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:



 
 

	
  

	
  


	
   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



 
 

	
  

	
  


	
   PROMISSORY
 NOTE 

	
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  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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   BORROWER: 

	
   XLNT
 VETERINARY CARE, INC. 


	
 

	
   a Delaware
 corporation 


	
 

	
 


	
 

	
 By:  

	
             



	
  

	
  

	  

	
 

	
 

	
   Robert Wallace, Chief Executive Officer