SECURITY AGREEMENT


Date: March 29, 2007 


          THIS
SECURITY AGREEMENT (hereinafter, the “Agreement”) is made by and between 


	
 

	
 


	
 

	
          FIFTH
  STREET MEZZANINE PARTNERS II, L.P., a Delaware
  limited partnership (the “Secured Party”), 


	
 

	
 


	
 

	
          and
  


	
 

	
 


	
 

	
          XLNT
  VETERINARY CARE INC., a Delaware corporation, ADLER VETERINARY GROUP, INC., a
  California corporation, ANIMAL CLINIC OF
  YUCCA VALLEY, INC., a California corporation, ANIMAL EMERGENCY CLINIC OF THE DESERT, INC.,
  a California corporation, ANIMAL MEDICAL
  HOSPITAL, INC., a California corporation, BONITA PET HOSPITAL, INC., a California
  corporation, BRENTWOOD PET CLINIC, INC.,
  a California corporation, ELDORADO ANIMAL
  HOSPITAL, INC., a California corporation, JERAULD L. WOODRING, INC., a California
  corporation, LAWRENCE PET HOSPITAL, INC.,
  a California corporation, MCCONNELL &
  FENTON CORPORATION, a California corporation, RAINBOW HAWK, INC., a California
  corporation, SAN CARLOS VETERINARY
  HOSPITAL, INC., a California corporation, SOUTH BAY VETERINARY SPECIALISTS, INC., a
  California corporation, SOUTH COUNTY
  EMERGENCY ANIMAL CLINIC, INC., a California corporation, STANFORD PET CLINIC, INC., a California
  corporation, TARVIN & LENEHAN, INC.,
  a California corporation, VETS & PETS,
  INCORPORATED, a California corporation, YUBA-SUTTER VETERINARY HOSPITAL, INC., a California
  corporation, CALIFORNIA ANIMAL HOSPITAL
  VETERINARY SPECIALTY GROUP, INC., a California corporation, and VETSURG, INC., a California corporation
  (jointly and severally, individually and collectively, “Debtor”), 





in
consideration of the mutual covenants contained herein and benefits to be
derived herefrom. 


WITNESSETH:


          ARTICLE
1. DEFINITIONS


          All
capitalized terms used herein shall have the meanings set forth in that certain
Credit Agreement of even date herewith by and between Debtor and Secured Party
(the “Loan Agreement”). In addition, as herein used, the following terms have
the following meanings or are defined in the section of this Agreement so indicated:



          “Account
Debtor” has the meaning given that term in the Code. 


          “Agreement”
is defined in the Preamble. 






          “Chattel
Paper” has the meaning given that term in the Code. 


          “Collateral”
is defined in Section 2.1. 


          “Contract
Rights” includes, without limitation, “contract rights” as now or formerly
defined in the Code and also any right to payment under a contract not yet
earned by performance and not evidenced by an instrument or Chattel Paper. 


          “Costs
of Collection” includes, without limitation, all attorneys’ reasonable fees and
reasonable out-of-pocket expenses incurred by the Secured Party’s attorneys
(including in-house counsel), accounting, consulting, brokerage or other
similar professional fees or expenses, and all reasonable costs incurred by the
Secured Party in the administration of the Obligations and/or the Loan
Documents, including, without limitation, reasonable costs and expenses
associated with travel on behalf of the Secured Party, which costs and expenses
are directly or indirectly related to or in respect of the Secured Party’s:
administration and management of the Obligations; negotiation, documentation,
and amendment of any Loan Document; or efforts to preserve, protect, collect,
or enforce the Collateral, the Obligations, and/or the Secured Party’s Rights
and Remedies and/or any of the Secured Party’s rights and remedies against or
in respect of any guarantor or other person liable in respect of the
Obligations (whether or not suit is instituted in connection with such
efforts). The Costs of Collection are Obligations, and at the Secured Party’s
option may bear interest at the highest post-default rate which the Secured
Party may charge the Debtor hereunder as if such had been lent, advanced, and
credited by the Secured Party to, or for the benefit of, the Debtor. 


          “Debtor”
is defined in the Preamble. 


          “Deposit
Account” has the meaning given that term in the Code. 


          “Documents”
has the meaning given that term in the Code. 


          “Documents
of Title” has the meaning given that term in the Code. 


          “Financial
Asset” has the meaning given that term in the Code. 


          “Goods”
has the meaning given that term in the Code. 


          “Letter-of-Credit
Right” has the meaning given that term in Code and also refers to any right to
payment or performance under a letter of credit, whether or not the beneficiary
has demanded or is at the time entitled to demand payment or performance. 


          “Payment
Intangible” as defined in the Code and also any General Intangible under which
the Account Debtor’s primary obligation is a monetary obligation. 


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          “Proceeds”
include, without limitation, “Proceeds” as defined in the Code, and each type
of property described in Section 2.1. 


          “Receivables
Collateral”: the Debtor’s Accounts, Accounts Receivable, Contract Rights,
General Intangibles, Payment Intangibles, Chattel Paper, Instruments, Documents
of Title, Documents, Securities, letters of credit for the benefit of the
Debtor, and bankers’ acceptances held by the Debtor, and any rights to payment.



          “Secured
Party” is defined in Preamble. 


          “Secured
Party’s Rights and Remedies” is defined in Section 6.6. 


          “Securities”
has the meaning given that term in the Code. 


          “Supporting
Obligation” has the meaning given that term in the Code and also refers to a
Letter-of-Credit Right or secondary obligation which supports the payment or
performance of an Account, Chattel Paper, a Document, a General Intangible, an
Instrument, or Investment Property. 


          “Transfer”
is defined in Section 4.1. 


          ARTICLE
2. GRANT OF SECURITY INTEREST


          2.1
Grant of Security Interest. To secure the Debtor’s prompt, punctual, and
faithful performance of all and each of the Obligations, the Debtor hereby
grants to the Secured Party a continuing security interest in and to, and
assigns to the Secured Party, the following, and each item thereof, whether now
owned or now due, or in which the Debtor has an interest, or hereafter
acquired, arising, or to become due, or in which the Debtor obtains an
interest, and all products, Proceeds, substitutions, and accessions of or to
any of the following (all of which, together with any other property in which
the Secured Party may in the future be granted a security interest, is referred
to herein as the “Collateral”): All assets of the Debtor, including, without
limitation, all Accounts and accounts receivable; Inventory; Contract Rights;
Instruments; Deposit Accounts; General Intangibles; Letter of Credit Rights,
Payment Intangibles, Supporting Obligations, Investment Property; Equipment;
Goods; Securities; Documents; Documents of Title; Fixtures; Chattel Paper;
Financial Assets, policies and certificates of insurance, money, cash, or other
property; all insurance proceeds, refunds, and premium rebates, including,
without limitation, proceeds of fire and credit insurance, whether any of such
proceeds, refunds, and premium rebates arise out of any of the foregoing; all
liens, guaranties, rights, remedies, and privileges pertaining to any of the
foregoing including the right of stoppage in transit all books, records, and
information relating to the Collateral and/or to the operation of the Debtor’s
business, and all rights of access to such books, records, and information, and
all property in which such books, records, and information are stored,
recorded, and maintained. 


          2.2
Commercial Tort Claims. If the Debtor shall at any time acquire a
commercial tort claim, the Debtor shall promptly notify the Secured Party in a
writing signed by the Debtor of the brief details thereof and grant to the
Secured Party in such writing a security interest therein and 


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in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance satisfactory to the Secured Party. 


          2.3
Extent and Duration of Security Interest. The within grant of a security
interest is in addition to, and supplemental of, any security interest
previously granted by the Debtor to the Secured Party and shall continue in
full force and effect applicable to all Obligations until all Obligations have
been paid and/or satisfied in full. 


          2.4
Authorization to File. The Debtor hereby authorizes the Secured Party to
file financing statements, without notice to the Debtor, with all appropriate
jurisdictions in order to perfect or protect the Secured Party’s interest or
rights hereunder, which financing statements may indicate the Collateral as
“all assets of the Debtor” or words of similar effect, or as being of an equal
or lesser scope, or with greater detail, all in the Secured Party’s discretion.



          ARTICLE
3. REPRESENTATIONS, WARRANTIES AND COVENANTS 


          The
Debtor, in addition to all other representations, warranties and covenants made
by the Debtor in any other Loan Document, makes those covenants included in
this Agreement. To induce Secured Party to enter into the Loan Documents and to
make the Loan, Debtor represents, warrants and covenants to Secured Party that:



          3.1
Due Organization Authorization; No Conflicts. 


	
 

	
 


	
 

	
          (a)
  The Debtor presently is and shall hereafter remain in good standing in its
  jurisdiction of formation and is and shall hereafter remain duly qualified
  and in good standing in every other State in which, by reason of the nature
  or location of the Debtor’s assets or operation of the Debtor’s business,
  such qualification may be necessary, except where the failure to be so
  qualified could reasonably be expected to have a Material Adverse Effect. 


	
 

	
 


	
 

	
          (b)
  The Debtor has all requisite power and authority to execute and deliver to
  the Secured Party all and singular the Loan Documents to which the Debtor is
  a party and has and will hereafter retain all requisite corporate power to
  perform all and singular the Obligations. 


	
 

	
 


	
 

	
          (c)
  The Loan Documents have been duly executed and delivered by Debtor and are
  the legal, valid and binding obligations of the Debtor, enforceable against
  the Debtor in accordance with their respective terms, subject to limitations
  as to enforceability which might result from bankruptcy, insolvency,
  moratorium and other similar laws affecting creditors’ rights generally and
  subject to limitations on the availability of equitable remedies. 





          3.2
Additional Assurances. The Debtor shall execute and deliver to the
Secured Party such instruments, documents, and papers, and shall do all such
things from time to time hereafter as the Secured Party may reasonably request
to carry into effect the provisions and intent of this Agreement and to comply
with all applicable statutes and laws. The Debtor shall execute all such
instruments as reasonably may be required by the Secured Party with respect to
the recordation and/or perfection of the security interests created herein. 


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          ARTICLE
4. NEGATIVE COVENANTS


          Debtor
covenants and agrees that Debtor will not do any of the following: 


          4.1
Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a “Transfer”), all or any part of its business or property,
other than Transfers: (i) of inventory in the ordinary course of business; (ii)
of non-exclusive licenses and similar arrangements for the use of the property
of Debtor in the ordinary course of business; (iii) that constitute payment of
normal and usual operating expenses in the ordinary course of business; (iv) of
worn-out or obsolete equipment; or (v) permitted by Section 3.7 of the Credit
Agreement. 


          4.2
Location of Collateral. The Debtor hereby certifies that no Collateral
is in the possession of any third party bailee (such as at a warehouse). In the
event that the Debtor, after the date hereof, intends to store or otherwise
deliver the Collateral to such a bailee, then Debtor shall use reasonable best
efforts to secure in writing from such bailee an acknowledgment that the bailee
is holding such Collateral for the benefit of the Secured Party. 


          ARTICLE
5. EVENTS OF DEFAULT


          Upon
the occurrence of any Event of Default, all Obligations of the Debtor to the
Secured Party shall become immediately due and payable, at the option of the
Secured Party and without notice or demand. The occurrence of any Event of
Default shall also constitute, without notice or demand, a default under all
other agreements between the Secured Party and the Debtor and instruments and
papers given the Secured Party by the Debtor, whether such agreements, instruments,
or papers now exist or hereafter arise. 


          ARTICLE
6. RIGHTS AND REMEDIES UPON DEFAULT 


          In
addition to all of the rights, remedies, powers, privileges, and discretions
which the Secured Party is provided under the Loan Documents or applicable law
prior to the occurrence of an Event of Default, the Secured Party shall have
the following rights and remedies upon the occurrence and during the
continuance of any Event of Default. 


          6.1
Rights of Enforcement. The Secured Party shall have all of the rights
and remedies of a secured party upon default under the Code, in addition to
which the Secured Party shall have all and each of the following rights and
remedies: 


	
 

	
 


	
 

	
          (a)
  To collect the Receivables Collateral with or without the taking of
  possession of any of the Collateral. 


	
 

	
 


	
 

	
          (b)
  To apply the Receivables Collateral or the proceeds of the Collateral towards
  (but not necessarily in complete satisfaction of) the Obligations. 


	
 

	
 


	
 

	
          (c)
  To take possession of all or any portion of the Collateral. 


	
 

	
 


	
 

	
          (d)
  To sell, lease, or otherwise dispose of any or all of the Collateral, in its
  then condition or following such preparation or processing as the Secured
  Party 





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reasonably
  deems necessary and with or without the taking of possession of any of the
  Collateral. 


	
 

	
 


	
 

	
          (e)
  To exercise all or any of the rights, remedies, powers, privileges, and
  discretions under all or any of the Loan Documents. 


	
 

	
 


	
 

	
          (f)
  To apply to the Obligations any balances and deposits in any Deposit Accounts
  of the Debtor which the Secured Party holds or is in control of. 





          6.2
Sale of Collateral. 


	
 

	
 


	
 

	
          (a)
  Any sale or other disposition of the Collateral may be at public or private
  sale upon such terms and in such manner as the Secured Party deems advisable,
  having due regard to compliance with any statute or regulation which might
  affect, limit, or apply to the Secured Party’s disposition of the Collateral.
  


	
 

	
 


	
 

	
          (b)
  Unless the Collateral is perishable or threatens to decline speedily in
  value, or is of a type customarily sold on a recognized market (in which
  event the Secured Party shall provide the Debtor with such notice as may be
  practicable under the circumstances), the Secured Party shall give the Debtor
  at least ten (10) days prior written notice of the date, time, and place of
  any proposed public sale, and of the date after which any private sale or
  other disposition of the Collateral may be made. The Debtor agrees that such
  written notice shall satisfy all requirements for notice to the Debtor which
  are imposed under the Code or other applicable law with respect to the
  Secured Party’s exercise of the Secured Party’s rights and remedies upon
  default. 


	
 

	
 


	
 

	
          (c)
  The Secured Party may purchase the Collateral, or any portion of it at any
  sale held under this Article. 


	
 

	
 


	
 

	
          (d)
  The Secured Party shall apply the proceeds of any exercise of the Secured
  Party’s Rights and Remedies under this Article towards the Obligations in
  such manner, and with such frequency, as the Secured Party determines. 





          6.3
Occupation of Business Location. In connection with the Secured Party’s
exercise of the Secured Party’s rights under this Article, the Secured Party
may enter upon, occupy, and use any premises owned or occupied by the Debtor,
and may exclude the Debtor from such premises or portion thereof as may have
been so entered upon, occupied, or used by the Secured Party. The Secured Party
shall not be required to remove any of the Collateral from any such premises
upon the Secured Party’s taking possession thereof, and may render any
Collateral unusable to the Debtor. In no event shall the Secured Party be
liable to the Debtor for use or occupancy by the Secured Party of any premises
pursuant to this Article, nor for any charge (such as wages for the Debtor’s
employees and utilities) incurred in connection with the Secured Party’s
exercise of the Secured Party’s Rights and Remedies. 


          6.4
Grant of Nonexclusive License. The Debtor hereby grants to the Secured
Party a royalty free nonexclusive irrevocable license to use, apply, and affix
any trademark, tradename, logo, or the like in which the Debtor now or
hereafter has rights, such license being with respect to the Secured Party’s
exercise of the rights hereunder including, without limitation, in 


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connection
with any completion of the manufacture of Inventory or sale or other
disposition of Inventory. 


          6.5
Assembly of Collateral. The Secured Party may require the Debtor to
assemble the Collateral and make it available to the Secured Party at the
Debtor’s sole risk and expense at a place or places which are reasonably
convenient to both the Secured Party and Debtor. 


          6.6
Rights and Remedies. The rights, remedies, powers, privileges, and
discretions of the Secured Party hereunder (herein, the “Secured Party’s Rights
and Remedies”) shall be cumulative and not exclusive of any rights or remedies
which it would otherwise have. No delay or omission by the Secured Party in
exercising or enforcing any of the Secured Party’s Rights and Remedies shall
operate as, or constitute, a waiver thereof. No waiver by the Secured Party of
any Event of Default or of any default under any other agreement shall operate
as a waiver of any other default hereunder or under any other agreement. No
single or partial exercise of any of the Secured Party’s Rights or Remedies,
and no express or implied agreement or transaction of whatever nature entered
into between the Secured Party and any person, at any time, shall preclude the
other or further exercise of the Secured Party’s Rights and Remedies. No waiver
by the Secured Party of any of the Secured Party’s Rights and Remedies on any
one occasion shall be deemed a waiver on any subsequent occasion, nor shall it
be deemed a continuing waiver. All of the Secured Party’s Rights and Remedies
and all of the Secured Party’s rights, remedies, powers, privileges, and
discretions under any other agreement or transaction are cumulative, and not
alternative or exclusive, and may be exercised by the Secured Party at such
time or times and in such order of preference as the Secured Party in its sole
discretion may determine. The Secured Party’s Rights and Remedies may be
exercised without resort or regard to any other source of satisfaction of the
Obligations. 


          ARTICLE
7. GENERAL


          7.1
Successors and Assigns. This Agreement shall be binding upon the Debtor
and the Debtor’s representatives, successors and assigns and shall inure to the
benefit of the Secured Party and the Secured Party’s successors and assigns;
provided, however, no trustee or other fiduciary appointed with respect to the
Debtor shall have any rights hereunder. 


          7.2
Severability. Any determination that any provision of this Agreement or
any application thereof is invalid, illegal, or unenforceable in any respect in
any instance shall not affect the validity, legality, or enforceability of such
provision in any other instance, or the validity, legality, or enforceability
of any other provision of this Agreement. 


          7.3
Integration; Amendments; Course of Dealing. This Agreement and the other
Loan Documents are intended by the parties as the final, complete and exclusive
statement of the transactions evidenced by this Agreement and the other Loan
Documents. All prior or contemporaneous promises, agreements and
understandings, whether oral or written, express or implied, are deemed to be
superceded by this Agreement and the other Loan Documents, and no party is
relying on any promise, agreement or understanding not set forth in this
Agreement and the other Loan Documents. No such discussions, negotiations,
custom, usage, or course of dealings shall limit, modify, or otherwise affect
the provisions thereof. This Agreement may not be amended or modified except by
a written instrument describing such amendment or 


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modification
executed by Debtor and Secured Party. No failure by the Secured Party to give
notice to the Debtor of the Debtor’s having failed to observe and comply with
any warranty or covenant included in any Loan Document shall constitute a
waiver of such warranty or covenant or the amendment of the subject Loan
Document. 


          7.4
Power of Attorney. The Debtor hereby irrevocably constitutes and
appoints the Secured Party (acting through any officer of the Secured Party) as
Debtor’s true and lawful attorney, with full power of substitution, following
the occurrence and during the continuation of an Event of Default. The rights
and powers granted the Secured Party by this appointment include but are not
limited to the right and power to: (i) prosecute, defend, compromise, or
release any action relating to the Collateral; (ii) sign change of address
forms to change the address to which the Debtor’s mail is to be sent to such
address as the Secured Party shall designate; receive and open the Debtor’s
mail; (iii) endorse the name of the relevant Debtor in favor of the Secured
Party upon any and all checks, drafts, notes, acceptances, or other items or
instruments; sign and endorse the name of the relevant Debtor on, and receive
as secured party, any of the Collateral, any invoices, schedules of Collateral,
freight or express receipts, or bills of lading, storage receipts, warehouse
receipts, or other documents of title respectively relating to the Collateral;
(iv) sign the name of the Debtor on any notice to the Debtor’s Account Debtors
or; sign the Debtor’s name on any Proof of Claim in Bankruptcy against Account
Debtors, and on notices of lien, claims of mechanic’s liens, or assignments or
releases of mechanic’s liens securing the Accounts; (v) take all such action as
may be necessary to obtain the payment of any letter of credit and/or banker’s
acceptance of which the Debtor is a beneficiary; (vi) repair, manufacture,
assemble, complete, package, deliver, alter or supply goods, if any, necessary
to fulfill in whole or in part the purchase order of any customer of the Debtor
and (vii) use, license or transfer any or all General Intangibles of the
Debtor. In connection with all powers of attorney described above, the Debtor
hereby grants unto the Secured Party (acting through any of its officers) full
power to do any and all things necessary or appropriate in connection with the exercise
of such powers as fully and effectually as the Debtor might or could do, hereby
ratifying all that said attorney shall do or cause to be done by virtue of this
Agreement. No power of attorney set forth above shall be affected by any
disability or incapacity suffered by the Debtor and each shall survive the
same. All powers conferred upon the Secured Party herein, being coupled with an
interest, shall be irrevocable until this Agreement is terminated by a written
instrument executed by a duly authorized officer of the Secured Party.
Notwithstanding anything herein to the contrary, Debtor hereby appoints Secured
Party its power of attorney to sign Debtor’s name on any documents necessary to
perfect or continue the perfection of any security interest regardless of
whether an Event of Default has occurred until all Obligations have been
satisfied in full and Secured Party is under no further obligation to make
loans or advances hereunder. 


          7.5
Secured Party’s Costs and Expenses. The Debtor shall pay on demand all
Costs of Collection and all reasonable expenses of the Secured Party in
connection with the preparation, execution, and delivery of this Agreement, and
any and all documents, instruments and agreements delivered to the Secured
Party in connection herewith, whether evidencing the Obligations, or granting
the Secured Party certain rights with respect to the Debtor, or its shares of
stock, and of any Loan Documents, whether now existing or hereafter arising,
and all other reasonable expenses which may be incurred by the Secured Party in
preparing or amending this 


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Agreement and
all other agreements, instruments, and documents related thereto, or otherwise
incurred with respect to the Obligations. 


          7.6
Copies and Facsimiles. This Agreement and all documents which relate
thereto, which have been or may be hereinafter furnished the Secured Party may
be reproduced by the Secured Party by any photographic, microfilm, xerographic,
digital imaging, or other process, and the Secured Party may destroy any
document so reproduced. Any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was made in
the regular course of business). 


          7.7
New York Law. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN
DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. DEBTOR HEREBY CONSENTS AND AGREES
THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK,
NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE DEBTOR AND SECURED PARTY PERTAINING TO THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED THAT DEBTOR
AND SECURED PARTY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY AND; PROVIDED, FURTHER,
THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE SECURED
PARTY FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SECURED PARTY. DEBTOR
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND DEBTOR HEREBY WAIVES ANY OBJECTION THAT
IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. DEBTOR HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO DEBTOR AND
THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF DEBTOR’S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED STATES
MAILS, PROPER POSTAGE PREPAID. 


          7.8
Right of Set-Off. Debtor and any guarantor hereby grant to Secured
Party, a lien, security interest and right of setoff as security for all
Obligations and obligations to Secured 


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Party, whether
now existing or hereafter arising upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Secured Party or any entity under the control of the
Secured Party and its successors and assigns or in transit to any of them. At
any time, without demand or notice (any such notice being expressly waived by
Debtor), Secured Party may set off the same or any part thereof and apply the
same to any liability or obligation of Debtor and any guarantor even though
unmatured and regardless of the adequacy of any other collateral securing the
loan. ANY AND ALL RIGHTS TO REQUIRE SECURED PARTY TO EXERCISE ITS RIGHTS OR REMEDIES
WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE DEBTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED. 


          7.9
Waivers. 


	
 

	
 

	
 


	
 

	
          (a)
  The Debtor (and all guarantors, endorsers, and sureties of the Obligations)
  make each of the waivers included in Subsection (b), below, knowingly,
  voluntarily, and intentionally, and understands that the Secured Party, in
  entering into the financial arrangements contemplated hereby and in providing
  loans and other financial accommodations to or for the account of the Debtor
  as provided herein, whether now or in the future, is relying on. 


	
 

	
 

	
 


	
 

	
          (b)
  THE DEBTOR, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY RESPECTIVELY
  KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
  THE FOLLOWING: 


	
 

	
 

	
 


	
 

	
 

	
          (i)
  Except as otherwise specifically required hereby or by any other Loan
  Document, notice of non-payment, demand, presentment, protest and all forms
  of demand and notice, both with respect to the Obligations. 


	
 

	
 

	
 


	
 

	
 

	
          (ii)
  Except as otherwise specifically required hereby or by any other Loan
  Document, the right to notice and/or hearing prior to the Secured Party’s
  exercising of the Secured Party’s rights upon the occurrence and continuation
  of an Event of Default. 


	
 

	
 

	
 


	
 

	
 

	
          (iii)
  DEBTOR AND SECURED PARTY MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
  INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM
  BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR
  ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH
  OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
  WRITTEN) OR ACTIONS OF ANY PARTY (WHETHER SUCH CASE OR CONTROVERSY IS
  INITIATED BY OR AGAINST THE SECURED PARTY OR IN WHICH THE SECURED PARTY IS
  JOINED AS A PARTY LITIGANT), INCLUDING, WITHOUT LIMITATION, ANY COURSE OF
  CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF 





-10-






	
 

	
 


	
 

	
SECURED
  PARTY RELATING TO THE ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THE LOAN
  DOCUMENTS, AND AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH
  ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
  WAIVED. EXCEPT AS PROHIBITED BY LAW, DEBTOR HEREBY WAIVES ANY RIGHT IT MAY
  HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE
  OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
  DAMAGES. 





-11-






          EXECUTED as of
the date first written above. 


	
 

	
 

	
 

	
 

	
 


	
 

	
(“Debtor”)


	
 

	
 


	
 

	
XLNT VETERINARY CARE, INC., a Delaware 

  corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name: 

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
ADLER VETERINARY GROUP, INC., a 

  California corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
ANIMAL CLINIC OF YUCCA VALLEY, INC., 
a California corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
ANIMAL EMERGENCY CLINIC OF THE 

  DESERT, INC., a California corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 










	
 

	
 

	
 

	
 

	
 


	
 

	
ANIMAL MEDICAL HOSPITAL, INC., a

  California corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
BONITA PET HOSPITAL, INC., a California

  corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
BRENTWOOD PET CLINIC, INC., a California

  corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
ELDORADO ANIMAL HOSPITAL, INC., a

  California corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
JERAULD L. WOODRING, INC., a California

  corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 










	
 

	
 

	
 

	
 

	
 


	
 

	
LAWRENCE PET HOSPITAL, INC., a

  California corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
MCCONNELL & FENTON CORPORATION, a

  California corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
RAINBOW HAWK, INC., a California

  corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
SAN CARLOS VETERINARY HOSPITAL,

  INC., a California corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
SOUTH BAY VETERINARY SPECIALISTS,

  INC., a California corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 










	
 

	
 

	
 

	
 

	
 


	
 

	
SOUTH COUNTY EMERGENCY ANIMAL

  CLINIC, INC., a California corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
STANFORD PET CLINIC, INC., a California

  corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
TARVIN & LENEHAN, INC., a California

  corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
VETS & PETS, INCORPORATED, a California

  corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
YUBA-SUTTER VETERINARY HOSPITAL,

  INC., a California corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 










	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
CALIFORNIA ANIMAL HOSPITAL

  VETERINARY SPECIALTY GROUP, INC., a

  California corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
 


	
 

	
VETSURG, INC., a California corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
Name:

	
 


	
 

	
 

	 


	
 

	
Title:

	
 


	
 

	
 

	 


	
 

	
 


	
 

	
(“Secured
  Party”)


	
 

	
 


	
 

	
FIFTH STREET
  MEZZANINE PARTNERS II, L.P.,


	
 

	
a Delaware
  limited partnership


	
 

	
 


	
 

	
By:

	
Fifth Street
  Mezzanine Partners II GP, LLC,


	
 

	
 

	
a Delaware
  limited liability company,


	
 

	
 

	
its general
  partner


	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
 

	
By:

	
 


	
 

	
 

	
 

	 


	
 

	
 

	
Name: 

	
Bernard D.
  Berman


	
 

	
 

	
Title:

	
Executive
  Vice President and Secretary