Document:

exhibit10_4.htm

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Exhibit
10.4

     

    AMENDING
AGREEMENT

     

    

     

    THIS
AGREEMENT made the 5th day of
February, 2009

     

    BETWEEN:

     

    LML PAYMENT SYSTEMS INC., a
corporation continued under the laws of the Yukon Territory of 1680 – 1140 West
Pender Street, Vancouver, B.C., V6E 4G1

     

    (the
“Company”)

     

    AND:

     

    RICHARD SCHULZ, businessman of
North Vancouver, B.C.

     

    (the
“Executive”)

     

    

     

    WHEREAS:

     

    
      	
              A.  

            	
              The
      Company and the Executive are parties to an employment agreement dated
      March 31, 2008 (the “Original Agreement”)
      whereby the Company has retained the services of the Executive in acting
      as the Chief Accounting Officer of the
Company;

            

    

     

    
      	
              B.  

            	
              The
      Board has determined that it is in the best interests of the Company to
      make the bonus structure for the Executive the same as that of other
      senior executives of the Company;

            

    

     

    
      	
              C.  

            	
              It
      is appropriate to amend the Original Agreement in order to reflect such
      change to the Executive’s bonus entitlement;
and

            

    

     

    
      	
              D.  

            	
              The
      parties now wish to make certain amendments to the Original Agreement upon
      the terms and conditions set out in this
  Agreement;

            

    

     

    NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein and other valuable consideration (the receipt and sufficiency of which is
hereby acknowledged), the parties hereto covenant and agree as
follows:

     

    
      	
              1.  

            	
              Section 4.2
      of the Original Agreement is deleted in its
  entirety.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              2.  

            	
              The
      following provision is added to the Original Agreement as a new
      section 4.2:

            

    

     

    “4.2           For
each full fiscal year of the Company that begins and ends during the Term,
commencing at the commencement of the 2010 fiscal year  of the
Company, the Executive shall be eligible to earn an annual cash bonus (the
“Annual Bonus”) of up to thirty-five percent (35%) of the Base Salary based on
the achievement by the Company of reasonable performance goals established by
the Compensation Committee for each such fiscal year (or portion) which may
include targets related to the earnings before interest, taxes, depreciation and
amortization (“EBITDA”) of the Company.  The Compensation Committee
shall, prior to the execution of this Agreement, establish objective criteria to
be used to determine the extent to which performance goals have been satisfied;
provided that until the commencement of the 2010 fiscal year  of the
Company, the Annual Bonus for the Executive shall be limited to being up to
fifteen percent (15%) of the Base Salary based upon the same criteria as are to
be applied hereunder in the 2010 fiscal year of the Company.”

     

    
      	
              3.  

            	
              All
      provisions of the Original Agreement which are not amended by this
      Agreement remain unchanged and the amendments contemplated in
      sections 1 and 2 hereof taken together with all other unamended
      provisions of the Original Agreement form the employment agreement between
      the Company and the Executive as if such amendments formed part of the
      Original Agreement.

            

    

     

    IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on
the day and year first above written.

     

    

     

    LML
PAYMENT SYSTEMS INC.

     

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	Per:	 	 
	 	 	 
	/s/ Greg
      MacRae  	 	 
	Authorized
      Signatory	 	 
	 	 	 
	 	 	 
	
                                        RICHARD
      SCHULZ

                                      	 
      	 
      
	 	 	 
	/s/
      Richard R. Schulz  	 
      	/s/
      Carolyn Gaines
	
                                        Signature

                                      	 
      	
                                        Witness
      Signature

                                      
	 	 	 
	 
      	 
      	Carolyn
      Gaines
	 
      	 
      	
                                        Print
      Witness NameEX-10.1

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into as of the 10th
day of February, 2009, by and among Pet DRx Corporation, a Delaware corporation (the
“Company”), and the undersigned parties listed under Investors on the signature pages
hereto (each, an “Investor” and collectively, the “Investors”).

Pursuant to the terms, conditions and provisions of the Purchase Agreement, dated as of
January 21, 2009, as that agreement may be amended from time to time, by and among the Company and
the Investors identified therein (the “Purchase Agreement”), the Company has issued and
will issue 12% Senior Convertible Notes due 2013 (the “Notes”) and warrants to purchase
shares of its Common Stock as hereinafter defined (the “Warrants”); and

The Company is executing and delivering this Agreement pursuant to the terms of the Purchase
Agreement to induce the Investors to purchase the Notes and the Warrants.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

1. DEFINITIONS.

Capitalized terms used herein shall have the respective meanings ascribed thereto in the
Purchase Agreement unless otherwise defined herein. The following capitalized terms used herein
have the following meanings:

“Agreement” means this Agreement, as amended, restated, supplemented, or otherwise
modified from time to time.

“Camden” means Camden Partners Strategic Fund III, L.P., Camden Partners Strategic
Fund III-A, L.P. and any of their Affiliates.

“Commission” means the Securities and Exchange Commission, or any other federal agency
then administering the 1933 Act or the 1934 Act.

“Common Stock” means the common stock, par value $0.0001 per share, of the Company.

“Company” is defined in the preamble to this Agreement.

“Demand Registration” is defined in Section 2.1.1.

“Demanding Holder” is defined in Section 2.1.1.

“Form S-3” is defined in Section 2.3.

“Galen” means Galen Partners IV, L.P., Galen Partners International IV, L.P., Galen
Employee Fund IV, L.P. or any of their respective Affiliates.

“Indemnified Party” is defined in Section 4.3.

“Indemnifying Party” is defined in Section 4.3.

“Investor” is defined in the preamble to this Agreement.

“Investor Indemnified Party” is defined in Section 4.1.

“Majority Holder Representative” shall mean Galen Partners IV, L.P., or its successor
then serving in such capacity.

“Majority Holders” means the Required Investors; provided, however, that if none of
the Required Investors holds the applicable Threshold Amount, then the term “Majority Holders”
shall refer to the holders of a majority-in-interest of the Registrable Securities. Any consent or
approval of, or other notice or instruction from, the Majority Holders shall be evidenced by the
signature of an authorized officer or representative of the Majority Holder Representative, which,
as between the Investors and the Company, shall be binding and conclusive.

“Maximum Number of Shares” is defined in Section 2.1.4.

“Notices” is defined in Section 6.2.

“Piggy-Back Registration” is defined in Section 2.2.1.

“Register”, “registered” and “registration” mean a registration
effected by preparing and filing a Registration Statement or similar document in compliance with
the requirements of the 1933 Act, and the applicable rules and regulations promulgated thereunder,
and such Registration Statement becoming effective.

“Registrable Securities” mean (i) all shares of Common Stock issuable upon conversion
of the Notes and (ii) all shares of Common Stock issuable upon the exercise of the Warrants.
Registrable Securities also include any warrants, shares of capital stock or other securities of
the Company issued as a dividend or other distribution with respect to or in exchange for or in
replacement of such shares of Common Stock. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when: (a) a Registration Statement with
respect to the sale of such securities shall have become effective under the 1933 Act and such
securities shall have been sold, transferred, disposed of or exchanged in accordance with such
Registration Statement; (b) such securities shall have been otherwise transferred, new certificates
for them not bearing a legend restricting further transfer shall have been delivered by the Company
and subsequent public distribution of them shall not require registration under the1933 Act;
(c) such securities shall have ceased to be outstanding, or (d) all Registrable Securities held by
the holder of such Registrable Securities are eligible for sale under Rule 144 without the
requirement for the Company to be in compliance with the current public information required
thereunder and without volume or manner-of-sale restrictions.

“Registration Statement” means a registration statement filed by the Company with the
Commission in compliance with the 1933 Act for a public offering and sale of Common Stock (other
than a registration statement on Form S-4 or Form S-8, or their successors, or any registration
statement covering only securities proposed to be issued in exchange for securities or assets of
another entity).

“Required Investors” means (i) Galen and Camden, if each of Galen and Camden holds the
applicable Threshold Amount, (ii) Galen only, if Galen holds the Threshold Amount and Camden does
not hold the Threshold Amount or (iii) Camden only, if Camden holds the Threshold Amount and Galen
does not hold the Threshold Amount.

“Threshold Amount” means (i) with respect to Galen, the amount of Registrable
Securities equal to at least 3,611,538 shares of Common Stock issuable to Galen pursuant to the
conversion of the Notes and/or exercise of the Warrants and (ii) with respect to Camden, the amount
of Registrable Securities equal to at least 1,805,769 shares of Common Stock issuable to Galen
pursuant to the conversion of the Notes and/or exercise of the Warrants.

“Underwriter” means a securities dealer who purchases any Registrable Securities as
principal in an underwritten offering and not as part of such dealer’s market-making activities.

“1933 Act” means the Securities Act of 1933, as amended, or any successor statute, and
the rules and regulations of the Commission promulgated thereunder, all as the same shall be in
effect at the time.

“1934 Act” means the Securities Exchange Act of 1934, as amended, or any successor
statute, and the rules and regulations of the Commission promulgated thereunder, all as the same
shall be in effect at the time.

2. REGISTRATION RIGHTS.

2.1. Demand Registration.

2.1.1. Request for Registration. At any time and from time to time on
or after March 31, 2010, the Majority Holders may make a written demand for
registration under the 1933 Act of all or part of their Registrable Securities (a
“Demand Registration”). Any demand for a Demand Registration shall specify
the number of shares of Registrable Securities proposed to be sold and the intended
method(s) of distribution thereof. The Company will notify all holders of
Registrable Securities of the demand, and each holder of Registrable Securities who
wishes to include all or a portion of such holder’s Registrable Securities in the
Demand Registration (each such holder including shares of Registrable Securities in
such registration, a “Demanding Holder”) shall so notify the Company within
fifteen (15) days after the receipt by the holder of the notice from the Company.
Upon any such request, the Demanding Holders shall be entitled to have their
Registrable Securities included in the Demand Registration, subject to
Section 2.1.4 and the provisos set forth in Section 3.1.1. The Company shall not
be obligated to effect more than an aggregate of two (2) Demand Registrations
initiated by the Majority Holders under this Section 2.1.1.

2.1.2. Effective Registration. A registration will not count as a
Demand Registration until the Registration Statement filed with the Commission with
respect to such Demand Registration has been declared effective and the Company has
complied with all of its obligations under this Agreement with respect thereto;
provided, however, that if, after such Registration Statement has been declared
effective, the offering of Registrable Securities pursuant to a Demand Registration
is interfered with by any stop order or injunction of the Commission or any other
governmental agency or court, the Registration Statement with respect to such
Demand Registration will be deemed not to have been declared effective, unless and
until, (i) such stop order or injunction is removed, rescinded or otherwise
terminated, and (ii) a majority-in-interest of the Demanding Holders thereafter
elect to continue the offering; provided, further, that the Company shall not be
obligated to file a second Registration Statement until a Registration Statement
that has been filed is counted as a Demand Registration or is terminated.

2.1.3. Underwritten Offering. If the Majority Holders so elect and
they so advise the Company as part of their written demand for a Demand
Registration, the offering of such Registrable Securities pursuant to such Demand
Registration shall be in the form of an underwritten offering. In such event, the
right of any holder to include its Registrable Securities in such registration
shall be conditioned upon such holder’s participation in such underwriting and the
inclusion of such holder’s Registrable Securities in the underwriting to the extent
provided herein. All Demanding Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in customary
form with the Underwriter or Underwriters selected for such underwriting by the
Majority Holders.

2.1.4. Reduction of Offering. If the managing Underwriter or
Underwriters for a Demand Registration that is to be an underwritten offering
advises the Company and the Demanding Holders in writing that the dollar amount or
number of shares of Registrable Securities which the Demanding Holders desire to
sell, taken together with all other shares of Common Stock or other securities
which the Company desires to sell and the shares of Common Stock, if any, as to
which registration has been requested pursuant to written contractual piggy-back
registration rights held by other shareholders of the Company who desire to sell,
exceeds the maximum dollar amount or maximum number of shares that can be sold in
such offering without adversely affecting the proposed offering price, the timing,
the distribution method, or the probability of success of such offering (such
maximum dollar amount or maximum number of shares, as applicable, the “Maximum
Number of Shares”), then the Company shall include in such registration:
(i) first, the Registrable Securities as to which Demand Registration has been
requested by the Demanding Holders (pro rata in accordance with the number of
            shares of Registrable Securities which such Demanding Holder has requested be
included in such registration, regardless of the number of shares of Registrable
Securities held by each Demanding Holder) that can be sold without exceeding the
Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of
Shares has not been reached under the foregoing clause (i), the shares of Common
Stock or other securities that the Company desires to sell that can be sold without
exceeding the Maximum Number of Shares; and (iii) third, to the extent that the
Maximum Number of Shares has not been reached under the foregoing clauses (i) and
(ii), the shares of Common Stock or other securities for the account of other
persons that the Company is obligated to register pursuant to written contractual
arrangements with such persons and that can be sold without exceeding the Maximum
Number of Shares.

2.1.5. Withdrawal. If the Majority Holders disapprove of the terms of
any underwriting or are not entitled to include all of their Registrable Securities
in any offering, the Majority Holders may elect to withdraw from such offering by
giving written notice to the Company and the Underwriter or Underwriters of their
request to withdraw prior to the effectiveness of the Registration Statement filed
with the Commission with respect to such Demand Registration. If the Majority
Holders withdraws from a proposed offering relating to a Demand Registration, then
such registration shall not count as a Demand Registration provided for in Section
2.1.

2.2. Piggy-Back Registration.

2.2.1. Piggy-Back Rights. If at any time on or after the date hereof
the Company proposes to file a Registration Statement under the 1933 Act with
respect to an offering of equity securities, or securities or other obligations
exercisable or exchangeable for, or convertible into, equity securities, by the
Company for its own account or for shareholders of the Company for their account
(or by the Company and by shareholders of the Company including, without
limitation, pursuant to Section 2.1), other than a Registration Statement (i) filed
in connection with any employee stock option or other benefit plan, (ii) for an
exchange offer or offering of securities solely to the Company’s existing security
holders, or for the conversion, exercise, or exchange of outstanding securities,
(iii) for an offering of debt that is convertible into equity securities of the
Company or (iv) for a dividend reinvestment plan, then the Company shall (x) give
written notice of such proposed filing to the holders of Registrable Securities as
soon as practicable but in no event less than twenty (20) days before the
anticipated filing date, which notice shall describe the amount and type of
securities to be included in such offering, the intended method(s) of distribution,
and the name of the proposed managing Underwriter or Underwriters, if any, of the
offering, and (y) offer to the holders of Registrable Securities in such notice the
opportunity to register the sale of such number of shares of Registrable Securities
as such holders may request in writing within fifteen (15) days following receipt
of such notice (a “Piggy-Back Registration”). The Company shall cause such
Registrable Securities to be included in such registration and shall use its best
efforts to cause the managing Underwriter or Underwriters of a proposed
underwritten offering to permit Registrable Securities requested to be included in
a Piggy-Back Registration to be included on the same terms and conditions as any
similar securities of the Company and to permit the sale or other disposition of
such Registrable Securities in accordance with the intended method(s) of
distribution thereof. All holders of Registrable Securities proposing to
distribute their securities through a Piggy-Back Registration that involves an
Underwriter or Underwriters shall enter into an underwriting agreement in customary
form with the Underwriter or Underwriters selected for such Piggy-Back
Registration.

2.2.2. Reduction of Offering. If the managing Underwriter or
Underwriters for a Piggy-Back Registration that is to be an underwritten offering
advises the Company and the holders of Registrable Securities in writing that the
dollar amount or number of shares of Common Stock which the Company desires to
sell, taken together with shares of Common Stock, if any, as to which registration
has been demanded pursuant to written contractual arrangements with persons other
than the holders of Registrable Securities hereunder, the Registrable Securities as
to which registration has been requested under this Section 2.2, and the shares of
Common Stock, if any, as to which registration has been requested pursuant to the
written contractual piggy-back registration rights of other shareholders of the
Company, exceeds the Maximum Number of Shares, then the Company shall include in
any such registration:

(i) If the registration is undertaken for the Company’s account: (A)
first, the shares of Common Stock or other securities that the Company
desires to sell that can be sold without exceeding the Maximum Number of
Shares; (B) second, to the extent that the Maximum Number of Shares has
not been reached under the foregoing clause (A), the Registrable
Securities as to which registration has been requested under this
Section 2.2 (pro rata in accordance with the number of shares of
Registrable Securities which each such holder has actually requested to be
included in such registration, regardless of the number of shares of
Registrable Securities with respect to which such holders have the right
to request such inclusion) that can be sold without exceeding the Maximum
Number of Shares, and (C) third, to the extent that the Maximum Number of
            shares has not been reached under the foregoing clauses (A) and (B), the
            shares of Common Stock or other securities for the account of other
persons that the Company is obligated to register pursuant to written
contractual piggy-back registration rights with such persons and that can
be sold without exceeding the Maximum Number of Shares; and

(ii) If the registration is a “demand” registration undertaken at the
demand of persons other than the holders of Registrable Securities
pursuant to written contractual arrangements with such persons, (A) first,
the shares of Common Stock for the account of the demanding persons that
can be sold without exceeding the Maximum Number of Shares; (B) second, to
the extent that the Maximum Number of Shares has not been reached under
the foregoing clause (A), the shares of Common Stock or other securities
that the Company desires to sell that can be sold without exceeding the
Maximum Number of Shares; and (C) third, to the extent that the Maximum
Number of Shares has not been reached under the foregoing clauses (A) and
(B), the Registrable Securities as to which registration has been
requested under this Section 2.2 (pro rata in accordance with the number
of shares of Registrable Securities which each such holder has actually
requested to be included in such registration, regardless of the number of
            shares of Registrable Securities with respect to which such holders have
the right to request such inclusion); and (D) fourth, to the extent that
the Maximum Number of Shares has not been reached under the foregoing
clauses (A), (B) and (C), the shares of Common Stock, if any, as to which
registration has been requested pursuant to written contractual piggy-back
registration rights which other shareholders desire to sell that can be
sold without exceeding the Maximum Number of Shares.

2.2.3. Withdrawal. Any holder of Registrable Securities may elect to
withdraw such holder’s request for inclusion of Registrable Securities in any
Piggy-Back Registration by giving written notice to the Company of such request to
withdraw prior to the effectiveness of the Registration Statement. The Company may
also elect to withdraw a registration statement at any time prior to the
effectiveness of the Registration Statement. Notwithstanding any such withdrawal,
the Company shall pay all expenses incurred by the holders of Registrable
Securities in connection with such Piggy-Back Registration as provided in Section
3.3.

2.3. Registrations on Form S-3. The Majority Holders may at any time and from
time to time on or after March 31, 2010, request in writing that the Company register the
resale of any or all of their Registrable Securities on Form S-3 or any similar short-form
registration which may be available at such time (“Form S-3”); provided, however,
that the Company shall not be obligated to effect such request through an underwritten
offering. Upon receipt of such written request, the Company will promptly give written
notice of the proposed registration to all other holders of Registrable Securities, and, as
soon as practicable thereafter, effect the registration of all or such portion of such
holder’s or holders’ Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other holder or holders joining in
such request as are specified in a written request given within fifteen (15) days after
receipt of such written notice from the Company; provided, however, that the Company shall
not be obligated to effect any such registration pursuant to this Section 2.3: (i) if Form
S-3 is not available for such offering; or (ii) if the holders of the Registrable
Securities, together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such other
securities (if any) at any aggregate price to the public of less than $500,000.
Registrations effected pursuant to this Section 2.3 shall not be counted as Demand
Registrations effected pursuant to Section 2.1.

3. REGISTRATION PROCEDURES.

3.1. Filings; Information. Whenever the Company is required to effect the
registration of any Registrable Securities pursuant to Section 2, the Company shall use its
best efforts to effect the registration and sale of such Registrable Securities in
accordance with the intended method(s) of distribution thereof as expeditiously as
practicable, and in connection with any such request:

3.1.1. Filing Registration Statement. The Company shall, as
expeditiously as possible and in any event within sixty (60) days after receipt of
a request for a Demand Registration pursuant to Section 2.1, prepare and file with
the Commission a Registration Statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which form
shall be available for the sale of all Registrable Securities to be registered
thereunder in accordance with the intended method(s) of distribution thereof, and
shall use its best efforts to cause such Registration Statement to become and
remain effective for the period required by Section 3.1.3; provided, however, that
the Company shall have the right to defer any Demand Registration for up to thirty
(30) days, and any Piggy-Back Registration for such period as may be applicable to
deferment of any demand registration to which such Piggy-Back Registration relates,
in each case if the Company shall furnish to the holders a certificate signed by
the Chief Executive Officer of the Company stating that, in the good faith judgment
of the Board of Directors of the Company, it would be materially detrimental to the
Company and its shareholders for such Registration Statement to be effected at such
time; provided further, however, that the Company shall not have the right to
exercise the right set forth in the immediately preceding proviso more than once in
any 365-day period in respect of a Demand Registration hereunder.

3.1.2. Copies. The Company shall, prior to filing each Registration
Statement or prospectus, or any amendment or supplement thereto, furnish without
charge to the holders of Registrable Securities included in such registration, and
such holders’ legal counsel, copies of such Registration Statement as proposed to
be filed, each amendment and supplement to such Registration Statement (in each
case including all exhibits thereto and documents incorporated by reference
therein), the prospectus included in such Registration Statement (including each
preliminary prospectus), and such other documents as the holders of Registrable
Securities included in such registration or legal counsel for any such holders may
request in order to facilitate the disposition of the Registrable Securities owned
by such holders.

3.1.3. Amendments and Supplements. The Company shall prepare and file
with the Commission such amendments, including post-effective amendments, and
supplements to each Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective and in
compliance with the provisions of the 1933 Act until all Registrable Securities and
other securities covered by such Registration Statement have been disposed of in
accordance with the intended method(s) of distribution set forth in such
Registration Statement (which period shall not exceed the sum of one hundred eighty
(180) days plus any period during which any such disposition is interfered with by
any stop order or injunction of the Commission or any governmental agency or court)
or such securities have been withdrawn.

3.1.4. Notification. After the filing of each Registration Statement,
the Company shall promptly, and in no event more than two (2) business days after
such filing, notify the holders of Registrable Securities included in such
Registration Statement of such filing, and shall further notify such holders
promptly and confirm such advice in writing in all events within two (2) business
days of the occurrence of any of the following: (i) when such Registration
Statement becomes effective; (ii) when any post-effective amendment to such
Registration Statement becomes effective; (iii) the issuance or threatened issuance
by the Commission of any stop order (and the Company shall take all actions
required to prevent the entry of such stop order or to remove it if entered); and
(iv) any request by the Commission for any amendment or supplement to such
Registration Statement or any prospectus relating thereto or for additional
information or of the occurrence of an event requiring the preparation of a
supplement or amendment to such prospectus so that, as thereafter delivered to the
purchasers of the securities covered by such Registration Statement, such
prospectus will not contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the statements
therein not misleading, and promptly make available to the holders of Registrable
Securities included in such Registration Statement any such supplement or
amendment; except that before filing with the Commission a Registration Statement
or prospectus or any amendment or supplement thereto, including documents
incorporated by reference, the Company shall furnish to the holders of Registrable
Securities included in such Registration Statement and to the legal counsel for any
such holders, copies of all such documents proposed to be filed sufficiently in
advance of filing to provide such holders and legal counsel with a reasonable
opportunity to review such documents and comment thereon, and the Company shall not
file any Registration Statement or prospectus or amendment or supplement thereto,
including documents incorporated by reference, to which such holders or their legal
counsel shall object.

3.1.5. State Securities Laws Compliance. The Company shall use its
best efforts to (i) register or qualify the Registrable Securities covered by each
Registration Statement under such securities or “blue sky” laws of such
jurisdictions in the United States as the holders of Registrable Securities
included in such Registration Statement (in light of their intended plan of
distribution) may request and (ii) take such action necessary to cause such
Registrable Securities covered by each Registration Statement to be registered with
or approved by such other Governmental Authorities as may be necessary by virtue of
the business and operations of the Company and do any and all other acts and things
that may be necessary or advisable to enable the holders of Registrable Securities
included in such Registration Statement to consummate the disposition of such
Registrable Securities in such jurisdictions; provided, however, that the Company
shall not be required to qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this paragraph (e) or subject
itself to taxation in any such jurisdiction.

3.1.6. Agreements for Disposition. The Company shall enter into
customary agreements (including, if applicable, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities. The
representations, warranties and covenants of the Company in any underwriting
agreement which are made to or for the benefit of any Underwriters, to the extent
applicable, shall also be made to and for the benefit of the holders of Registrable
Securities included in such Registration Statement. No holder of Registrable
Securities included in such Registration Statement shall be required to make any
representations or warranties in the underwriting agreement except, with respect to
written information relating to such holder that such holder has furnished in
writing expressly for inclusion in such Registration Statement, and if applicable,
with respect to such holder’s organization, good standing, authority, title to
Registrable Securities, lack of conflict of such sale with such holder’s material
agreements and organizational documents or, if such holder is an individual, such
holder’s full legal capacity to enter into such underwriting agreement and title to
Registrable Securities.

3.1.7. Cooperation. The principal executive officer of the Company,
the principal financial officer of the Company, the principal accounting officer of
the Company and all other officers and members of the management of the Company
shall cooperate fully in any offering of Registrable Securities undertaken pursuant
to the terms, conditions and provisions of this Agreement, which cooperation shall
include, without limitation, the preparation of each Registration Statement with
respect to such offering and all other offering materials and related documents,
and participation in meetings with Underwriters, attorneys, accountants and
potential investors.

3.1.8. Records. The Company shall make available for inspection by
the holders of Registrable Securities included in each Registration Statement, any
Underwriter participating in any disposition pursuant to such Registration
Statement and any attorney, accountant or other professional retained by any holder
of Registrable Securities included in such Registration Statement or any
Underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, as shall be necessary to enable them to exercise their
due diligence responsibility, and cause the Company’s officers, directors and
employees to supply all information requested by any of them in connection with
such Registration Statement.

3.1.9. Opinions and Comfort Letters. The Company shall furnish to
each holder of Registrable Securities included in any Registration Statement a
signed counterpart, addressed to such holder, of (i) any opinion of counsel to the
Company delivered to any Underwriter and (ii) any comfort letter from the Company’s
independent public accountants delivered to any Underwriter. In the event no legal
opinion is delivered to any Underwriter, the Company shall furnish to each holder
of Registrable Securities included in such Registration Statement, at any time that
such holder elects to use a prospectus, an opinion of counsel to the Company to the
effect that the Registration Statement containing such prospectus has been declared
effective and that no stop order is in effect.

3.1.10. Earnings Statement. The Company shall comply with all
applicable rules and regulations of the Commission and the 1933 Act, and make
available to its shareholders, as soon as practicable, an earnings statement
covering a period of twelve (12) months, beginning within three (3) months after
the effective date of each Registration Statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder.

3.1.11. Listing. The Company shall use its best efforts to cause all
Registrable Securities included in any registration to be listed on such exchanges
or otherwise designated for trading in the same manner as similar securities issued
by the Company are then listed or designated or, if no such similar securities are
then listed or designated, in a manner satisfactory to the holders of a majority of
the Registrable Securities included in such registration.

3.2. Obligation to Suspend Distribution. Upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.1.4(iv), or, in
the case of a resale registration on Form S-3 pursuant to Section 2.3 hereof, upon any
suspension by the Company, pursuant to a written insider trading compliance program adopted
by the Company’s Board of Directors, of the ability of all “insiders” covered by such
program to transact in the Company’s securities because of the existence of material
non-public information, each holder of Registrable Securities included in any Registration
Statement shall immediately discontinue disposition of such Registrable Securities pursuant
to any Registration Statement covering such Registrable Securities until such holder
receives the supplemented or amended prospectus contemplated by Section 3.1.4(iv) or the
restriction on the ability of “insiders” to transact in the Company’s securities is
removed, as applicable, and, if so directed by the Company, each such holder will deliver
to the Company all copies, other than permanent file copies then in such holder’s
possession, of the most recent prospectus covering such Registrable Securities at the time
of receipt of such notice.

3.3. Registration Expenses. The Company shall bear all costs and expenses
incurred in connection with any Demand Registration pursuant to Section 2.1, any Piggy-Back
Registration pursuant to Section 2.2, and any registration on Form S-3 effected pursuant to
Section 2.3, and all expenses incurred in performing or complying with its other
obligations under this Agreement, whether or not the Registration Statement becomes
effective, including, without limitation: (i) all registration and filing fees; (ii) fees
and expenses of compliance with securities or “blue sky” laws (including fees and
disbursements of counsel in connection with blue sky qualifications of the Registrable
Securities); (iii) printing expenses; (iv) the Company’s internal expenses (including,
without limitation, all salaries and expenses of its officers and employees); (v) the fees
and expenses incurred in connection with the listing of the Registrable Securities as
required by Section 3.1.11; (vi) Financial Industry Regulatory Authority fees; (vii) fees
and disbursements of counsel for the Company and fees and expenses for registered public
accounting firms retained by the Company (including the expenses or costs associated with
the delivery of any opinions or comfort letters requested pursuant to Section 3.1.9);
(viii) the fees and expenses of any special experts retained by the Company in connection
with such registration and (ix) the fees and expenses of one legal counsel selected by the
holders of a majority-in-interest of the Registrable Securities included in such
registration. The Company shall have no obligation to pay any underwriting discounts or
selling commissions attributable to the Registrable Securities being sold by the holders
thereof, which underwriting discounts or selling commissions shall be borne by such
holders.

3.4. Information. The holders of Registrable Securities shall provide such
information as may reasonably be requested by the Company, or the managing Underwriter, if
any, in connection with the preparation of any Registration Statement, including amendments
and supplements thereto, in order to effect the registration of any Registrable Securities
under the 1933 Act pursuant to Section 2 and in connection with the Company’s obligation to
comply with federal and applicable state securities laws.

4. INDEMNIFICATION AND CONTRIBUTION.

4.1. Indemnification by the Company. The Company agrees to indemnify and hold
harmless each Investor and each other holder of Registrable Securities, and each of their
respective officers, employees, affiliates, directors, partners, members, attorneys and
agents, and each person, if any, who controls an Investor and each other holder of
Registrable Securities (within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act) (each, an “Investor Indemnified Party”), from and against any
expenses, losses, judgments, claims, damages or liabilities, whether joint or several,
arising out of or based upon any untrue statement (or allegedly untrue statement) of a
material fact contained in any Registration Statement under which the sale of such
Registrable Securities was registered under the 1933 Act, any preliminary prospectus, final
prospectus or summary prospectus contained in such Registration Statement, or any amendment
or supplement to such Registration Statement, or arising out of or based upon any omission
(or alleged omission) to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, or any violation by the Company of the 1933
Act or any rule or regulation promulgated thereunder applicable to the Company and relating
to action or inaction required of the Company in connection with any such registration; and
the Company shall promptly reimburse the Investor Indemnified Party for any legal and any
other expenses reasonably incurred by such Investor Indemnified Party in connection with
investigating and defending any such expense, loss, judgment, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case to the
extent that any such expense, loss, claim, damage or liability arises out of or is based
upon any untrue statement or allegedly untrue statement or omission or alleged omission
made in such Registration Statement, preliminary prospectus, final prospectus, or summary
prospectus, or any such amendment or supplement, in reliance upon and in conformity with
information furnished to the Company, in writing, by such selling holder expressly for use
therein. The Company also shall indemnify any Underwriter of the Registrable Securities,
their officers, affiliates, directors, partners, members and agents and each person who
controls such Underwriter on substantially the same basis as that of the indemnification
provided above in this Section 4.1.

4.2. Indemnification by Holders of Registrable Securities. Each selling
holder of Registrable Securities will, in the event that any registration is being effected
under the 1933 Act pursuant to this Agreement of any Registrable Securities held by such
selling holder, indemnify and hold harmless the Company, each of its directors and officers
and each Underwriter (if any), and each other person, if any, who controls such selling
holder or such Underwriter (within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act), from and against any losses, claims, judgments, damages or liabilities,
whether joint or several, insofar as such losses, claims, judgments, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue statement (or
allegedly untrue statement) of a material fact contained in any Registration Statement
under which the sale of such Registrable Securities was registered under the 1933 Act, any
preliminary prospectus, final prospectus or summary prospectus contained in such
Registration Statement, or any amendment or supplement to such Registration Statement, or
arise out of or are based upon any omission (or the alleged omission) to state a material
fact required to be stated therein or necessary to make the statement therein not
misleading, if the statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by such selling holder expressly for use
therein, and shall reimburse the Company, its directors and officers, and each such
controlling person for any legal or other expenses reasonably incurred by any of them in
connection with investigation or defending any such loss, claim, damage, liability or
action. Each selling holder’s indemnification obligations hereunder shall be several and
not joint and shall be limited to the amount of any net proceeds (after payment of any
underwriting fees, discounts, commissions or taxes) actually received by such selling
holder.

4.3. Conduct of Indemnification Proceedings. Promptly after receipt by any
person of any notice of any loss, claim, damage or liability or any action in respect of
which indemnity may be sought pursuant to Section 4.1 or 4.2, such person (the
“Indemnified Party”) shall, if a claim in respect thereof is to be made against any
other person for indemnification hereunder, notify such other person (the “Indemnifying
Party”) in writing of the loss, claim, judgment, damage, liability or action; provided,
however, that the failure by the Indemnified Party to notify the Indemnifying Party shall
not relieve the Indemnifying Party from any liability which the Indemnifying Party may have
to such Indemnified Party hereunder, except and solely to the extent the Indemnifying Party
is actually prejudiced by such failure. If the Indemnified Party is seeking
indemnification with respect to any claim or action brought against the Indemnified Party,
then the Indemnifying Party shall be entitled to participate in such claim or action, and,
to the extent that it wishes, jointly with all other Indemnifying Parties, to assume
control of the defense thereof with counsel satisfactory to the Indemnified Party. After
notice from the Indemnifying Party to the Indemnified Party of its election to assume
control of the defense of such claim or action, the Indemnifying Party shall not be liable
to the Indemnified Party for any legal or other expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof other than reasonable costs of
investigation; provided, however, that in any action in which both the Indemnified Party
and the Indemnifying Party are named as defendants, the Indemnified Party shall have the
right to employ separate counsel (but no more than one such separate counsel) to represent
the Indemnified Party and its controlling persons who may be subject to liability arising
out of any claim in respect of which indemnity may be sought by the Indemnified Party
against the Indemnifying Party, with the fees and expenses of such counsel to be paid by
such Indemnifying Party if, based upon the written opinion of counsel of such Indemnified
Party, representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, consent to entry of judgment or effect
any settlement of any claim or pending or threatened proceeding in respect of which the
Indemnified Party is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such judgment or settlement includes an
unconditional release of such Indemnified Party from all liability arising out of such
claim or proceeding.

4.4. Contribution.

4.4.1. If the indemnification provided for in the foregoing Sections 4.1, 4.2
and 4.3 is unavailable to any Indemnified Party in respect of any loss, claim,
damage, liability or action referred to herein, then each such Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party as a result of such loss, claim, damage,
liability or action in such proportion as is appropriate to reflect the relative
fault of the Indemnified Parties and the Indemnifying Parties in connection with
the actions or omissions which resulted in such loss, claim, damage, liability or
action, as well as any other relevant equitable considerations. The relative fault
of any Indemnified Party and any Indemnifying Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of
a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such Indemnified Party or such Indemnifying
Party and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

4.4.2. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.4 were determined by pro rata allocation
or by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding Section 4.4.1. The amount
paid or payable by an Indemnified Party as a result of any loss, claim, damage,
liability or action referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or other
expenses incurred by such Indemnified Party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this Section
4.4, no holder of Registrable Securities shall be required to contribute any amount
in excess of the dollar amount of the net proceeds (after payment of any
underwriting fees, discounts, commissions or taxes) actually received by such
holder from the sale of Registrable Securities which gave rise to such contribution
obligation. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

5. UNDERWRITING AND DISTRIBUTION.

5.1. Rule 144. The Company covenants that it shall file any reports required
to be filed by it under the 1933 Act and the 1934 Act and shall take such further action as
the holders of Registrable Securities may reasonably request, all to the extent required
from time to time to enable such holders to sell Registrable Securities without
registration under the 1933 Act within the limitation of the exemptions provided by Rule
144 under the 1933 Act, as such rules may be amended from time to time, or any similar rule
or regulation hereafter adopted by the Commission.

6. MISCELLANEOUS.

6.1. Assignment; No Third Party Beneficiaries. This Agreement and the rights,
duties and obligations of the Company hereunder may not be assigned or delegated by the
Company in whole or in part. This Agreement and the rights, duties and obligations of the
holders of Registrable Securities hereunder may be freely assigned or delegated by such
holder of Registrable Securities in conjunction with and to the extent of any transfer of
Registrable Securities by any such holder; provided, that (i) such transfer of Registrable
Securities is permissible under the Purchase Agreement and applicable law and (ii) the
assignee or transferee is already a party to this Agreement or, if the assignee or
transferee is not already a party to this Agreement, such assignee or transferee agrees in
writing to be bound by this Agreement and a copy of such agreement is furnished to the
Company prior to such transfer. This Agreement and the provisions hereof shall be binding
upon and shall inure to the benefit of each of the parties and their respective successors
and the permitted assigns of the Investor or holder of Registrable Securities or of any
assignee of the Investor or holder of Registrable Securities. This Agreement is not
intended to confer any rights or benefits on any persons that are not party hereto other
than as expressly set forth in Article 4 and this Section 6.1.

6.2. Notices. All notices, demands, requests, consents, approvals or other
communications (collectively, “Notices”) required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in writing and shall
be personally served, delivered by reputable air courier service with charges prepaid, or
transmitted by hand delivery, telegram, telex or facsimile, addressed as set forth below,
or to such other address as such party shall have specified most recently by written
notice. Notice shall be deemed given on the date of service or transmission if personally
served or transmitted by telegram, telex or facsimile; provided, that if such service or
transmission is not on a Business Day or is after normal business hours, then such notice
shall be deemed given on the next Business Day. Notice otherwise sent as provided herein
shall be deemed given on the next Business Day following timely delivery of such notice to
a reputable air courier service with an order for next-day delivery.

To the Company:

Pet DRx Corporation

215 Centerview Drive

Suite 360

Brentwood, Tennessee  37027

Attention: General Counsel

Facsimile: (408) 521-2168

with a copy to:

Bryan Cave LLP

One Atlantic Center, Fourteenth Floor

1201 West Peachtree Street, NW

Atlanta, Georgia  30309-3488

Attention:  Rick Miller

Facsimile:  (404) 572-6999

To an Investor: to the address of such Investor set forth in the Purchase Agreement or as is
then reflected on the records of the Company.

6.3. Severability. This Agreement shall be deemed severable, and the
invalidity or unenforceability of any term or provision hereof shall not affect the
validity or enforceability of this Agreement or of any other term or provision hereof.
Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties
hereto intend that there shall be added as a part of this Agreement a provision as similar
in terms to such invalid or unenforceable provision as may be possible and be valid and
enforceable.

6.4. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, and all of which taken together shall constitute
one and the same instrument.

6.5. Entire Agreement. This Agreement, the Purchase Agreement and the other
Transaction Documents (including all agreements entered into pursuant hereto and all
certificates and instruments delivered pursuant hereto and thereto) constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede all prior
and contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written.

6.6. Modifications and Amendments. No amendment, modification or termination
of this Agreement shall be binding upon any party unless executed in writing by such party.
Notwithstanding the foregoing, any and all parties must obtain the written consent of the
Majority Holders to amend or modify this Agreement

6.7. Titles and Headings. Titles and headings of sections of this Agreement
are for convenience only and shall not affect the construction of any provision of this
Agreement.

6.8. Waivers and Extensions. Any party to this Agreement may waive any right,
breach or default which such party has the right to waive, provided that such waiver will
not be effective against the waiving party unless it is in writing, is signed by such
party, and specifically refers to this Agreement. Waivers may be made in advance or after
the right waived has arisen or the breach or default waived has occurred. Any waiver may
be conditional. No waiver of any breach of any agreement or provision herein contained
shall be deemed a waiver of any preceding or succeeding breach thereof nor of any other
agreement or provision herein contained. No waiver or extension of time for performance of
any obligations or acts shall be deemed a waiver or extension of the time for performance
of any other obligations or acts.

6.9. Remedies Cumulative. In the event that the Company fails to observe or
perform any covenant or agreement to be observed or performed under this Agreement, the
Investor or any other holder of Registrable Securities may proceed to protect and enforce
its rights by suit in equity or action at law, whether for specific performance of any term
contained in this Agreement or for an injunction against the breach of any such term or in
aid of the exercise of any power granted in this Agreement or to enforce any other legal or
equitable right, or to take any one or more of such actions, without being required to post
a bond. None of the rights, powers or remedies conferred under this Agreement shall be
mutually exclusive, and each such right, power or remedy shall be cumulative and in
addition to any other right, power or remedy, whether conferred by this Agreement or now or
hereafter available at law, in equity, by statute or otherwise.

6.10. Term. The registration rights provided to the Investors hereunder shall
terminate at such time as there are no Registrable Securities outstanding.

6.11. Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of New York
without regard to any law or principles that would make this choice of law provision
invalid. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of
the courts of the State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this Agreement and the transactions
contemplated hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same methods as
are specified for the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit, action or
proceeding and to the laying of venue in such court. Each party hereto irrevocably waives
any objection to the laying of venue of any such suit, action or proceeding brought in such
courts and irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.

6.12. Waiver of Trial by Jury. Each party hereby irrevocably and
unconditionally waives the right to a trial by jury in any action, suit, counterclaim or
other proceeding (whether based on contract, tort or otherwise) arising out of, connected
with or relating to this Agreement, the transactions contemplated hereby, or the actions of
the Investor in the negotiation, administration, performance or enforcement hereof.

[signature pages follow]

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered
by their duly authorized representatives as of the date first written above.

 

The Company:

PET DRX CORPORATION

By: /s/ Gene E. Burleson

Name: Gene E. Burleson

Title: CEO

The Investors:

GALEN PARTNERS IV, L.P.

By: Claudius IV, LLC, Its General Partner

By: /s/ Zubeen Shroff

Name: Zubeen Shroff

Title: Managing Member

GALEN PARTNERS INTERNATIONAL IV, L.P.

By: Claudius IV, LLC, Its General Partner

 By: /s/ Zubeen Shroff

Name: Zubeen Shroff

Title: Managing Member

GALEN EMPLOYEE FUND IV, L.P.

By: Wesson Enterprises, Inc.

 By: /s/ Bruce F. Wesson

Name: Bruce F. Wesson

Title: President

CAMDEN PARTNERS STRATEGIC FUND III, L.P.

By: Camden Partners Strategic III, LLC

Its: General Partner

By: Camden Partners Strategic Manager, LLC

Its: Managing Member

By: /s/ Richard M. Johnston

Name: Richard M. Johnston

Its: Managing Member

CAMDEN PARTNERS STRATEGIC FUND III-A, L.P.

By: Camden Partners Strategic III, LLC

Its: General Partner

By: Camden Partners Strategic Manager, LLC

Its: Managing Member

By: /s/ Richard M. Johnston

Name: Richard M. Johnston

Its: Managing Member

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