect to options. Such authorized action may include (but shall not be
limited to) establishing, amending or waiving the type, terms, conditions or
duration of, or restrictions on, options so as to provide for earlier, later,
extended or additional time for exercise and other modifications, and the Plan
Administrator may take such actions with respect to all Optionees, to certain
categories of Optionees or only to individual Optionees. The Plan Administrator
may take such action before or after granting options to which the action
relates and before or after any public announcement with respect to such, sale,
merger, consolidation, reorganization, liquidation or change in control that is
the reason for such action.
10.4 FRACTIONAL SHARES. In the event of any adjustment in the
number of shares covered by any option, any fractional shares resulting from
such adjustment shall be disregarded and each such option shall cover only the
number of full shares resulting from such adjustment.
10.5 DETERMINATION OF PLAN ADMINISTRATOR TO BE FINAL. All
adjustments made pursuant to this Section 10 shall be made by the Plan
Administrator and its determination as to what adjustments shall be made, and
the extent thereof, shall be final, binding and conclusive.
SECTION 11. SECURITIES REGULATIONS
11.1 COMPLIANCE. Shares shall not be issued with respect to an
option granted under this Plan unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange, national market system, over the counter system, or any electronic
bulletin board, upon which the shares may then be listed, quoted or traded, and
shall further be subject to the approval of counsel for the Company with respect
to such compliance. Inability of the Company to obtain from any regulatory body
having jurisdiction the authority deemed by the Company's counsel to be
necessary for the lawful issuance and sale of any shares hereunder shall relieve
the Company of any liability in respect of the nonissuance or sale of such
shares as to which such requisite authority shall not have been obtained.
11.2 REPRESENTATIONS BY OPTIONEE. As a condition to the
exercise of an option, the Company may require the Optionee to represent and
warrant at the time of any such exercise that the shares are being purchased
only for investment and without any present intention to sell or distribute
-8-
<PAGE>
such shares, if, in the opinion of counsel for the Company, such
representation is required by any relevant provision of the laws referred to
in Section 11.1 above. At the option of the Company, a stop transfer order
against any shares of stock may be placed on the official stock books and
records of the Company, and a legend indicating that the stock may not be
pledged, sold or otherwise transferred unless an opinion of counsel was
provided (concurred in by counsel for the Company) stating that such transfer
is not in violation of any applicable law or regulation, may be stamped on
the stock certificate in order to assure exemption from registration. The
Plan Administrator may also require such other action or agreement by the
Optionees as may from time to time be necessary to comply with the federal
and state securities laws. This provision shall not obligate the Company to
undertake registration of options or stock hereunder.
SECTION 12. EMPLOYMENT RIGHTS. Nothing in this Plan or any option or
right granted pursuant hereto shall confer upon any Optionee any right to be
continued in the employment of the Company, a Parent or any Subsidiary of the
Company, or to remain a director thereof or a consultant thereto, or to
interfere in anyway with the right of the Company, a Parent or any Subsidiary,
in its sole discretion, to terminate such Optionee's employment at any time or
to remove the Optionee as a director or consultant at any time.
SECTION 13. AMENDMENT AND TERMINATION
13.1 ACTION BY SHAREHOLDERS. The Plan may be terminated,
modified or amended by the shareholders of the Company.
13.2 ACTION BY BOARD OF DIRECTORS. The Board of Directors may
also terminate the Plan, or modify or amend the Plan in such respects as it
shall deem advisable in order to conform to any changes in law or regulation
applicable thereto, or in other respects; provided, however, that, to the extent
required for compliance with Section 422 of the Code or any applicable law or
regulation, the Board of Directors may not, without further approval by the
shareholders of the Company:
(i) Change the number of shares in the aggregate, as
to which options may be granted under the Plan;
(ii) Change the eligibility of persons to be granted
Incentive Stock Options under the Plan;
(iii) Change the terms of the Plan which causes the
Plan to lose its qualification as an incentive stock option plan under
Section 422(b) of the Code; or
(iv) Otherwise amend the Plan for which shareholder
approved is required under any applicable law or regulation.
No termination, suspension or amendment of the Plan may,
without the consent of each Optionee to whom any option shall previously have
been granted, adversely affect the rights of such Optionees under such options.
13.3 AUTOMATIC TERMINATION. Unless the Plan shall have been
terminated as herein provided, this Plan shall terminate ten years from the
earlier of: (i) the date on which the Plan is adopted by the Board of Directors;
or (ii) the date on which this Plan is approved by the shareholders of the
Company. No option may be granted after such termination, or during any
suspension of this Plan. The
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<PAGE>
amendment or termination of this Plan shall not, without the consent of the
Optionee, alter or impair any rights or obligations under any option
previously granted under this Plan.
SECTION 14. EFFECTIVE DATE OF THE PLAN. This Plan shall become
effective on the date of its adoption by the Board of Directors of the Company
and options may be granted immediately thereafter, but no option may be
exercised under the Plan unless and until the Plan shall have been approved by
the shareholders within 12 months after the date of adoption of the Plan by the
Board of Directors. If such approval is not obtained within such period the Plan
and any options granted shall be null and void.
ADOPTED BY THE BOARD OF DIRECTORS ON DECEMBER 15, 1998; APPROVED BY THE
COMPANY'S SHAREHOLDERS ON DECEMBER 15, 1998.
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<PAGE>
THIS OPTION, AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF, HAVE NOT BEEN FILED OR REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR WITH THE SECURITIES REGULATORY AUTHORITY OF ANY
STATE, BUT ARE BEING ISSUED PURSUANT TO CERTAIN EXEMPTIONS THEREUNDER. THIS
OPTION, AND SUCH SHARES OF COMMON STOCK, HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR BY THE
SECURITIES REGULATORY AUTHORITY OF ANY STATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THIS OPTION, AND SUCH SHARES OF COMMON STOCK,
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION THEREUNDER OR EXEMPTION THEREFROM.
MOBILE PET SYSTEMS, INC.
NON-STATUTORY STOCK OPTION AGREEMENT
UNDER THE 1999 STOCK OPTION PLAN
This Non-Statutory Stock Option Agreement (this "Agreement") is made as of
July 1, 1999, between Mobile PET Systems, Inc. (the "Company"), and
Jill Janik (the "Optionee").
1. OPTION GRANT. The Company hereby grants to the Optionee an option (the
"Option") to purchase the number of shares of the Company's common stock (the
"Shares"), for an exercise price per share (the "Option Price") and based
upon a Grant Date, all as set forth below:
Shares under option: ___________________
Option Price per Share: ________________
Grant Date: ____________________________
The Option will be subject to all of the terms and conditions set forth
herein and in the Company's 1999 Stock Option Plan (the "Plan"), a copy of which
is attached hereto and incorporated herein by reference. The Option will be a
nonstatutory or nonqualified option for tax purposes.
2. STOCKHOLDER RIGHTS. No rights or privileges of a stockholder in the
Company are conferred by reason of the granting of the Option. The Optionee
will not become a stockholder in the Company with respect to the Shares
unless and until the Option has been properly exercised and the Option Price
fully paid as to the portion of the Option exercised.
3. TERMINATION. subject to earlier termination as provided in the Plan, this
Option will expire, unless previously exercised in full, on the earlier of
(i) June 30, 2002, or (ii) the 30th day following the termination, for any
reason other than the Optionee's death or disability, of the Optionee's
status as a full time employee of the Company.
<PAGE>
4. TERMS OF THE OPTION PLAN. The Optionee understands that the Plan includes
important terms and conditions that apply to this Option. Those terms include
(without limitation): (i) important conditions to the right of the Optionee
to exercise the Option; (ii) important restrictions on the ability of the
Optionee to transfer the Option or to transfer Shares received upon exercise
of the Option; (iii) and early termination of the Option following the
occurrence of certain events, including the Optionee no longer being an
employee of the Company. THE OPTIONEE ACKNOWLEDGES THAT HE OR SHE HAS READ
THE PLAN, AGREES TO BE BOUND BY ITS TERMS, AND MAKES EACH OF THE
REPRESENTATIONS REQUIRED TO BE MADE BY THE OPTIONEE UNDER IT.
5. MISCELLANEOUS. This Agreement, together with the Plan, sets forth the
complete agreement of the parties concerning the subject matter hereof,
superseding all prior agreements, negotiations and understandings. This
Agreement will be governed by the substantive law of the State of California,
and may be executed in counterparts.
6. ARBITRATION. Any controversy or claim arising out of or relating to this
Agreement (whether in contract or tort, or both) shall be determined by
binding arbitration at San Diego, California, in accordance with the
commercial arbitration rules of the American Arbitration Association, by a
panel of three arbitrators, one chosen by each of the parties and the third
by the two so chosen. If the two arbitrators cannot agree on a third, then
the third shall be appointed in accordance with such rules. The prevailing
party in any arbitration proceeding shall be awarded reasonable attorneys fees
and costs of the proceedings. The arbitration award shall be final, and may
be entered in and enforced by any court having jurisdiction.
The parties have entered into this Agreement as of the date set forth above.
THE COMPANY: THE OPTIONEE:
MOBILE PET SYSTEMS, INC. _________________________________
Address:
By ___________________________ _________________________________
Title ________________________ _________________________________
Attachment: Mobile PET Systems, Inc., 1999 Stock Option Plan
<PAGE>
EXHIBIT 21
Mobile PET Systems, Inc., a Nevada corporation
Colony International Incorporated, a Nevada corporation
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