Document:

ex10-1.htm

    
      

    

    
      Exhibit
10.1

    

     

     

    
      FIRST
AMENDMENT TO CREDIT AGREEMENT AND LOAN DOCUMENTS

       

      This
First Amendment to Credit Agreement and Loan Documents (this “Amendment”) is
dated as of February 19, 2008 by and among FIFTH STREET MEZZANINE PARTNERS II,
L.P., a Delaware limited partnership (“Lender”) and (i) XLNT VETERINARY CARE,
INC., a Delaware corporation (“Lead Borrower”); (ii) 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 (collectively, “Non-Lead Borrowers”); and (iii) BAY AREA VETERINARY
SPECIALISTS, INC., a California corporation and BRADSHAW VETERINARY CLINIC,
INC., a California corporation (collectively, “New Borrowers”) (Lead Borrower,
Non-Lead Borrowers and New Borrowers are jointly and severally, individually and
collectively, “Borrower”).

       

      RECITALS

       

      A.           Pursuant
to that certain Credit Agreement dated as of March 29, 2007 by and between
Lender and Borrower (the “Credit Agreement”), Borrower has received a loan from
Lender in the maximum principal amount of Twelve Million Dollars
($12,000,000.00) (the “Loan”), as evidenced by that certain Note dated as of
March 29, 2007 executed by Borrower in favor Lender (the “Note”).

       

      B.           The
Credit Agreement, the Note, the Security Agreement dated as of March 29, 2007
and all other agreements, documents, and instruments evidencing, securing, or
otherwise relating to the Loan, as may be amended, modified, extended or
restated from time to time, are sometimes referred to individually and
collectively as the “Loan Documents.”

       

      C.           Borrower
and Lender have agreed to modify the Credit Agreement and the other Loan
Documents subject to the terms and conditions set forth below.  All
capitalized terms used herein and not otherwise defined shall have the meanings
given to such terms in the Credit Agreement or the other Loan
Documents.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      AGREEMENT

       

      NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree to amend the Credit Agreement
and the other Loan Documents as follows:

       

      1.           
 New
Borrowers.  BAY
AREA VETERINARY SPECIALISTS, INC., a California corporation and BRADSHAW
VETERINARY CLINIC, INC., a California corporation shall, jointly and severally,
individually and collectively, be the “Borrower” along with Lead Borrower and
Non-Lead Borrowers under the Credit Agreement and the other Loan
Documents.  New Borrowers agree to and do hereby join in and assume,
as of the original closing date of the Loan, all of the obligations of Borrower
now or hereafter incurred under the Credit Agreement and the other Loan
Documents, including, without limitation, payment of all sums due and payable as
and when due under the Credit Agreement and the other Loan
Documents.  New Borrowers agree that New Borrowers are and shall be
bound by, and hereby assumes, all representations, warranties, covenants, terms,
conditions, duties and waivers applicable to a Borrower under the Credit
Agreement and the other Loan Documents.  New Borrowers, Lead Borrower
and Non-Lead Borrowers hereby acknowledge and agree that New Borrowers, Lead
Borrower and Non-Lead Borrowers are and shall be at all times jointly and
severally liable for all of the obligations of Borrower as though each of the
Loan Documents had been made, executed and delivered by New Borrowers as of the
original Closing Date of the Loan.  New Borrowers acknowledge and
agree that any reference to Borrower in the Loan Documents shall be deemed to
also refer to New Borrowers.

       

      2.          
  Interest
Rate.  Notwithstanding anything to the contrary stated in
Section 1.2(a) of the Credit Agreement from and after February 1, 2008, interest
shall accrue on the outstanding balance of the Loan at a fixed rate of fifteen
percent (15%) per annum which shall be paid or added to the principal balance of
the Loan as follows:  (a) accrued interest in the amount of twelve
percent (12.0%) per annum shall be payable monthly in arrears on the first day
of each month (the “Payment Date”), and (b) accrued interest in the amount of
three percent (3%) per annum shall be added to the principal balance of the Loan
on each Payment Date of each month beginning on March 1, 2008 and during the
remaining term of the Loan.

       

      3.           
 Restructuring
Fee.  Concurrently with the execution of this
Amendment, Borrower shall pay to Fifth Street Capital LLC a restructuring fee in
the amount of One Hundred Twenty Thousand Dollars ($120,000.00) (the
“Restructuring Fee”) in immediately available funds, which fee shall be deemed
fully earned on the date due, and shall not be credited to any other payment
required hereunder.

       

      4.            
Servicing
Fee.  Concurrently with the execution of this Amendment,
notwithstanding anything to the contrary stated in Section 1.3(b) of the Credit Agreement,
Borrower shall pay Two Thousand Two Hundred Fifty Dollars ($2,250.00) to Fifth
Street Capital LLC in addition to the regular monthly Servicing
Fee.  Beginning on March 1, 2008 and during the remaining term of the
Loan, the Servicing Fee shall be increased from Two Thousand Two Hundred Fifty
Dollars ($2,250.00) to Four
Thousand Five Hundred Dollars ($4,500.00) per month.

       

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

       

      5.            
Financial Covenants
and Ratios.

       

      a.      Borrower
acknowledges that it is in default of the financial covenants and ratios
required under Section 4.3 and Exhibit 4.3 of the Credit Agreement
(collectively, the “Financial Covenants”) for the Fiscal Quarter ending on
December 31, 2007.  Notwithstanding the foregoing, Lender hereby
waives (a) Borrower’s default of the Financial Covenants for the Fiscal Quarter
ending December 31, 2007 and (b) the Financial Covenants for the Fiscal Quarter
ending March 31, 2008.  Except as otherwise provided herein, no other
waiver of the Financial Covenants under any Fiscal Quarter is hereby made or
intended, and the Financial Covenants remain in full force and
effect.

       

      b.      Exhibit
4.3 to the Credit Agreement is hereby deleted in its entirety and replaced with
Exhibit 4.3 attached to this Amendment.

       

      c.      Notwithstanding
anything to the contrary stated herein, Borrower shall deliver to Lender the
quarterly financial statement for the Fiscal Quarter ending on December 31, 2007
at the same time Borrower provides such financial statement to the
SEC.

       

      6.           
 Costs and
Expenses.  In accordance with Section 1.3(d) of the Credit
Agreement, Borrower agrees to promptly pay all fees, charges, costs and expenses
(including reasonable attorneys’ fees and expenses incurred by Lender in
connection with any matters contemplated by or arising out of the Credit
Agreement or the other Loan Documents), in connection with the examination,
review, due diligence investigation, documentation, negotiation, closing and
syndication of the transactions contemplated herein and in connection with the
continued administration of the Credit Agreement and the other Loan Documents,
including any amendments (including this Amendment), modifications,
subordination or intercreditor agreements, consents and
waivers.  Borrower agrees to promptly pay reasonable documentation
charges assessed by Lender for amendments (including this Amendment),
modifications, subordination or intercreditor agreements, waivers, consents and
any of the documentation prepared by Lender’s attorneys.  All fees,
charges, costs and expenses for which Borrower is responsible pursuant hereto
shall be deemed part of the Obligations when incurred, payable upon demand and
secured by the Collateral.

       

      7.           
 Covenants of
Borrower.  Borrower covenants to Lender as
follows:

       

      a.           Borrower
shall cause to be executed, delivered, and performed such additional agreements,
documents, and instruments as reasonably required by Lender to effectuate the
intent of this Amendment.

       

      b.           Borrower
fully, finally, and forever releases and discharges Lender, together with their
respective successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in law
or equity (collectively, the “Claim”), that Borrower has or in the future may
have, whether known or unknown, but only with respect to those Claims for which
both of the following are true:  (i) the Claim is in respect of the
Loan, the Credit Agreement, the Loan Documents, or the actions or omissions of
Lender in respect of the Loan, the Credit Agreement or the other Loan Documents,
and (ii) the Claim arises from events occurring prior to the date of this
Amendment.  It is the intention of Borrower that the above release
shall be effective as a full and final release of each and every matter
specifically and generally referred to above.

       

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

         

      

      c.           Currently
with the execution of this Amendment, Borrower shall execute and deliver to
Lender the post-closing letter
attached hereto and incorporated herein as Exhibit
“A” (the “Post-Closing Letter”) and perform the Post-Closing Obligations
(as defined in the Post-Closing Letter) to the satisfaction of Lender within the time frame set
forth in the Post-Closing Letter.

       

      8.         
   Borrower Representations and
Warranties.  Borrower represents and warrants to Lender as of
the date hereof that:

       

      a.           The
representations, warranties, certifications and agreements contained in the
Credit Agreement and the other Loan Documents are true, complete and accurate in
all material respects as of the date hereof.

       

      b.           Both
Borrower and, to Borrower’s knowledge, Lender have performed all of their
respective obligations under the Credit Agreement and the other Loan Documents
and Borrower has no knowledge of any event which with the giving of notice, the
passage of time or both would constitute a default by Borrower or Lender under
the Credit Agreement and the other Loan Documents.

       

      c.           Borrower
has no claim against Lender and no offset or defense to the payment or
performance of the Obligations or any counterclaim or right to rescission to
enforcement of any of the terms of the Credit Agreement and the other Loan
Documents.

       

      d.           No
voluntary actions or, to Borrower’s knowledge, involuntary actions are pending
against Borrower, any member of Borrower of the Loan under the bankruptcy or
insolvency laws of the United States or any state thereof.

       

      e.           The
Credit Agreement and the other Loan Documents, as any of the same have been
modified, amended and restated, are the valid, legal and binding obligations of
Borrower (as applicable), enforceable in accordance with their
terms.

       

      9.           
 Conditions
Precedent.  Lender shall not be bound by this Amendment unless
and until Lender has received a fully executed original of this Amendment and
all other Loan Documents required by Lender in connection with this
Amendment.

       

      10.           Ratification of Loan
Documents and Collateral.  Borrower hereby ratifies and affirms
the Credit Agreement and each of the Loan Documents, as amended hereby, and
agrees to perform each obligation set forth in the Credit Agreement and each of
the Loan Documents, as amended hereby.  Except as specifically
modified and amended herein, all terms, conditions and covenants contained in
the Credit Agreement and the other Loan Documents shall remain in full force and
effect.  Any property or rights to or interests in property granted as
security in the Credit Agreement and the other Loan Documents, including the
Collateral, shall remain as security for the Loan and the obligations of
Borrower under the Credit Agreement and the other Loan Documents.

       

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

         

      

      11.           Miscellaneous.

       

      a.           The
Credit Agreement and the other Loan Documents as modified herein contain the
entire understanding and agreement of Borrower and Lender with respect to the
Loan and supersede all prior representations, warranties, agreements,
arrangements, and understandings.  No provision of the Credit
Agreement or the other Loan Documents as modified may be changed, discharged,
supplemented, terminated, or waived except in a writing signed by Lender and
Borrower.

       

      b.           All
references in the Loan Documents to the Credit Agreement shall mean the Credit
Agreement as hereby modified and amended.  This Amendment shall also
constitute a Loan Document and all terms and conditions of the Credit Agreement
and the other Loan Documents (as modified herein) including, without limitation,
events of default, maturity dates and the miscellaneous provisions set forth
therein, including without limitation, consent to jurisdiction, applicable law,
and waiver of jury are incorporated herein as though set forth in full and
Lender shall be entitled to the benefits thereof with respect to this
Amendment.

       

      c.           This
Amendment may be executed in any number of counterparts with the same effect as
if all parties hereto had signed the same document.  All such
counterparts shall be construed together and shall constitute one instrument,
but in making proof hereof it shall only be necessary to produce one such
counterpart.

       

      [Signature
Page Follows]

       

      
 

      

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

       

      IN
WITNESS WHEREOF, the undersigned have entered into this Amendment as of the date
first above written.

       

                                              BORROWER:

       

                                              XLNT VETERINARY CARE,
INC.,

                                              a Delaware
corporation

       

       

                                                                                                                             
By: /s/ George
Villasana                                                            

      
                                                                                                                               
Name: George
Villasana                                                       

                                                Title: Secretary

         

       

                                              ADLER VETERINARY
GROUP, INC.,

                                              a California
corporation

       

      
        
          
             

                                                                                                                                   
By: /s/ George
Villasana                                                            

            
                                                                                                                                     
Name: George
Villasana                                                       

                                                      Title: Secretary

               

            

 

        

      

                                              ANIMAL
CLINIC OF YUCCA VALLEY, INC.,

                                              a
California corporation

      
        
           

          
             

                                                                                                                                   
By: /s/ George
Villasana                                                            

            
                                                                                                                                     
Name: George
Villasana                                                       

                                                      Title: Secretary

               

            

 

        

      

                                              ANIMAL
EMERGENCY CLINIC OF THE DESERT, INC.,

                                              a
California corporation

       

      
        
          
             

                                                                                                                                   
By: /s/ George
Villasana                                                            

            
                                                                                                                                     
Name: George
Villasana                                                       

                                                      Title: Secretary

               

 

          

        

      

                                              [Signature
Page Follows]

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

                                              [Signature
Page Continued]

       

                                              ANIMAL
MEDICAL HOSPITAL, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

        

      

       

                                              BONITA
PET HOSPITAL, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

          

        

      

       

                                              BRENTWOOD
PET CLINIC, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

        

      

       

                                              ELDORADO
ANIMAL HOSPITAL, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

        

      

       

                                              JERAULD
L. WOODRING, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             
 

        

      

                                              [Signature
Page Follows]

       

      
        
          Signature
Page to First Amendment Credit

          Agreement

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

                                              [Signature
Page Continued]

       

                                              LAWRENCE
PET HOSPITAL, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             
 

        

      

       

                                              MCCONNELL
& FENTON CORPORATION,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

 

      

                                              RAINBOW
HAWK, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             
 

        

         

      

                                              SOUTH
BAY VETERINARY SPECIALISTS, INC.,

                                              a
California corporation

      
        
           

           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             
 

        

                                              SAN
CARLOS VETERINARY HOSPITAL, INC.,

                                              a
California corporation

       

      
        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

        

      

       

                                              [Signature
Page Follows]

       

      
        
          Signature
Page to First Amendment Credit

          Agreement

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

                                              [Signature
Page Continued]

       

                                              SOUTH
COUNTY EMERGENCY ANIMAL CLINIC, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             
 

        

      

       

                                              STANFORD
PET CLINIC, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

 

      

                                              TARVIN
& LENEHAN, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             
 

        

         

      

                                              VETS
& PETS, INCORPORATED,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             
 

        

         

      

                                              YUBA-SUTTER
VETERINARY HOSPITAL, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

        

      

      
 

                                              [Signature
Page Follows]

       

      
        
          Signature
Page to First Amendment Credit

          Agreement

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

                                              [Signature
Page Continued]

       

       

       

                                              CALIFORNIA
ANIMAL HOSPITAL VETERINARY

                                              SPECIALTY
GROUP, INC., a California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

 

      

                                              VETSURG,
INC., a California corporation

       

      
        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

        

      

       

                                              BAY
AREA VETERINARY SPECIALISTS, INC.,

                                              a
California corporation

       

      
        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

        

         

      

                                              BRADSHAW
VETERINARY CLINIC, INC.,

                                              a
California corporation

       

      
        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

        

      

       

       

       

       

       

                                              [Signature
Page Follows]

       

      
        
          Signature
Page to First Amendment Credit

          Agreement

          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

                                              [Signature
Page Continued]

       

                                              LENDER:

       

                                              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: /s/ Bernard D.
Berman                                        

          
                                                                                                                                                   
Name: Bernard
D. Berman

                                                                   
Title:   Executive Vice President and

                                                                               
Secretary

             

             

          

        

        
          
            
              Signature
Page to First Amendment Credit

              Agreement

              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

           

           

        

      

       

      EXHIBIT
4.3

       

      FINANCIAL COVENANTS AND
RATIOS

       

      Borrower
shall continuously maintain the following:

       

      1.           Free Cash
Flow.  Borrower shall have Free Cash Flow to be tested as of
the end of each Fiscal Quarter commencing with the Fiscal Quarter ending on June
30, 2008 on a trailing twelve-month basis of greater than $500,000.00; provided,
however, for the Fiscal Quarters ending on June 30, 2008 and September 30, 2008,
Borrower’s results shall be annualized by Lender for the period commencing on
January 1, 2008 through such testing date.

       

      2.           Fixed Charge Coverage
Ratio.  Borrower shall have a Fixed Charge Coverage Ratio to be
tested as of the end of each Fiscal Quarter commencing with the Fiscal Quarter
ending on June 30, 2008 on a trailing twelve-month basis, of not less than 1.2
to 1.0; provided, however, for the Fiscal Quarters ending on June 30, 2008 and
September 30, 2008, Borrower’s results shall be annualized by Lender for the
period commencing on January 1, 2008 through such testing date.

       

      3.           Leverage
Ratio.  Borrower shall have a Leverage Ratio to be tested as of
the end of each Fiscal Quarter commencing with the Fiscal Quarter ending on June
30, 2008 on a trailing twelve-month basis of not greater than 5.0 to 1.0;
provided, however, for the Fiscal Quarters ending on June 30, 2008 and September
30, 2008, Borrower’s results shall be annualized by Lender for the period
commencing on January 1, 2008 through such testing date.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
“A”

      

      POST-CLOSING
LETTER

      

      [See
Attached]

      

      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      

      

      February
19, 2008

      

      

      FIFTH
STREET MEZZANINE PARTNERS II, L.P.

      White
Plains Plaza

      445
Hamilton Ave., Suite 1206

      White
Plains, NY  10601

      
        

         

        Re:           $12,000,000 Loan by FIFTH STREET
MEZZANINE PARTNERS II, L.P. (“Lender”) to XLNT VETERINARY CARE, INC., a Delaware
corporation and all other borrowers named in the Credit Agreement (jointly and
severally, individually and collectively, “Borrower”)

        

        Ladies and
Gentlemen:

        

        This letter shall memorialize the
understanding with respect to the performance of certain post-closing
obligations as more particularly set forth in Schedule
A, attached hereto
(collectively and individually, “Post-Closing Obligations”) in consideration for
the making of the above-referenced loan (the “Loan”) pursuant to the terms of a
Credit Agreement dated as
of March 29, 2007, as amended by that certain First Amendment to Credit
Agreement and Loan Documents dated as of the even date hereof by and between
Borrower and Lender (collectively, the “Credit
Agreement”).  This post-closing letter shall be
considered a Loan Document under the Credit Agreement and a default under this
letter shall constitute a default under the Credit Agreement, the Loan Documents
and the Loan.

      

      

      Any failure of Borrower to deliver any
items or perform any Post-Closing Obligations as set forth on Schedule A within the
time frame set forth in Schedule A shall be
an immediate Event of Default under the Credit Agreement for which there shall
be no notice, grace or cure period.  

      

      All conditions precedent,
representations, covenants and Events of Default contained in the Credit
Agreement and the other Loan Documents shall be deemed modified only to the
extent necessary to effect the rights and obligations set forth in this
post-closing letter (and to permit the taking of the actions
described herein within the time periods required above, rather than as
elsewhere provided in the Loan Documents), provided that to the
extent any representation and warranty would not be true because the foregoing
actions were not taken on the Closing Date, the respective representation and
warranty shall be required to be true and correct in all material respects at
the time the respective action is taken (or was required to be taken) in
accordance with this post-closing letter.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      Any capitalized term not
defined herein shall have the meaning ascribed to such term in the Credit
Agreement.

       

                                              Very
truly yours,

       

       

                                              XLNT
VETERINARY
CARE, INC.,

                                              a
Delaware corporation

       

       

      
        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

        

      

       

                                              ADLER
VETERINARY GROUP, INC.,

                                              a
California corporation

      
         

         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

        

      

       

                                              ANIMAL
CLINIC OF YUCCA VALLEY, INC., 

                                              a
California corporation

      
         

         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             
 

        

         

      

       

                                              ANIMAL
EMERGENCY CLINIC OF THE DESERT, INC., 

                                              a
California corporation

       

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

        

      

       

       

                                              [Signature
Page Follows]

       

      
        
          Signature
Page to

          Post
Closing Letter

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

                                              [Signature
Page Continued]

       

                                              ANIMAL
MEDICAL HOSPITAL, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             
 

        

      

       

                                              BONITA
PET HOSPITAL, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

             

          

        

      

                                              BRENTWOOD
PET CLINIC, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

             

          

        

      

                                              ELDORADO
ANIMAL HOSPITAL, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             
 

        

      

       

                                              JERAULD
L. WOODRING, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

             

          

        

      

                                              [Signature
Page Follows]

       

      
        
          Signature
Page to

          Post
Closing Letter

          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

                                              [Signature
Page Continued]

       

                                              LAWRENCE
PET HOSPITAL, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

 

      

                                              MCCONNELL
& FENTON CORPORATION,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

 

      

                                              RAINBOW
HAWK, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          

        

      

       

                                              SOUTH
BAY VETERINARY SPECIALISTS, INC., 

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

        

      

       

                                              SAN
CARLOS VETERINARY HOSPITAL, INC., 

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

             

          

        

      

       

       

                                              [Signature
Page Follows]

       

      
        
          Signature
Page to

          Post
Closing Letter

          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

                                              [Signature
Page Continued]

       

                                              SOUTH
COUNTY EMERGENCY ANIMAL CLINIC, INC., 

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

            
 

          

        

      

       

                                              STANFORD
PET CLINIC, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          
                                        

      

                                              TARVIN
& LENEHAN, INC.,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          
                                        

      

                                              VETS
& PETS, INCORPORATED,

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             
 

        

         

      

                                              YUBA-SUTTER
VETERINARY HOSPITAL, INC., 

                                              a
California corporation

      
         

        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

          

        

      

       

       

                                              [Signature
Page Follows]

       

      
        
          Signature
Page to

          Post
Closing Letter

          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

                                              [Signature
Page Continued]

       

       

       

                                              CALIFORNIA
ANIMAL HOSPITAL 

                                              VETERINARY
SPECIALTY GROUP, INC., 

                                              a
California corporation

       

      
        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

          
                                        

      

                                              VETSURG,
INC., a California corporation

      
        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             
 

        

      

       

                                              BAY
AREA VETERINARY SPECIALISTS, INC., 

                                              a
California corporation

       

      
        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             
 

        

      

       

                                              BRADSHAW
VETERINARY CLINIC, INC.,

                                              a
California corporation

       

      
        
           

                                                                                                                                 
By: /s/ George
Villasana                                                            

          
                                                                                                                                   
Name: George
Villasana                                                       

                                                    Title: Secretary

             

        

      

       

       

       

                                              [Signature
Page Follows]

       

      
        
          Signature
Page to

          Post
Closing Letter

          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

                                              [Signature
Page Continued]

       

       

       

                                              AGREED
AND ACKNOWLEDGED:

       

                                              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: /s/ Bernard D.
Berman                     
                
 

        
                                                                                                                                                 
Name: Bernard
D. Berman

                                                                 
Title:   Executive Vice President and

                                                                             
Secretary

           

        

       

      
        
          Signature
Page to

          Post
Closing Letter

          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      Schedule
A

       

      The
Post-Closing Obligations are as follows:

       

      1.           On
or before March 5, 2008, Borrower shall pay all outstanding amounts and file all
applicable returns with the Franchise Tax Board in connection with Rainbow Hawk,
Inc., which was suspended on November 1, 2007 by the Franchise Tax
Board.  On or before April 30, 2008, Borrower shall provide evidence
to Lender, acceptable to Lender in its reasonable discretion, that Rainbow Hawk,
Inc. has been restored to good standing.

       

      2.           On
or before March 5, 2008, Borrower shall pay all outstanding amounts and file all
applicable returns with the Franchise Tax Board in connection with Vetsurg, Inc.
in order to remove that certain Federal Tax Lien Los Angeles County, CA Doc #
2007-1769089 dated July 26, 2007 (the “Federal Tax Lien”).  On or
before April 30, 2008, Borrower shall provide evidence to Lender, acceptable to
Lender in its reasonable discretion, that the Federal Tax Lien has been released
and terminated and Vetsurg, Inc. has been restored to good
standing.

       

      3.           On
or before March 5, 2008, Borrower shall provide Lender with a Secretary’s
Certificate of incumbency and authority, attaching organizational documents
(Articles and Bylaws) and resolutions of Lead Borrower, New Borrowers and Pet
DRx Corporation, a Delaware corporation.

       

      4.           On
or before March 5, 2008, Borrower shall provide Lender with the Perfection
Certificates of New Borrowers.

       

      5.           On
or before March 5, 2008, Borrower shall provide Lender with an updated
Litigation Disclosure Exhibit to the Credit Agreement.

       

      6.           On
or before March 5, 2008, Borrower shall provide Lender with an updated Lien
Disclosure Exhibit to the Credit Agreement.ex10-2.htm

    
      

    

    
      Exhibit
10.2

    

     

    
      SECOND
AMENDMENT TO CREDIT AGREEMENT AND LOAN DOCUMENTS

       

      This
Second Amendment to Credit Agreement and Loan Documents (this “Amendment”) is
dated as of February 19, 2008 by and between FIFTH STREET MEZZANINE PARTNERS II,
L.P., a Delaware limited partnership (“Lender”) and XLNT VETERINARY CARE, INC.,
a Delaware corporation (“Borrower”).

       

      A.           Pursuant
to that certain Credit Agreement dated as of June 29, 2007, as amended by that
certain First Amendment to Credit Agreement dated November 27, 2007 by and
between Lender and Borrower (collectively, the “Credit Agreement”), Borrower has
received a loan from Lender in the maximum principal amount of Four Million
Dollars ($4,000,000.00) (the “Loan”), as evidenced by that certain Amended and
Restated Note dated November 27, 2007 executed by Borrower in favor Lender (the
“Note”) and secured by those certain Deeds
of Trust, Assignment of Rents, Security Agreement and Fixture Filing each
dated June 26, 2007, as amended by those certain Modification Agreements (Short
Form) each dated November 27, 2008 (collectively, the “Deed of
Trust”).

       

      B.           The
Credit Agreement, the Note, the Deed of Trust and all other agreements,
documents, and instruments evidencing, securing, or otherwise relating to the
Loan, as may be amended, modified, extended or restated from time to time, are
sometimes referred to individually and collectively as the “Loan
Documents.”

       

      C.           Borrower
and Lender have agreed to modify the Credit Agreement and the other Loan
Documents subject to the terms and conditions set forth below.  All
capitalized terms used herein and not otherwise defined shall have the meanings
given to such terms in the Credit Agreement or the other Loan
Documents.

       

      AGREEMENT

       

      NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree to amend the Credit Agreement
and the other Loan Documents as follows:

       

      1.           Interest
Rate.  Notwithstanding anything to the contrary stated in
Section 1.2(a) of the Credit Agreement from and after February 1, 2008, interest
shall accrue on the outstanding balance of the Loan at a fixed rate of fifteen
percent (15%) per annum which shall be paid or added to the principal balance of
the Loan as follows:  (a) accrued interest in the amount of twelve
percent (12.0%) per annum shall be payable monthly in arrears on the first day
of each month (the “Payment Date”), and (b) accrued interest in the amount of
three percent (3%) per annum shall be added to the principal balance of the Loan
on each Payment Date of each month beginning on March 1, 2008 and during the
remaining term of the Loan.

       

      2.           Restructuring
Fee.  Concurrently with the execution of this Amendment,
Borrower shall pay to Fifth Street Capital LLC a restructuring fee in the amount
of Thirty Six Thousand Three Hundred Eighty-One Dollars ($36,381.00) (the
“Restructuring Fee”) in immediately available funds, which fee shall be deemed
fully earned on the date due, and shall not be credited to any other payment
required hereunder.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      3.           Servicing
Fee.  Concurrently
with the execution of this Amendment, notwithstanding anything to the contrary
stated in Section 1.3(b) of
the Credit Agreement, Borrower shall pay Seven Hundred Sixty-Two Dollars and
50/100 ($762.50) to Fifth Street Capital LLC in addition to the regular monthly
Servicing Fee.  Beginning on March 1, 2008 and during the remaining
term of the Loan, the Servicing Fee shall be increased from Seven Hundred
Sixty-Two Dollars and 50/100 ($762.50) to One Thousand Five Hundred Twenty-Five
Dollars ($1,525.00) per month.

       

      4.           Financial
Covenants and Ratios.

       

                  
a.           Borrower
acknowledges that it is in default of the financial covenants and ratios
required under Section 4.3 and Exhibit 4.3 of the Credit Agreement
(collectively, the “Financial Covenants”) for the Fiscal Quarter ending on
December 31, 2007.  Notwithstanding the foregoing, Lender hereby
waives (a) Borrower’s default of the Financial Covenants for the Fiscal Quarter
ending December 31, 2007 and (b) the Financial Covenants for the Fiscal Quarter
ending March 31, 2008.  Except as otherwise provided herein, no other
waiver of the Financial Covenants under any Fiscal Quarter is hereby made or
intended, and the Financial Covenants remain in full force and
effect.

       

                   
b.           Exhibit 4.3
to the Credit Agreement is hereby deleted in its entirety and replaced with
Exhibit 4.3 attached to this Amendment.

       

                  
c.           Notwithstanding
anything to the contrary stated herein, Borrower shall deliver to Lender the
quarterly financial statement for the Fiscal Quarter ending on December 31, 2007
at the same time Borrower provides such financial statement to the
SEC.

       

      5.           Costs
and Expenses.  In accordance with Section 1.3(d) of the Credit
Agreement, Borrower agrees to promptly pay all fees, charges, costs and expenses
(including reasonable attorneys’ fees and expenses incurred by Lender in
connection with any matters contemplated by or arising out of the Credit
Agreement or the other Loan Documents), in connection with the examination,
review, due diligence investigation, documentation, negotiation, closing and
syndication of the transactions contemplated herein and in connection with the
continued administration of the Credit Agreement and the other Loan Documents,
including any amendments (including this Amendment), modifications,
subordination or intercreditor agreements, consents and
waivers.  Borrower agrees to promptly pay reasonable documentation
charges assessed by Lender for amendments (including this Amendment),
modifications, subordination or intercreditor agreements, waivers, consents and
any of the documentation prepared by Lender’s attorneys.  All fees,
charges, costs and expenses for which Borrower is responsible pursuant hereto
shall be deemed part of the Obligations when incurred, payable upon demand and
secured by the Collateral.

       

      6.           Covenants
of Borrower.  Borrower covenants to Lender as
follows:

       

                                   
a.           Borrower
shall cause to be executed, delivered, and performed such additional agreements,
documents, and instruments as reasonably required by Lender to effectuate the
intent of this Amendment.

       

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

         

      

                                  
b.           Borrower
fully, finally, and forever releases and discharges Lender, together with their
respective successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in law
or equity (collectively, the “Claim”), that Borrower has or in the future may
have, whether known or unknown, but only with respect to those Claims for which
both of the following are true:  (i) the Claim is in respect of the
Loan, the Credit Agreement, the Loan Documents, or the actions or omissions of
Lender in respect of the Loan, the Credit Agreement or the other Loan Documents,
and (ii) the Claim arises from events occurring prior to the date of this
Amendment.  It is the intention of Borrower that the above release
shall be effective as a full and final release of each and every matter
specifically and generally referred to above.

       

                                  
c.           Currently
with the execution of this Amendment, Borrower shall execute and deliver to
Lender the post-closing
letter attached hereto and incorporated herein as Exhibit
“A” (the “Post-Closing Letter”) and perform the Post-Closing Obligations
(as defined in the Post-Closing Letter) to the satisfaction of Lender within
the time frame set forth in the Post-Closing Letter.

       

      7.           Borrower
Representations and Warranties.  Borrower represents and
warrants to Lender as of the date hereof that:

       

                                   
a.           The
representations, warranties, certifications and agreements contained in the
Credit Agreement and the other Loan Documents are true, complete and accurate in
all material respects as of the date hereof.

       

                                   
b.           Both
Borrower and, to Borrower’s knowledge, Lender have performed all of their
respective obligations under the Credit Agreement and the other Loan Documents
and Borrower has no knowledge of any event which with the giving of notice, the
passage of time or both would constitute a default by Borrower or Lender under
the Credit Agreement and the other Loan Documents.

       

                                   
c.           Borrower has
no claim against Lender and no offset or defense to the payment or performance
of the Obligations or any counterclaim or right to rescission to enforcement of
any of the terms of the Credit Agreement and the other Loan
Documents.

       

                                   
d.           No voluntary
actions or, to Borrower’s knowledge, involuntary actions are pending against
Borrower, any member of Borrower of the Loan under the bankruptcy or insolvency
laws of the United States or any state thereof.

       

                                   
e.           The Credit
Agreement and the other Loan Documents, as any of the same have been modified,
amended and restated, are the valid, legal and binding obligations of Borrower
(as applicable), enforceable in accordance with their terms.

       

      8.           Conditions
Precedent.  Lender shall not be bound by this Amendment unless
and until Lender has received a fully executed original of this Amendment and
all other Loan Documents required by Lender in connection with this
Amendment.

       

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

         

      

      9.           Ratification
of Loan Documents and Collateral.  Borrower hereby ratifies and
affirms the Credit Agreement and each of the Loan Documents, as amended hereby,
and agrees to perform each obligation set forth in the Credit Agreement and each
of the Loan Documents, as amended hereby.  Except as specifically
modified and amended herein, all terms, conditions and covenants contained in
the Credit Agreement and the other Loan Documents shall remain in full force and
effect.  Any property or rights to or interests in property granted as
security in the Credit Agreement and the other Loan Documents, including the
Collateral, shall remain as security for the Loan and the obligations of
Borrower under the Credit Agreement and the other Loan
Documents.

       

      10.           Miscellaneous.

       

      a.           The
Credit Agreement and the other Loan Documents as modified herein contain the
entire understanding and agreement of Borrower and Lender with respect to the
Loan and supersede all prior representations, warranties, agreements,
arrangements, and understandings.  No provision of the Credit
Agreement or the other Loan Documents as modified may be changed, discharged,
supplemented, terminated, or waived except in a writing signed by Lender and
Borrower.

       

      b.           All
references in the Loan Documents to the Credit Agreement shall mean the Credit
Agreement as hereby modified and amended.  This Amendment shall also
constitute a Loan Document and all terms and conditions of the Credit Agreement
and the other Loan Documents (as modified herein) including, without limitation,
events of default, maturity dates and the miscellaneous provisions set forth
therein, including without limitation, consent to jurisdiction, applicable law,
and waiver of jury are incorporated herein as though set forth in full and
Lender shall be entitled to the benefits thereof with respect to this
Amendment.

       

      c.           This
Amendment may be executed in any number of counterparts with the same effect as
if all parties hereto had signed the same document.  All such
counterparts shall be construed together and shall constitute one instrument,
but in making proof hereof it shall only be necessary to produce one such
counterpart.

       

      [Signature
Page Follows]

       

       

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

       

      
        
          Exhibit
10.2

        

         

      

       

      IN
WITNESS WHEREOF, the undersigned have entered into this Amendment as of the date
first above written.

       

                                              BORROWER:

       

                                              XLNT
VETERINARY
CARE, INC.,

                                              a
Delaware corporation

       

      
        
          
             

                                                                                                                                   
By: /s/ George
Villasana                                                            

            
                                                                                                                                     
Name: George
Villasana                                                       

                                                      Title: Secretary

              
 

            

          

        

      

      
         

                                                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: /s/ Bernard D.
Berman                                        

          
                                                                                                                                                   
Name: Bernard
D. Berman

                                                                   
Title:   Executive Vice President and

                                                                               
Secretary

             

          

        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      EXHIBIT
4.3

       

      FINANCIAL
COVENANTS AND RATIOS

       

      Borrower
shall continuously maintain the following:

       

      1.           Free
Cash Flow.  Borrower shall have Free Cash Flow to be tested as
of the end of each Fiscal Quarter commencing with the Fiscal Quarter ending on
June 30, 2008 on a trailing twelve-month basis of greater than $500,000.00;
provided, however, for the Fiscal Quarters ending on June 30, 2008 and September
30, 2008, Borrower’s results shall be annualized by Lender for the period
commencing on January 1, 2008 through such testing date.

       

      2.           Fixed
Charge Coverage Ratio.  Borrower shall have a Fixed Charge
Coverage Ratio to be tested as of the end of each Fiscal Quarter commencing with
the Fiscal Quarter ending on June 30, 2008 on a trailing twelve-month basis, of
not less than 1.2 to 1.0; provided, however, for the Fiscal Quarters ending on
June 30, 2008 and September 30, 2008, Borrower’s results shall be annualized by
Lender for the period commencing on January 1, 2008 through such testing
date.

       

      3.           Leverage
Ratio.  Borrower shall have a Leverage Ratio to be tested as of
the end of each Fiscal Quarter commencing with the Fiscal Quarter ending on June
30, 2008 on a trailing twelve-month basis of not greater than 5.0 to 1.0;
provided, however, for the Fiscal Quarters ending on June 30, 2008 and September
30, 2008, Borrower’s results shall be annualized by Lender for the period
commencing on January 1, 2008 through such testing date.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      EXHIBIT
“A”

       

      POST-CLOSING
LETTER

       

      [See
Attached]

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

       

      February
19, 2008

       

       

      FIFTH
STREET MEZZANINE PARTNERS II, L.P.

      White
Plains Plaza

      445
Hamilton Ave., Suite 1206

      White
Plains, NY  10601

       

       

      Re:           $4,000,000
Loan by FIFTH STREET MEZZANINE PARTNERS II, L.P. (“Lender”) to XLNT VETERINARY
CARE, INC., a Delaware corporation (“Borrower”)

       

      Ladies
and Gentlemen:

       

      This letter shall
memorialize the understanding with respect to the performance of certain
post-closing obligations as more particularly set forth in Schedule
A, attached hereto (collectively and individually, “Post-Closing
Obligations”) in consideration for the making of the above-referenced loan (the
“Loan”) pursuant to the terms of a Credit Agreement dated as
of
June 29, 2007, as amended by that certain First Amendment to Credit Agreement
dated November 27, 2007 and
Second Amendment to Credit Agreement and Loan Documents dated as of the even
date hereof by and between Borrower and Lender (collectively, the “Credit
Agreement”).  This post-closing letter shall be considered a
Loan Document under the Credit Agreement and a default under this letter shall
constitute a default under the Credit Agreement, the Loan Documents and the
Loan.

       

      Any failure of Borrower to
deliver any items or perform any Post-Closing Obligations as set forth on Schedule
A within the time frame set forth in Schedule
A shall be an immediate Event of Default under the Credit Agreement for
which there shall be no notice, grace or cure
period.  

       

      All conditions precedent,
representations, covenants and Events of Default contained in the Credit
Agreement and the other Loan Documents shall be deemed modified only to the
extent necessary to effect the rights and obligations set forth in this
post-closing letter (and to permit the taking of the actions
described herein within the time periods required above, rather than as
elsewhere provided in the Loan Documents), provided
that to the extent any representation and warranty would not be true because the
foregoing actions were not taken on the Closing Date, the respective
representation and warranty shall be required to be true and correct in all
material respects at the time the respective action is taken (or was required to
be taken) in accordance with this post-closing letter.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      Any capitalized term not
defined herein shall have the meaning ascribed to such term in the Credit
Agreement.

       

                                              Very
truly yours,

       

       

                                              XLNT
VETERINARY
CARE, INC.,

                                              a
Delaware corporation

       

       

      
        
          
             

                                                                                                                                   
By: /s/ George
Villasana                                                            

            
                                                                                                                                     
Name: George
Villasana                                                       

                                                      Title: Secretary

               

            

          

        

      

       

       

       

                                              AGREED
AND ACKNOWLEDGED:

       

                                              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: /s/ Bernard D.
Berman                                        

            
                                                                                                                                                     
Name: Bernard
D. Berman

                                                                     
Title:   Executive Vice President and

                                                                                 
Secretary

               

            

          

        

      
        
          Signature
Page to

          Post
Closing Letter

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Schedule
A

       

      The
Post-Closing Obligations are as follows:

       

      1.           On
or before March 5, 2008, Borrower shall pay all outstanding amounts and file all
applicable documents to remove that certain County Tax Lien filed in Riverside
County on November 19, 2007 as Document No. 2007-071110 (the “County Tax Lien”),
which affects 30695 Hill ST, Thousand Palms, CA  92260.  On
or before April 30, 2008, Borrower shall provide evidence to Lender, acceptable
to Lender in its reasonable discretion, that the County Tax Lien has been
released and removed from title.

       

      2.           On
or before March 5, 2008, Borrower shall record a Correction
Quitclaim Deed and/or a Declaration of Scrivener in the Riverside County
Recorder’s Office to correct Borrower’s state of formation to Delaware
(30695 Hill ST, Thousand Palms, CA  92260
in Riverside is currently vested in XLNT VETERINARY CARE INC., a California
corporation).

       

      3.           On
or before March 5, 2008, Borrower shall pay all general, special and
supplemental property taxes in San Bernardino County and Riverside County that
are due and payable on the real property collateral.  On or before
April 30, 2008, Borrower shall provide evidence to Lender, acceptable to Lender
in its reasonable discretion, that all such property taxes have been
paid.

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