GUARANTY
THIS
UNLIMITED GUARANTY (“
Guaranty ”) is made as of this 19
th day of February, 2008 in favor of FIFTH STREET MEZZANINE
PARTNERS II, L.P., a Delaware limited partnership (together with
its successors and assigns, “
Lender ”) by PET DRX CORPORATION, a Delaware
corporation (“
Guarantor ”).
BACKGROUND
A. XLNT
VETERINARY CARE, INC., a Delaware corporation (“Lead
Borrower”) and 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,
VETSURG, INC., a California corporation, BAY AREA VETERINARY
SPECIALIST, INC., a California corporation and BRADSHAW
VETERINARY CLINIC, INC., a California corporation (jointly and
severally, individually and collectively,
“Borrower”) and Lender have entered into a certain
Credit Agreement dated March 29, 2007, as amended by that
certain First Amendment to Credit Agreement and Loan Documents
dated as of the even date herewith (collectively, the “
Loan Agreement ”) pursuant to which Lender has made a
loan (“
Loan ”) to Borrower in the amount of
$12,000,000.00. The Loan also is evidenced by
Borrower’s note to Lender dated March 29, 2007 (“
Note ”) and secured by, among other things, a Security
Agreement executed and delivered by Borrower to Lender dated March
29, 2007 and that certain Security Agreement executed and delivered
by PET DRX CORPORATION,
a Delaware corporation, BAY AREA VETERINARY
SPECIALIST, INC., a California corporation and BRADSHAW VETERINARY
CLINIC, INC., a California corporation to Lender dated as of the
even date herewith (collectively, the “
Security Instrument ”) which grants to Lender, among
other things, a first lien on all business assets and property of
Borrower.
B. Guarantor
will derive substantial benefit from Lender’s
modification of the Loan to Borrower.
C. Lender
requires as a condition to the modification of the Loan that
Guarantor agrees, to guarantee for the benefit of Lender, and
its successors and assigns, all obligations and liabilities of
Borrower with respect to the Loan.
NOW,
THEREFORE, to induce Lender to modify the Loan to Borrower,
and in consideration of the substantial benefit Guarantor will
derive from the Loan, and other good and valuable
consideration, the receipt and sufficiency of which are
acknowledged, and intending to be legally bound hereby,
Guarantor hereby agrees as follows:
SECTION
1
DEFINED
TERMS
Defined Terms . Capitalized terms used in this
Guaranty and not specifically defined in this Guaranty have the
meaning provided in the Loan Agreement.
SECTION
2
OBLIGATION
GUARANTEED
Guaranty of Guaranteed Obligations . Guarantor
irrevocably and unconditionally, guarantees to Lender the prompt
payment when due, whether at stated maturity, by acceleration or
otherwise, of all obligations and liabilities of Borrower to
Lender, including, without limitation, (a) the due and punctual
payment of all amounts due under the Note and the Loan Agreement
and of all monetary payments required to be made under the Loan
Documents (and all renewals, extensions, modifications and
rearrangements thereof); and (b) the full and faithful performance
of all of the terms, covenants, conditions, agreements and other
obligations of Borrower contained in the Loan Documents and all
renewals, extensions, modifications and rearrangements of said Loan
Documents (collectively, “
Guaranteed Obligations ”).
Unlimited Nature of Guaranty . This is a guaranty
of payment and performance and not of collection or collectibility
only. The obligations under this Guaranty shall be
unlimited, absolute, independent and unconditional under any and
all circumstances. For purposes of this Guaranty, the
term Guaranteed Obligations is used in its most comprehensive sense
to include both monetary and non-monetary obligations of Borrower
to Lender and to include, without limitation, each and every debt,
obligation and liability of Borrower already, now or hereafter
made, incurred or created in favor of Lender. The term
also includes voluntary and involuntary indebtedness however it
arose or arises, whether it was or is a direct obligation to Lender
or was or is acquired by Lender by assignment, merger or
succession, whether it is due or not yet due, absolute or
contingent, liquidated or unliquidated or determined or
undetermined, whether arising under a single transaction or a
series of transactions, whether arising before or after an
obligation of Borrower to Lender has been satisfied in full, and
whether Borrower may be liable for it individually or jointly with
others.
Continuing Obligation . This Guaranty is a
continuing guaranty and in full force and effect and will be
discharged only if and when the Loan has been paid in full, and all
obligations under the Loan Agreement and other Loan Documents have
been fully performed;
provided ,
however , that notwithstanding any of the foregoing to the
contrary, this Guaranty shall remain in full force and effect for
so long as any payment hereunder may be voided in bankruptcy
proceedings as a preference or for any other
reason.
Direct Action Against Guarantor
. Lender has the right to require Guarantor
to pay, comply with and satisfy its obligations and liabilities
under this Guaranty, and shall have the right to proceed
immediately against Guarantor with respect thereto, without being
required to attempt recovery first from Borrower or any other
party, without first suing on the Note or any other Loan Document
and without demonstrating that the collateral for the Loan is
inadequate security or that Lender has exercised (to any degree) or
exhausted any of Lender’s other rights and remedies with
respect to Borrower or any collateral for the
Loan.
SECTION
3
GENERAL
TERMS AND CONDITIONS
Payments; Interest on Amounts Payable Hereunder
. Amounts payable to Lender under this Guaranty shall be
immediately due and payable on Lender’s written demand and
shall be paid without reduction by set-off, defense, counterclaim
or cross-claim. Interest at the lower of the Default
Rate or the maximum interest rate permitted by applicable law also
shall accrue on any judgment obtained by Lender in connection with
the enforcement or collection of amounts due under this Guaranty
until such judgment is paid in full. Lender may apply
all money received by Lender to payment or reduction of the Loan or
reimbursement of Lender’s expenses, in such priority and
proportions, and at such time or times as Lender may
elect.
Cumulative Remedies . Guarantor acknowledges that
following an Event of Default, with respect to the Loan, Lender
shall be entitled to accelerate the Loan and exercise all other
rights and remedies as have been provided to Lender hereunder,
under the other Loan Documents, by law or in equity including
without limitation enforcement of this Guaranty. All
rights and remedies are cumulative and may be exercised
independently, concurrently or successively in Lender’s sole
discretion and as often as occasion therefor shall
arise. Lender’s delay or failure to accelerate the
Loan or exercise any other remedy upon the occurrence of an Event
of Default with respect to the Loan shall not be deemed a waiver of
such right as remedy. No partial exercise by Lender of
any right or remedy will preclude further exercise
thereof. Notice or demand given to Borrower in any
instance will not entitle Borrower to notice or demand in similar
or other circumstances nor constitute Lender’s waiver of its
right to take any future action in any circumstance without notice
or demand (except where expressly required by this Guaranty to be
given). Lender may release other security for the Loan,
may release any party liable for the Loan, may grant extensions,
renewals or forbearances with respect thereto, may accept a partial
or past due payment or grant other indulgences, or may apply any
other security held by it to payment of the Loan, in each case
without prejudice to its rights under this Guaranty and without
such action being deemed an accord and satisfaction or a
reinstatement of the Loan. Lender will not be deemed as
a consequence of its delay or failure to act, or any forbearances
granted, to have waived or be estopped from exercising any of its
rights or remedies.
Enforcement Costs . Guarantor hereby agrees to pay, on
written demand by Lender, all costs incurred by Lender in
collecting any amount payable under this Guaranty or enforcing or
protecting its rights under the Guaranty in each case whether or
not legal proceedings are commenced. Such fees and
expenses include, without limitation, reasonable fees for
attorneys, paralegals and other hired professionals, a reasonable
assessment of the cost of services performed by Lender’s
default management staff, court fees, costs incurred in connection
with pre-trial, trial and appellate level proceedings (including
discovery and expert witnesses), costs incurred in post-judgment
collection efforts or in any bankruptcy
proceeding. Amounts incurred by Lender shall be
immediately due and payable, and shall bear interest at the Default
Rate from the date of disbursement until paid in full, if not paid
in full within ten (10) business days after Lender’s written
demand for payment.
Unimpaired Liability . Guarantor acknowledges and
agrees that all obligations hereunder are and shall be absolute and
unconditional under any and all circumstances without regard to the
validity, regularity or enforceability of any or all of the Loan
Documents or the existence of any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a
guarantor or surety. Without limiting the foregoing,
Guarantor acknowledges and agrees that its respective liability
hereunder shall in no way be released,
terminated,
