PROMISSORY NOTE

 

 

 

 

Borrower:

XLNT VETERINARY CARE, Inc.

Lender:

HUNTINGTON CAPITAL, L.P.

 

15466 Los Gatos Blvd., Suite 109-352

 

11988 EI Camino Real #160

 

Los Gatos, CA 95032

 

San Diego, CA 92130

 

     

 

Principal Amount:

Interest Rate: 12.000%

Date of Note: November 2, 2005

 

$1,400,000.00

 

 

PROMISE TO PAY. XLNT VETERINARY CARE, Inc. (“Borrower”) promises to pay to
HUNTINGTON CAPITAL, L.P. (“Lender”), or order, in lawful money of the United
States of America, the principal amount of One Million Four Hundred Thousand
Dollars ($1,400,000.00), together with interest at the rate of 12.000% per annum
on the unpaid principal balance from the date of each advance, until paid in
full.

PAYMENT. Borrower will pay this loan in sixty (60 payments. Commencing December
1, 2005, and continuing on the first day of each month after that, Borrower will
pay forty-two (42) regular monthly payments of accrued, unpaid interest.
Commencing June 1, 2009, and continuing on the first day of each month after
that, Borrower will pay seventeen (17) monthly payments of accrued, unpaid
interest, plus principal in the sum of Nineteen Thousand Four Hundred Forty-four
Dollars ($19,444.00). Borrower’s final payment will be due November 1, 2010 and
will be for all principal and all accrued interest not yet paid. Unless
otherwise agreed or required by applicable law, payments will be applied first
to accrued unpaid interest, then to principal, and any remaining amount to any
unpaid collection costs and late charges. Interest on this Note is computed on a
30/360 simple interest basis; that is, with the exception of odd days in the
first payment period, monthly interest is calculated by applying the ratio of
the annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by a month of 30 days. Interest for the odd days
is calculated on the basis of the actual days to the next full month and a
360-day year. Borrower will pay Lender at Lender’s address shown above or at
such other place as Lender may designate in writing.

PREPAYMENT FEE; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. This Note may not be
prepaid in the first two years from the Date of the Note. Borrower understands
that Lender is entitled to a Prepayment Charge as described below. The
Prepayment Charge, if any, shall be due in the event of voluntary or involuntary
prepayment in full or in part, whether due to acceleration by the Lender or
otherwise. If for any reason there is a prepayment of the Note within two years
of the loan term, the Prepayment Charge is three percent (3%) of the principal
amount of the repayment plus the amount of interest that would accrue on the
principal amount of the repayment for twenty-four months less the interest
actually paid. The Prepayment Charge shall be three percent (3.0%) of the
principal amount of the prepayment during the third year of the loan term. There
shall be no Prepayment Charge after the third year of the loan term. Partial
prepayment is subject to the Prepayment Charge. The Prepayment Charge shall be
payable at the time of prepayment and is in addition to accrued interest.
Borrower’s initials _______ Commencing three years after the Date of the Note,
Borrower may pay all or a portion of the amount owed earlier than it is due
without penalty. Early payments will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower’s obligation to continue to make payments under the
payment schedule. Rather, early payments will reduce the principal balance due
and may result in Borrower’s making fewer payments. Borrower agrees not to send
Lender payments marked “paid in full”, “without recourse”, or similar language.
If Borrower sends such a payment, Lender may accept it without losing any of
Lender’s rights under this Note, and Borrower will remain obligated to pay any
further amount owed to Lender.

LATE CHARGE. If a payment is 10 days or more late, and without waiving any
events of default, Borrower will be charged 2.000% of the regularly scheduled
payment or $50.00, whichever is greater.

INTEREST AFTER DEFAULT. Upon Borrower’s failure to pay all amounts declared due
pursuant to this section, including failure to pay upon final maturity, and in
addition to any Late Charge, Lender, at its option, may, if permitted under
applicable law, increase the interest rate on this Note to 17.50% per annum,
effective as of the date of the breach or default. Subject to any right of
Lender to increase the interest rate on this Note in the event of a breach or
other default, the interest rate will continue at the stated Note rate.

DEFAULT. Each of the following shall constitute an event of default (“Event of
Default”) under this Note:

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PROMISSORY NOTE

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Payment Default. Borrower fails to make any payment within five (5) business
days of when due under the Note.

 

 

 

Other Defaults. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
Related Documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.

 

 

 

Default in Favor of Third Parties. Borrower or any Grantor defaults under any
loan, extension of credit, security agreement, purchase or sales agreement, or
any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower’s property or Borrower’s ability to repay this
Note or perform their respective obligations under this Note or any of the
related documents.

 

 

 

Environmental Default. Failure of any party to comply with or perform when due
any term, obligations, covenant or condition contained in any environmental
agreement executed in connection with any Loan.

 

 

 

False Statements. Any warranty, representation, or statement made or furnished
to Lender by Borrower or on Borrower’s behalf under this Agreement, the Note, or
the Related Documents is false or misleading in any material respect, either now
or at the time made or furnished or becomes false or misleading at any time
thereafter.

 

 

 

Death or Insolvency. The dissolution of Borrower (regardless of whether election
to continue is made), any shareholder withdraws from Borrower, or any other
termination of Borrower’s existence as a going business or the death of any
shareholder, the insolvency of Borrower, the appointment of a receiver for any
part of Borrower’s property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower.

 

 

 

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the Loan. This includes a garnishment of any of
Borrower’s accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

 

 

 

Adverse Change. A material adverse change occurs in Borrower’s financial
condition, or Lender in good faith believes the prospect of payment or
performance of the Note is impaired.

 

 

 

Cure Provisions. If any default, other than a default in payment which shall not
be considered a default if paid within five (5) business days of when due, is
curable and if Borrower has not been given a notice of a breach of the same
provision of the Note within the preceding twelve (12) months, it may be cured
(and no event of default will have occurred) if Borrower, after receiving
written notice from Lender demanding cure of such default: (a) cures the default
within fifteen (15) days; or (b)) if the cure requires more than fifteen (15)
days, immediately initiates steps which Lender deems in Lender’s sole discretion
to be sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.

LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and the
Borrower will pay that amount. Lender shall also have all other rights available
under the Related Documents, at law, or in equity upon any event of default.

RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower’s rights, title, and interest in and to, Borrower’s accounts with
Lender (whether checking, savings, or some other account), including without
limitation all accounts held jointly with someone else and all accounts Borrower
may open in the future, excluding however all IRA and Keogh accounts, and all
trust accounts for which the grant of a security interest would be prohibited by
law. Borrower authorizes Lender, after the

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PROMISSORY NOTE

page 3

occurrence of a default hereunder and to the extent permitted by applicable law,
to charge or setoff all sums owing on this Note against any and all such
accounts.

ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender’s attorneys’ fees
and Lender’s legal expenses, whether or not there is a lawsuit, including
attorneys’ fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. Borrower also
will pay any court costs, in addition to all other sums provided by law.

GOVERNING LAW AND VENUE. This Note will be governed by, construed and enforced
in accordance with federal law and the laws of the State of California. This
Note has been accepted by Lender in the State of California. If there is a
lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of
the courts of San Diego County, State of California.

WAIVER OF JURY TRIAL. Lender and Borrower hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by either Lender or
Borrower against the other.

DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower
makes a payment on Borrower’s loan and the check or preauthorized charge with
which Borrower pays is later dishonored.

CALIFORNIA UNIFORM COMMERCIAL CODE DEFINITIONS. All terms used herein, if not
otherwise specifically defined, shall have the meaning defined by the current or
any future version of the California Uniform Commercial Code, as revised,
amended, or modified.

AGENCY. Nothing in this Agreement shall be construed to constitute the creation
of a partnership or joint venture between Lender and borrower or any contractor.
Lender is not an agent or representative of Borrower. This Agreement does not
create a contractual relationship with and shall not be construed to benefit or
bind Lender in any way with or create any contractual duties by Lender to any
contractor, subcontractor, materialman, laborer, or any other person.

NO CHANGE IN JURISDICTION. Borrower will not change its jurisdiction of
organization without prior notice to Lender.

OTHER DEFAULT WITH LENDER. In the event Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement in favor of Lender that may materially affect any of Borrower’s
property or Borrower’s ability to repay the Note or any of the Related
Documents, it shall be considered an event of Default (“Event of Default”) under
the Note.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower’s heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.

GENERAL PROVISIONS: Lender may delay or forego enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations, presentment, demand for payment, and notice
of dishonor. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender’s security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the party
with whom the modification is made. The obligations under this Note are joint
and several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

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PROMISSORY NOTE

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BORROWER:

XLNT VETERINARY CARE, INC.

 

a Delaware corporation

 

 

 

By: 

              -s- Robert Wallace [d22490001.jpg]

 

 

 

 

 

Robert Wallace, Chief Executive Officer

 

 

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