Press Release 07/10/2008

Termination of a Material Definitive Agreement

Item 1.02 Termination of a Material Definitive Agreement

On June 30, 2008, XLNT Veterinary Care, Inc. ("XLNT"), a wholly-owned subsidiary of Pet DRx Corporation (the "Registrant"), elected to prepay its $12,000,000 loan pursuant to the Credit Agreement between XLNT and the subsidiaries of XLNT (collectively with XLNT, the "Borrowers") and Fifth Street Mezzanine Partners, II, L.P. ("Fifth Street"), dated March 29, 2007, as amended ("Credit Agreement"). Specifically, XLNT paid off all outstanding principal, interest and fees under the Credit Agreement, in a total amount of $12,511,854.97. A prepayment fee of $242,429.16 was incurred as a result of this termination and is included in the total amount.
The Credit Agreement provided for a $12,000,000 term loan, with interest payable monthly at a rate of 15% per annum, and the principal due in full on March 8, 2010. The Credit Agreement was secured by the inventory, chattel paper, accounts, equipment and general intangibles of the Borrowers. The Registrant guaranteed all obligations and liabilities of the Borrowers under the Credit Agreement pursuant to a Guaranty dated February 19, 2008. The Registrant also entered into a Security Agreement with Fifth Street dated February 19, 2008, whereby the Registrant and two additional subsidiaries of XLNT granted Fifth Street a security interest in all of their assets.
The Registrant's decision to pay off the loan in full is based on its belief that when additional capital is required other forms of capital may be available to it on more favorable terms than those offered under the Credit Agreement. The Registrant believes that Fifth Street has been an excellent financial partner. For that reason, the Registrant may consider alternative financing arrangements with Fifth Street in the future.