Exhibit 10.1




                      AMENDED AND RESTATED CREDIT AGREEMENT


                 ===============================================


                           PETCO ANIMAL SUPPLIES, INC.

                                    BORROWER

                             THE BANKS NAMED HEREIN

                                     LENDERS

                                       AND

                         UNION BANK OF CALIFORNIA, N.A.

                       Administrative Agent, Arranger and
                                Syndication Agent

                 ===============================================


                           Dated as of July 15, 1999





                                TABLE OF CONTENTS


SCHEDULE 1 - LENDERS AND APPLICABLE LENDING OFFICES
SCHEDULE 2 - SUBSIDIARIES
SCHEDULE 3 - DEBT
SCHEDULE 4 - EXISTING  LOANS,  ADVANCES  AND  GUARANTIES
SCHEDULE 5 - CERTAIN EXISTING INVESTMENTS IN PETCETERA L.P.
SCHEDULE 6 - CERTAIN LIENS
SCHEDULE 7 - LITIGATION

EXHIBIT A-1 - FORM OF REVOLVING  NOTE
EXHIBIT A-2 - FORM OF FACILITY A TERM NOTE
EXHIBIT A-3 - FORM OF FACILITY B TERM NOTE
EXHIBIT B -  COMPLIANCE  CERTIFICATE
EXHIBIT C - ASSIGNMENT  AGREEMENT
EXHIBIT D - LEVERAGE RATIO LEVEL  CERTIFICATE
EXHIBIT E - FORMS OF LETTER  OF  CREDIT  REQUESTS
EXHIBIT F - FORM OF NOTICE OF BORROWING
EXHIBIT G - FORM OF NOTICE OF BORROWING (CONVERSIONS)
EXHIBIT H - FORM OF NOTICE OF BORROWING (CONTINUATIONS)
EXHIBIT I - FORM OF JOINING LENDER AGREEMENT





                      AMENDED AND RESTATED CREDIT AGREEMENT

         This  Agreement,  dated as of July 15,  1999,  is  among  PETCO  ANIMAL
SUPPLIES,   INC.,  a  Delaware  corporation  (the  "Borrower"),   the  financial
institutions  party  hereto  (together  with  their  respective  successors  and
permitted assigns,  the "Lenders") and UNION BANK OF CALIFORNIA,  N.A. ("UBOC"),
as Agent for the Lenders. The parties hereto agree as follows:

                                    RECITALS
                                    --------

         WHEREAS,  UBOC,  certain  lenders and the  Borrower are parties to that
Credit  Agreement  dated as of January  30,  1998,  as amended  (the "Prior Loan
Agreement"); and

         WHEREAS,  the Lenders have agreed,  on the terms and conditions  herein
set forth, to extend term and revolving  credit to the Borrower for the purposes
set forth below,  including for the purpose of refinancing  amounts  outstanding
under the Prior Loan Agreement;

         WHEREAS,  the Lenders have agreed,  on the terms and conditions  herein
set forth, to issue letters of credit for the Borrower's  account as a revolving
commitment  subfacility for the purposes of supporting purchases of inventory by
the Borrower and of providing support for lease and insurance obligations of the
Borrower;

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants herein contained, the parties hereto hereby agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS
                                   -----------

         As used in this Agreement:

         "Acquisition"   means  any  transaction,   or  any  series  of  related
transactions,  consummated on or after the date of this Agreement,  by which the
Borrower or any of its  Subsidiaries  (i) acquires any going business in the pet
food and supply  business or related fields or all or  substantially  all of the
assets of any firm,  corporation or division  thereof in the pet food and supply
business  or related  fields,  whether  through  purchase  of assets,  merger or
otherwise or (ii) directly or indirectly  acquires (in one transaction or as the
most recent  transaction  in a series of  transactions)  at least a majority (in
number of votes) of the  securities of a corporation  in the pet food and supply
business or related fields which have ordinary  voting power for the election of
directors  (other  than  securities  having  such  power  only by  reason of the
happening of a contingency) or a majority (by percentage or voting power) of the
outstanding partnership interests of a partnership (or limited liability company
interests in a limited liability company) in the pet food and supply business or
related fields.

         "Acquisition Documents" means the purchase agreement, together with all
schedules and exhibits  referenced  therein and the legal opinions  delivered in
connection therewith in connection with any Acquisition.

         "Advance"  means a borrowing,  or a  continuation  or  conversion  of a
borrowing  pursuant to Section 2.7 hereof,  consisting of Loans of the same Type
and, in the case of a LIBOR Loan, for the same Interest Period.

         "Affiliate" of any Person means any other Person directly or indirectly
controlling,  controlled by or under common  control with such Person.  A Person
shall be deemed to control another Person if the controlling  Person  possesses,
directly  or  indirectly,  the power to direct  or cause  the  direction  of the
management or policies of the controlled  Person,  whether through  ownership of
stock,  by  contract  or  otherwise.  A Person  having 10% or more of the voting
capital stock of another Person shall be deemed to have control of such Person.

         "Agent"  means UBOC in its  capacity  as  administrative  agent for the
Lenders pursuant to Article 10, and not in its individual  capacity as a Lender,
and any successor Agent appointed pursuant to Article 10.

         "Aggregate  Available  Commitment" means the aggregate of the Available
Commitments of all the Lenders.

         "Aggregate  Commitment"  means the  aggregate  of the  Facility  A Term
Commitments,  Facility B Term  Commitments and Revolving  Commitments of all the
Lenders.

         "Aggregate  Revolving  Commitment" means the aggregate of the Revolving
Commitments of all the Lenders.

         "Agreement" means this Amended and Restated Credit Agreement, as it may
be amended or modified and in effect from time to time.

         "Agreement  Accounting  Principles" means generally accepted accounting
principles as in effect from time to time,  applied in a manner  consistent with
that used in  preparing  the  financial  statements  referred  to in Section 5.6
(except  for  changes  concurred  on  by  the  Borrower's   independent   public
accountants and the Required Lenders).

         "Applicable Lending Office" means for any Lender, its offices for LIBOR
Loans and Base Rate  Loans,  specified  in Schedule 1 or in the  Assignment  and
Acceptance  or  Joining  Lender  Agreement  pursuant  to which it became a party
hereto,  as the  case may be,  any of which  offices  may,  upon 10 days'  prior
written notice to the Agent and the Borrower, be changed by such Lender.

         "Applicable Margin" means the Revolving/Term A Applicable Margin or the
Term B Applicable Margin, as appropriate.

         "Approved Fund" means, with respect to any Lender that is an investment
fund that invests in commercial loans, any other investment fund that invests in
commercial  loans and is managed or  advised by the same  investment  advisor as
such Lender or by an Affiliate of such investment advisor or such Lender.

         "Article" means an article of this Agreement unless another document is
specifically referenced.

         "Assignment and  Acceptance"  means an Assignment and Acceptance in the
form of Exhibit C hereto.

         "Authorized  Officer" means any of the chief executive  officer,  chief
financial  officer,  any senior vice president  (specifically  authorized by the
Borrower) or the treasury manager of the Borrower, acting singly.

         "Available  Commitment"  means,  with  respect to each Lender  having a
Revolving  Commitment,  the amount by which (i) the Revolving Commitment of each
Lender on such date exceeds (ii) the sum of (a) the  aggregate  principal sum of
such  Lender's  Revolving  Loans   outstanding,   (b)  such  Lender's  Revolving
Commitment Percentage of the aggregate Letter of Credit Amount of all Letters of
Credit outstanding and (c) such Lender's Revolving Commitment  Percentage of the
aggregate  amount of  unreimbursed  drawings under all Letters of Credit on such
date.

         "Base  Rate"  means,  for any day,  a rate per  annum  equal to (i) the
Corporate  Base  Rate for such day plus  (ii) the  Revolving/Term  A  Applicable
Margin or the Term B Applicable Margin (as  appropriate),  in each case changing
when and as the Corporate Base Rate changes.

         "Base Rate Loan" means a Loan when it bears interest at the Base Rate.

         "Borrower" means Petco Animal Supplies,  Inc., a Delaware corporation,
and its successors and assigns.

         "Borrowing  Date"  means  a date  on  which  a  Revolving  Loan is made
hereunder.

         "Business Day" means any day (i) other than a Saturday, Sunday or other
day on which  commercial banks are authorized or required by law to close in Los
Angeles,  California and (ii) if the applicable  Business Day relates to a LIBOR
Loan, on which dealings are carried on in the London interbank market.

         "Capital Expenditures" means, for any period, for any person or entity,
the  aggregate of all  expenditures  which are made during such period  (whether
paid in cash or accrued as liabilities), by such person or entity, for property,
plant or equipment and which would be reflected as additions to property,  plant
or equipment on a balance sheet of such person or entity  prepared in accordance
with Agreement Accounting Principles  (including,  without limitation,  all such
property held under Capitalized Leases).

         "Capitalized  Lease" of a Person  means any lease of  Property  by such
Person as lessee which would be  capitalized  on a balance  sheet of such Person
prepared in accordance with Agreement Accounting Principles.

         "Capitalized  Rent  Expense  Ratio"  means  for  the  Borrower  and its
Subsidiaries  on a consolidated  basis,  determined as of the end of each fiscal
quarter for the period of four fiscal quarters then ended,  the ratio of (i) the
sum of Funded Debt plus eight times the Rent Expense for such period to (ii) the
sum of Funded  Debt plus eight  times the Rent  Expense for such period plus the
stockholders' equity of the Borrower and its Subsidiaries at such time.

         "Closing Date" means the date on which all the conditions precedent set
forth in Section 4.1 shall have been satisfied.

         "Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.

         "Collateral  means  all  of  the  property   (tangible  or  intangible)
purported to be subject to the lien or security interest purported to be created
by any mortgage, deed of trust, security agreement, pledge agreement, assignment
or other security document  heretofore or hereafter  executed by the Borrower as
security for all or part of the Obligations.

         "Collateral   Documents":  the  Security  Agreement,  all   Form  UCC-1
Financing  Statements and  amendments thereto and any other document encumbering
the Collateral  or  evidencing  or  perfecting a security  interest  therein for
the benefit of the Lenders executed by the Borrower.

         "Commitment"  means,  for each Lender,  its Revolving  Commitment,  its
Facility A Term Commitment and its Facility B Term Commitment, as applicable.

         "Compliance Certificate" has the meaning set forth in Section 6.1(v).

         "Consideration"  means, with respect to any Acquisition,  the aggregate
consideration,  in whatever form (including,  without limitation, cash payments,
the principal amount of promissory notes and Debt assumed, the aggregate amounts
payable to acquire, extend and exercise any option, the aggregate amount payable
under non-compete agreements and management agreements and the fair market value
of other property delivered) paid,  delivered or assumed by the Borrower and its
Subsidiaries  for  such  Acquisition  and  the  expenses  associated  therewith,
including  all  brokerage   commissions,   legal  fees  and  similar   expenses.
Notwithstanding  anything herein to the contrary,  no Acquisition  involving the
assumption  of Debt by the  Borrower or its  Subsidiaries  shall be permitted if
such assumption would violate the terms of this Agreement.

         "Consolidated   Fixed  Charges"   means,   for  the  Borrower  and  its
Subsidiaries, on a consolidated basis, for any period of four consecutive fiscal
quarters, the sum (without duplication) of (i) Interest Expense for such period,
(ii) cash dividends and distributions  paid with respect to the capital stock of
the Borrower or its  Subsidiaries  during such period (other than  dividends and
distributions  paid by its  Subsidiaries  to the Borrower),  (iii) the aggregate
principal  amount of all  scheduled  payments of Debt  (including  the principal
portion of rentals  under  Capitalized  Leases)  required to be made during such
period,  (iv) all income  taxes  required  to be paid during such period and (v)
Rent Expenses during such period.

         "Consolidated  Net Worth"  means with  respect to the  Borrower and its
Subsidiaries,  the  excess of total  assets  over total  liabilities,  all to be
determined on a  consolidated  basis in  accordance  with  Agreement  Accounting
Principles.

         "Control"  means the power to  direct  or cause  the  direction  of the
management or policies of a person,  whether  through rights of ownership  under
voting   securities,   under  contract  or  otherwise,   and  "Controlling"  and
"Controlled" shall have meanings correlative thereto.

         "Controlled   Group"  means  all  members  of  a  controlled  group  of
corporations and all trades or businesses  (whether or not  incorporated)  under
common control which, together with the Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.

         "Conversion/Continuation  Notice" is the notice  referred to in Section
2.7.

         "Corporate  Base Rate" means a fluctuating  interest rate per annum, as
in effect from time to time, at all times equal to the higher of the  following:
(i) the sum of the Federal Funds Effective Rate in effect from time to time plus
0.50% per annum;  and (ii) the annual  rate of interest  announced  from time to
time by UBOC as its corporate  reference rate (which is a rate set by UBOC based
upon various factors, including, without limitation,  general market conditions,
which is used as a reference  point for pricing certain loans and UBOC may price
its loans at, above or below such rate).

         "Debt" of any  Person  means (i) all  indebtedness  of such  Person for
borrowed money or for the deferred purchase price of property or services,  (ii)
all obligations of such Person  evidenced by notes,  bonds,  debentures or other
similar  instruments,  (iii)  all  indebtedness  created  or  arising  under any
conditional-sale  or other  title-retention  agreement  with respect to property
acquired by such  Person,  (iv) all  obligations  of such Person as lessee under
leases  that have been or should be, in  accordance  with  Agreement  Accounting
Principles,  recorded as Capitalized  Leases, (v) all obligations of such Person
under direct or indirect  guaranties in respect of, and obligations  (contingent
or otherwise) to purchase or otherwise acquire,  or otherwise to secure a credit
against loss in respect of,  indebtedness  or obligations of others of the kinds
referred to in clause (i),  (ii),  (iii) or (iv) above and (vi)  liabilities  in
respect of unfunded vested benefits under plans covered by Title IV of ERISA.

         "Default"  means  any  Event  of  Default  and any  default,  event  or
condition that would, with the giving of any requisite notice and the passage of
any requisite period of time, constitute an Event of Default.

         "Drawing Lender" has the meaning set forth in Section 2.2(iii).

         "EBITDA"  means for any period,  for the fiscal  quarter most  recently
ended and the  immediately  preceding  three fiscal  quarters,  Net Income after
eliminating  extraordinary  gains and  losses,  plus (i)  provisions  for income
taxes, (ii) depreciation and amortization and (iii) Interest Expense.

         "EBITDAR"  means for any period,  for the fiscal  quarter most recently
ended and the immediately preceding three fiscal quarters,  (i) EBITDA plus (ii)
Rent Expenses.

         "E-Commerce  Investment"  means an  investment  in a Person the primary
business of which is the  development,  formation,  operation and marketing of a
business  the purpose of which is selling pet food and pet supplies to consumers
over the internet;  provided that for purposes of this definition,  "investment"
shall  not  include  investments  in the form of  services  performed,  or other
in-kind  benefits  conferred,  on such Person by the Borrower or a Subsidiary in
connection with such investment.

         "Eligible  Institution" means (i) a commercial bank organized under the
laws of the United  States,  or any State  thereof,  and having  total assets in
excess of  $250,000,000;  (ii) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development,  or a political  subdivision of any such country,  and having total
assets in excess of  $250,000,000,  provided that such bank is acting  through a
branch or agency  located in the United  States;  (iii) an insurance  company or
other  financial  institution  or an investment  fund that is engaged in making,
purchasing or otherwise  investing in commercial loans in the ordinary course of
its business and having total assets in excess of $250,000,000; (iv) any Lender;
(v) any  Affiliate  of an existing  Lender or any  Approved  Fund of an existing
Lender;  and (vi) any other Person  approved by the Agent and, in the absence of
any Default, the Borrower.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.

         "Eurocurrency Liabilities" has the meaning set forth in Regulation D of
the Board of Governors of the Federal Reserve System.

         "Event of Default" has the meaning set forth in Article 7.

         "Facility A Reduction Installment" is defined in Section 2.4(iv).

         "Facility A Term Commitment" means, for each Lender having a Facility A
Term Commitment, the obligation of such Lender to make a Facility A Term Loan in
the amount set forth  opposite  its name on Schedule 1 hereto or as set forth in
any  Assignment  and  Acceptance  relating  to any  assignment  that has  become
effective  pursuant to Section 12.3, as such amount may be modified from time to
time pursuant to the terms hereof.

         "Facility A Term  Lenders"  means each Lender  having a Facility A Term
Commitment or Facility A Term Loans.

         "Facility A Term Loan" is defined in Section 2.4(i).

         "Facility A Term Note" means a promissory  note, in  substantially  the
form of Exhibit A-2 hereto,  duly  executed by the  Borrower  and payable to the
order of each Lender  having a Facility A Term  Commitment in the amount of such
Lender's Facility A Term Commitment.

         "Facility A Termination Date" means July 15, 2004.

         "Facility B Reduction Installment" is defined in Section 2.5(iv).

         "Facility B Term Commitment" means, for each Lender having a Facility B
Term Commitment, the obligation of such Lender to make a Facility B Term Loan in
the amount set forth  opposite  its name on Schedule 1 hereto or as set forth in
any  Assignment  and  Acceptance  relating  to any  assignment  that has  become
effective  pursuant to Section 12.3, as such amount may be modified from time to
time pursuant to the terms hereof.

         "Facility B Term  Lenders"  means each Lender  having a Facility B Term
Commitment or Facility B Term Loans.

         "Facility B Term Loan" is defined in Section 2.5(i).

         "Facility B Term Note" means a promissory  note, in  substantially  the
form of Exhibit A-3 hereto,  duly  executed by the  Borrower  and payable to the
order of each Lender  having a Facility B Term  Commitment in the amount of such
Lender's Facility B Term Commitment.

         "Facility B Termination Date" means July 15, 2006.

         "Facility   Reduction   Installment"   means  a  Facility  A  Reduction
Installment or a Facility B Reduction Installment, as applicable.

         "Facility  Usage  Amount"  means an amount  equal to the sum of (i) the
aggregate  principal  amount  of  all  Revolving  Loans  outstanding,  (ii)  the
aggregate Letter of Credit Amount of all Letters of Credit outstanding and (iii)
the aggregate amount of unreimbursed drawings under all Letters of Credit.

         "Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the  weighted  average of the rates on  overnight  Federal  funds
transactions  with  members of the Federal  Reserve  System  arranged by Federal
funds  brokers on such day, as published  for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York,  or, if such rate is not so  published  for any day which is a
Business Day, the average of the  quotations at  approximately  10:00 a.m.,  Los
Angeles time, on such day on such transactions  received by the Agent from three
Federal funds brokers of recognized  standing  selected by the Agent in its sole
discretion.

         "Foreign  Subsidiary"  means  any  Subsidiary  other  than one which is
formed under the laws of the United States or any state thereof.

         "Funded Debt" means the sum of the outstanding principal balance of all
Debt of the Borrower and its Subsidiaries  described in clauses (i), (ii), (iii)
and (iv) of the definition of "Debt" set forth herein.

         "Governmental Person" means, whether domestic or foreign, any national,
federal,  state or local government,  any political  subdivision  thereof or any
governmental,    quasi-governmental,     judicial,    public    or    regulatory
instrumentality,  authority,  body or  entity,  including  the  Federal  Deposit
Insurance  Corporation,  the Comptroller of the Currency, the Board of Governors
of the Federal Reserve System, any central bank and any comparable authority.

         "Governmental Rule" means any treaty, law, rule, regulation, ordinance,
order, code, judgment, decree, directive,  interpretation,  request,  guideline,
policy or similar form of decision of any Governmental Person.

         "Guaranties"  means,  collectively,  (i) each Guarantee and Amended and
Restated  Guarantee  dated as of even date herewith  executed by a Guarantor and
(ii) each other guarantee  executed by a Guarantor  pursuant to Section 6.27, in
each case in favor of the Agent, for the benefit of the Lenders, and in form and
substance satisfactory to the Agent, as it may be amended,  modified or restated
from time to time.

         "Guarantor   Collateral"  means  all  of  the  property   (tangible  or
intangible)  purported to be subject to the lien or security interest  purported
to be  created  by any  mortgage,  deed of  trust,  security  agreement,  pledge
agreement,  assignment  or  other  security  document  heretofore  or  hereafter
executed by any Guarantor as security for a Guarantee.

         "Guarantor   Collateral   Documents"  means  each  Guarantor   Security
Agreement,  all Form UCC-1 Financing  Statements and amendments  thereto and any
other document  encumbering the Guarantor Collateral or evidencing or perfecting
a security  interest  therein  for the  benefit of the  Lenders  executed by any
Guarantor.

         "Guarantor Security  Agreement" means each security agreement,  in form
and  substance  satisfactory  to the Agent,  made by a Guarantor in favor of the
Agent,  for the benefit of the  Lenders,  as it may be amended or modified  from
time to time in accordance with the terms hereof.

         "Guarantors"  means each  Subsidiary  of the  Borrower now or hereafter
formed or acquired  which has  executed  and  delivered a Guarantee  pursuant to
Section 6.27.

         "Hedge  Agreement"  means  any  interest  rate  protection   agreement,
interest rate future,  interest rate option,  interest rate swap,  interest rate
cap or other interest rate hedge or  arrangement  entered with any Lender or any
Affiliate of a Lender under which the Borrower is party or is beneficiary.

         "Interest  Expense"  means as of any date,  for the fiscal quarter most
recently ended and the immediately  preceding three fiscal quarters,  the sum of
(i) the amount of all  interest  on Funded Debt which was paid,  payable  and/or
accrued for such period (without  duplication of previous  amounts) and (ii) all
commitment, letter of credit or line of credit fees paid, payable and/or accrued
for such  period  (without  duplication  of  previous  amounts) to any lender in
exchange for such lender's commitment to lend.

         "Interest Period" means, with respect to a LIBOR Loan, a period of one,
two, three or six months,  commencing on a Business Day selected by the Borrower
pursuant to this Agreement.  Such Interest Period shall end on (but exclude) the
day which  corresponds  numerically to such date one, two or three or six months
thereafter,   provided,   however,   that  if  there  is  no  such   numerically
corresponding  day in such next, second or third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second or third
or sixth  succeeding  month.  If an Interest Period would otherwise end on a day
which  is not a  Business  Day,  such  Interest  Period  shall  end on the  next
succeeding  Business  Day,  provided,  however,  that  if said  next  succeeding
Business Day falls in a new calendar  month,  such Interest  Period shall end on
the  immediately  preceding  Business  Day. No Interest  Period with  respect to
Revolving Loans may end after the Revolving Termination Date. No Interest Period
with respect to Facility A Term Loans may end after the  Facility A  Termination
Date. No Interest Period with respect to Facility B Term Loans may end after the
Facility B Termination Date.

         "Joining Lender" has the meaning set forth in Section 12.4(i).

         "Joining Lender Agreement" means a Joining Lender Agreement in the form
of Exhibit I.

         "Lenders" means the lending  institutions listed on the signature pages
of this Agreement and their respective successors and assigns.

         "Letter of Credit" shall have the meaning set forth in Section 2.1.

         "Letter of Credit Amount" means the stated maximum amount  available to
be drawn under a particular  Letter of Credit,  as such amount may be reduced or
reinstated  from time to time in  accordance  with the  terms of such  Letter of
Credit.

         "Letter  of Credit  Request"  means a request by the  Borrower  for the
issuance  of a Letter of  Credit,  on the  Agent's  standard  form of standby or
commercial letter of credit application and agreement, the current form of which
is  attached   hereto  as  Exhibit  E,  and  containing   terms  and  conditions
satisfactory to the Agent in its sole discretion.

         "Leverage Ratio Level" means the  Revolving/Term A Leverage Ratio Level
or the Term B Leverage Ratio Level, as applicable.

         "Leverage Ratio Level Certificate" is defined in Section 2.8.

         "LIBOR" means, for any Interest Period for any LIBOR Loan, the interest
rate per annum obtained by dividing (a) the average of the respective  rates per
annum at which  deposits  in United  States  dollars are offered to the Agent in
London,  England in the London interbank market at 11:00 a.m.,  London time, two
Business  Days  before  the  first  day of such  Interest  Period  in an  amount
substantially  equal to the  amount of such Loan and for a period  equal to such
Interest  Period by (b) a  percentage  equal to 100%  minus  the  LIBOR  Reserve
Percentage for such Interest Period.

         "LIBOR Loan" means a Loan when it bears interest at the LIBOR Rate.

         "LIBOR  Rate"  means,  with  respect to a LIBOR  Loan for the  relevant
Interest Period,  the sum of (i) LIBOR applicable to such Interest Period,  plus
(ii) the following margin, as appropriate:  (x) for Revolving Loans and Facility
A Term Loans, the Revolving/Term A Applicable Margin and (y) for Facility B Term
Loans, the Term B Applicable Margin. The LIBOR Rate shall be rounded to the next
higher multiple of 1/100 of 1% if the rate is not such a multiple.

         "LIBOR Reserve Percentage" means, for any Interest Period for any LIBOR
Loan, the reserve  percentage  applicable two Business Days before the first day
of such Interest Period under regulations  issued from time to time by the Board
of Governors of the Federal  Reserve System for  determining the maximum reserve
requirements  (including any emergency,  supplemental or other marginal  reserve
requirement) for any Lender with respect to liabilities or assets  consisting of
or including Eurocurrency  Liabilities (or with respect to any other category of
liabilities  that  includes  deposits by reference to which the interest rate on
such LIBOR Loan is determined) having a term equal to such Interest Period.

         "Lien" means any lien, security interest or other charge or encumbrance
of any kind, or any other type of preferential  arrangement,  including the lien
or retained  title of a  conditional  vendor and any  easement,  right of way or
other encumbrance on title to real property.

         "Loan"  means,  with  respect to a Lender,  a  Facility A Term Loan,  a
Facility B Term Loan or a Revolving Loan, as applicable.

         "Loan Documents"  means this Agreement,  any Letter of Credit Requests,
the Letters of Credit, the Notes, the Guaranties,  the Collateral Documents, the
Guarantor Collateral  Documents,  any Hedge Agreement and any other agreement or
document  executed by the  Borrower or any  Guarantor  in  connection  herewith,
including but not limited to UCC-1 Financing Statements,  as such agreements and
documents may be amended,  supplemented and otherwise modified from time to time
in accordance with the terms hereof.

         "Material  Adverse  Effect" means a material  adverse effect on (i) the
business,  Property, condition (financial or otherwise) or results of operations
of the Borrower and its Subsidiaries  taken as a whole,  (ii) the ability of the
Borrower  to  perform  its  obligations  under the Loan  Documents  or (iii) the
validity  or  enforceability  of any of the  Loan  Documents  or the  rights  or
remedies of the Agent or the Lenders thereunder.

         "Maximum  Aggregate  Commitment"  means  an  Aggregate  Commitment  of
          ------------------------------
$175,000,000.

         "Multiemployer  Plan"  means a Plan that is a  "multiemployer  plan" as
defined in Section 3(37) or 4001(i)(3) of the Borrower's ERISA Plan.

         "Net  Income"  means  for  the  Borrower  and  its  Subsidiaries  on  a
consolidated  basis,  net income as  determined  in  accordance  with  Agreement
Accounting Principles.

         "Net Proceeds" means, with respect to any asset disposition or issuance
of equity or debt securities of the Borrower or any of its Subsidiaries, the net
amount equal to the aggregate  amount  received in cash in connection  with such
asset disposition or issuance of equity or debt securities minus federal,  state
and local  taxes and other  expenses  including  legal,  accounting,  brokerage,
advertising, underwriting and closing costs incurred and paid in connection with
such  asset  disposition  or  issuance  of equity or debt  securities  and taxes
reasonably  estimated  to  be  actually  payable  as  a  result  of  such  asset
disposition or issuance of equity or debt securities.

         "Notes" means,  collectively,  the Revolving Notes, the Facility A Term
Notes and the Facility B Term Notes.

         "Notice of Assignment" is defined in Section 12.3(ii).

         "Obligations"  means all unpaid  principal  of and  accrued  and unpaid
interest on the Notes,  the  obligation to reimburse  drawings  under Letters of
Credit  (including  the  contingent  obligation to reimburse any drawings  under
outstanding  Letters of Credit),  all accrued and unpaid fees and all  expenses,
reimbursements,  indemnities  and  other  obligations  of  the  Borrower  or any
Guarantor to the Lenders or to any Lender,  the Agent or any  indemnified  party
hereunder arising under the Loan Documents.

         "Participants" is defined in Section 12.2(i).

         "Payment  Date"  means the last day of each  January,  April,  July and
October in each calendar year.

         "PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.

         "Person" means any natural person, corporation, firm, limited liability
company, joint venture,  partnership,  association,  enterprise,  trust or other
entity or  organization,  or any  government  or  political  subdivision  or any
agency, department or instrumentality thereof.

         "Petcetera L.P."  means  Canadian  Petcetera  Limited  Partnership,  a
Canadian limited partnership.

         "Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code  maintained  by or  contributed  to by the  Borrower  or any  member of the
Controlled Group.

         "Prior Loan Agreement" is defined in the first Recital.

         "Property"  of a  Person  means  any and all  property,  whether  real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.

         "Purchasers" is defined in Section 12.3(i).

         "Registered Loans" is defined in Section 3.2(b).

         "Registered Notes" is defined in Section 3.2(b).

         "Regulation  D" means  Regulation  D of the Board of  Governors  of the
Federal Reserve System as from time to time in effect and any successor  thereto
or other  regulation  or  official  interpretation  of said  Board of  Governors
relating  to reserve  requirements  applicable  to member  banks of the  Federal
Reserve System.

         "Regulation  U" means  Regulation  U of the Board of  Governors  of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of  purchasing  or carrying  margin
stocks applicable to member banks of the Federal Reserve System.

         "Rent  Expense"  means,  for the  Borrower and its  Subsidiaries,  on a
consolidated  basis,  for any period of four consecutive  fiscal quarters,  rent
expenses under operating leases of real, personal or mixed property.

         "Reportable  Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Single
Employer  Plan,  excluding,  however,  such  events  as to  which  the  PBGC  by
regulation  waived  the  requirement  of  Section  4043(a)  of ERISA  that it be
notified within 30 days of the occurrence of such event, provided, however, that
a failure to meet the minimum funding standard of Section 412 of the Code and of
Section 302 of ERISA shall be a Reportable  Event  regardless of the issuance of
any such waiver of the notice  requirement  in  accordance  with either  Section
4043(a) of ERISA or Section 412(d) of the Code.

         "Required  Lenders"  means  Lenders  in the  aggregate  having at least
66-2/3% of the Aggregate  Commitment (or, if any Commitment has been terminated,
with  respect  to such  Commitment,  Lenders in the  aggregate  holding at least
66-2/3% of the aggregate unpaid  principal amount of the outstanding  Loans made
under such Commitment).

         "Required Facility A Term Lenders" means Facility A Term Lenders in the
aggregate  having at least 66-2/3% of the aggregate  Facility A Term Commitments
(or,  if  any  such  Commitment  has  been  terminated,  with  respect  to  such
Commitment, Facility A Term Lenders in the aggregate holding at least 66-2/3% of
the aggregate unpaid  principal amount of the outstanding  Facility A Term Loans
made under such Commitment).

         "Required Facility B Term Lenders" means Facility B Term Lenders in the
aggregate  having at least 66-2/3% of the aggregate  Facility B Term Commitments
(or,  if  any  such  Commitment  has  been  terminated,  with  respect  to  such
Commitment, Facility B Term Lenders in the aggregate holding at least 66-2/3% of
the aggregate unpaid  principal amount of the outstanding  Facility B Term Loans
made under such Commitment).

         "Required  Revolving  Lenders" means Revolving Lenders in the aggregate
having at least 66-2/3% of the aggregate Revolving  Commitments (or, if any such
Commitment  has been  terminated,  with  respect to such  Commitment,  Revolving
Lenders in the  aggregate  holding  at least  66-2/3%  of the  aggregate  unpaid
principal amount of the outstanding Revolving Loans made under such Commitment).

         "Revolving  Commitment"  means,  for each  Lender  having  a  Revolving
Commitment,  the obligation of such Lender to make Revolving Loans not exceeding
the amount set forth  opposite  its name on Schedule 1 hereto or as set forth in
any  Assignment  and  Acceptance  relating  to any  assignment  that has  become
effective  pursuant to Section 12.3, as such amount may be modified from time to
time pursuant to the terms hereof.

         "Revolving  Commitment  Percentage"  means,  as to each Lender having a
Revolving  Commitment at any time,  the  percentage  of the Aggregate  Revolving
Commitment then constituted by such Lender's Revolving Commitment.

         "Revolving  Lender"  means a Lender  having a Revolving  Commitment  or
Revolving Loans outstanding.

         "Revolving Loan" is defined in Section 2.1(i).

         "Revolving Note" means a promissory note, in substantially  the form of
Exhibit A-1 hereto,  duly  executed by the  Borrower and payable to the order of
the  Lender  having a  Revolving  Commitment  in the  aggregate  amount  of such
Lender's Revolving Commitment.

         "Revolving/Term  A Applicable  Margin" means, with respect to Revolving
Loans and Facility A Term Loans, for each LIBOR Loan and for each Base Rate Loan
as set forth below:

                  Revolving/Term A                   LIBOR        Base
                  Leverage Ratio Level               Margin    Rate Margin
                  --------------------               ------    -----------

                           5                         2.000%        0.500%
                           4                         1.750%        0.250%
                           3                         1.625%        0.125%
                           2                         1.375%            0%
                           1                         1.000%            0%

         "Revolving/Term  A Leverage Ratio Level": if the Total Debt Ratio shall
be less than or equal to 0.75:1.00,  the  Revolving/Term  A Leverage Ratio Level
shall be 1; if the Total Debt Ratio  shall be greater  than  0.75:1.00  and less
than or equal to 1:00:1.00,  the  Revolving/Term A Leverage Ratio Level shall be
2; if the Total Debt  Ratio  shall be greater  than  1.00:1.00  and less than or
equal to 1.50:1.00, the Revolving/Term A Leverage Ratio Level shall be 3; if the
Total  Debt  Ratio  shall be greater  than  1.50:1.00  and less than or equal to
2.00:1.00,  the  Revolving/Term  A Leverage  Ratio  Level shall be 4; and if the
Total Debt Ratio shall be greater than 2.00:1.00,  the Revolving/Term A Leverage
Ratio Level shall be 5.

         "Revolving Termination Date" means July 15, 2004.

         "SEC" means the United States Securities and Exchange Commission.

         "SEC  Report"  means a  Current  Report  on Form  8-K  pursuant  to the
Securities Exchange Act of 1934.

         "Section" means a numbered  section of this  Agreement,  unless another
document is specifically referenced.

         "Security Agreement" means the Security Agreement dated as of even date
herewith, in form and substance  satisfactory to the Agent, made by the Borrower
in favor of the Agent,  for the benefit of the Lenders,  as it may be amended or
modified from time to time in accordance with the terms hereof.

         "Single Employer Plan" means a Plan other than a Multiemployer Plan.

         "Solvent" means when used with respect to any Person, that:

         (i) the present fair salable value of such Person's assets is in excess
of the total amount of the probable liability on such Person's liabilities;

         (ii)  such Person is able to pay its debts as they become due; and

         (iii) such Person does not have unreasonably  small capital to carry on
such Person's business as theretofore  operated and all businesses in which such
Person is about to engage.

         "Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding  securities  having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its  Subsidiaries or by such Person and one or more of its  Subsidiaries,  or
(ii) any partnership,  limited liability company, association,  joint venture or
similar  business  organization  in which such Person or any  Subsidiary of such
Person is a general  partner  or  managing  member  thereof,  or holds a similar
function therein.  Unless otherwise expressly provided, all references herein to
a "Subsidiary" shall mean a Subsidiary of the Borrower.

         "Tax Compliance Certificate" is defined in Section 2.16 hereof.

         "Taxes" is defined in Section 3.2.

         "Tax Register" is defined in Section 12.6(b).

         "Term B Applicable Margin":  with  respect  to  Facility B  Term Loans,
for each LIBOR Loan and for each Base Rate Loan as set forth below:

                      Facility B                     LIBOR        Base
                  Leverage Ratio Level               Margin    Rate Margin
                  --------------------               ------    -----------

                           2                         3.250%       1.750%
                           1                         3.000%       1.500%

         "Term B Leverage  Ratio  Level":  if the Total Debt Ratio shall be less
than or equal to 1.50:1.00,  the Term B Leverage  Ratio Level shall be 1; and if
the Total Debt Ratio shall be greater than 1.50:1.00,  the Term B Leverage Ratio
Level shall be 2.

         "Total Debt Ratio"  means for the Borrower  and its  Subsidiaries  on a
consolidated  basis,  determined  as of the end of each  fiscal  quarter for the
period of four fiscal  quarters then ended,  the ratio of Funded Debt (including
obligations under Capitalized Leases) outstanding at such time to EBITDA.

         "Transferee" is defined in Section 12.5.

         "Type" means, with respect to a Loan, its nature as a Base Rate Loan or
a LIBOR Loan.

         "UBOC" means Union Bank of California, N.A. in its individual capacity,
and its successors.

         "Unfunded  Liabilities"  means the amount (if any) by which the present
value of all nonforfeitable benefits under all Single Employer Plans exceeds the
fair  market  value of all such Plan  assets  allocable  to such  benefits,  all
determined in accordance  with the  respective  most recent  valuations for such
Plans.

         "U.S.  Person"  means a citizen or  resident  of the United  States,  a
corporation,  a partnership or other entity created or organized in or under any
laws of the United States or any State  thereof,  or any estate or trust that is
subject to Federal income taxation regardless of the source of its income.

         "Yukon  Subsidiary"  means 17187 Yukon, a corporation  formed under the
laws of the Territory of Yukon, Canada, and a Subsidiary of the Borrower.

         The  foregoing  definitions  shall be  equally  applicable  to both the
singular and plural forms of the defined terms.

                                    ARTICLE 2

                                   THE CREDIT
                                   ----------

         2.1      Revolving Loans.
                  ---------------

         (i) Each Lender having a Revolving  Commitment severally agrees, on the
terms and conditions set forth in this  Agreement,  to make loans on a revolving
credit basis (each a "Revolving Loan," and, collectively, the "Revolving Loans")
to the  Borrower  from  time  to  time  and to  participate  in  standby  and/or
commercial  letters of credit issued for the account of the Borrower pursuant to
Section 2.2 from time to time (each a "Letter of Credit" and, collectively,  the
"Letters of Credit"),  from and  including the Closing Date to but excluding the
Revolving  Termination  Date  in an  amount  not to  exceed  the  amount  of its
Revolving  Commitment.  The sum of (a) the  aggregate  principal  amount  of all
Revolving Loans  outstanding,  (b) the aggregate  Letter of Credit Amount of all
Letters  of Credit  outstanding  and (c) the  aggregate  amount of  unreimbursed
drawings  under all Letters of Credit shall not exceed,  at any time, the amount
of the Aggregate  Revolving  Commitment.  Further,  the sum of (A) the aggregate
Letter  of Credit  Amount  of all  Letters  of  Credit  outstanding  and (B) the
aggregate amount of unreimbursed  drawings under all Letters of Credit shall not
exceed  $10,000,000  at any time.  Within the limit of each  Lender's  Revolving
Commitment,  the  Borrower  may borrow,  have  Letters of Credit  issued  and/or
renewed for the Borrower's  account,  prepay Revolving Loans,  reborrow and have
additional Letters of Credit issued for the Borrower's account.

         (ii)  The  principal  amount  of  each  Lender's   Revolving  Loan  and
participation  in a Letter of Credit  shall be in an amount equal to the product
of (a) such Lender's Revolving Commitment  Percentage  (expressed as a fraction)
and (b) the total amount of the Revolving Loan or Revolving  Loans or Letters of
Credit  requested;  provided  that in no event shall any Lender be  obligated to
make a  Revolving  Loan if after  giving  effect  to such  Revolving  Loan  such
Lender's Revolving Loans, the Revolving  Commitment  Percentage of the aggregate
Letter of Credit Amount of all Letters of Credit  outstanding  and the Revolving
Commitment Percentage of the aggregate amount of unreimbursed drawings under all
Letters of Credit  outstanding  would exceed its Revolving  Commitment or if the
amount  of  such  requested  Loan  is  in  excess  of  such  Lender's  Available
Commitment.

         (iii) The Revolving  Loans made by each Lender to the Borrower shall be
evidenced by a Revolving Note, with appropriate  insertions therein as to payee,
date and principal amount,  payable to the order of such Lender and representing
the obligation of the Borrower to pay the aggregate  unpaid  principal amount of
all Revolving Loans made by such Lender to the Borrower,  with interest  thereon
as  prescribed  in Sections 2.8 and 2.9.  Each such Lender is hereby  authorized
(but not  required) to record the date and amount of each payment or  prepayment
of principal of its  Revolving  Loans made to the  Borrower,  each  continuation
thereof, each conversion of all or a portion thereof to another Type and, in the
case of LIBOR Loans, the length of each Interest Period with respect thereto, in
the books and records of such Lender,  and any such recordation shall constitute
prima facie evidence of the accuracy of the information so recorded. The failure
of any Lender to make any such  recordation or notation in the books and records
of such Lender (or any error in such  recordation or notation)  shall not affect
the  obligations of the Borrower  hereunder or under the Revolving  Notes.  Each
Revolving  Note shall (a) be dated the Closing Date, (b) provide for the payment
of  interest in  accordance  with  Sections  2.8 and 2.9 and (c) be stated to be
payable on the Revolving Termination Date.

         (iv) The  Borrower  shall  give the Agent  irrevocable  written  notice
substantially  in the form of Exhibit F attached  hereto  (which  notice must be
received by the Agent prior to 10:30 a.m.,  Los Angeles  time,  on the  proposed
Borrowing Date or, if all or any part of the Revolving Loans are requested to be
made as LIBOR Loans,  three Business Days prior to each proposed Borrowing Date)
requesting  that the Lenders  having a Revolving  Commitment  make the Revolving
Loans on the proposed  Borrowing Date and specifying (a) the aggregate amount of
Revolving Loans requested to be made (which must be in an aggregate amount equal
to at least  $1,000,000  or an integral  multiple of  $500,000),  (b) subject to
Section 2.6, whether the Revolving Loans are to be LIBOR Loans,  Base Rate Loans
or a combination  thereof and (c) if the  Revolving  Loans are to be entirely or
partly LIBOR Loans,  the respective  amounts of each such Type of Revolving Loan
and the respective lengths of the Interest Periods therefor.  On receipt of such
notice,  the Agent shall promptly notify each such Lender thereof not later than
11:00 a.m.,  Los Angeles  time,  on the date of receipt of such  notice.  On the
proposed  Borrowing  Date, not later than 1:00 p.m., Los Angeles time, each such
Lender shall make available to the Agent at its office specified in Section 13.1
such Lender's Revolving Commitment  Percentage of the aggregate borrowing amount
(as  determined in accordance  with Section  2.1(ii)) in  immediately  available
funds. Not later than 1:30 p.m., Los Angeles time, on the date of such Loans and
upon fulfillment of the applicable  conditions set forth in Section 4, the Agent
shall  make such  Revolving  Loans  available  to the  Borrower  in  immediately
available  funds.  Each  notice  pursuant  to  this  Section  2.1(iv)  shall  be
irrevocable  and  binding  on the  Borrower.  The Agent may,  in the  absence of
notification from any Lender having a Revolving  Commitment that such Lender has
not made its pro rata share  available  to the Agent,  on such date,  credit the
account  of the  Borrower  on the books of such  office  of the  Agent  with the
aggregate amount of such Revolving Loans.

         (v) At the  Borrower's  option  and upon at least five  Business  Days'
prior  irrevocable  written notice to the Agent, with such notice specifying the
amount and the date of such reduction,  the Borrower may permanently  reduce the
Aggregate  Revolving  Commitment  in whole at any time or in part  from  time to
time; provided,  however, that each partial reduction of the Aggregate Revolving
Commitment  shall be in an aggregate  amount equal to at least  $1,000,000 or an
integral  multiple of $1,000,000.  The Agent shall  promptly  notify each Lender
having a Revolving  Commitment  (by telecopy or by telephone) of such  requested
Aggregate Revolving Commitment reduction.

         Reductions  of the  Aggregate  Revolving  Commitment  pursuant  to this
Section  2.1(v)  shall  automatically   effect  a  reduction  of  the  Revolving
Commitment  of each such  Lender to an amount  equal to the  product  of (a) the
Aggregate  Revolving  Commitment  of all  Lenders,  as reduced  pursuant to this
Section 2.1(v) and (b) the Revolving  Commitment  Percentage of such Lender,  in
each  case  determined  immediately  prior to such  reduction  of the  Aggregate
Revolving Commitment on such date.

         Upon each reduction of the Aggregate Revolving Commitment, the Borrower
shall (a) pay the unused  commitment  fee,  payable  pursuant  to  Section  2.3,
accrued on the amount of the Aggregate  Revolving  Commitment so reduced through
the date of such reduction,  (b) prepay the amount,  if any, by which the sum of
(1) the  aggregate  unpaid  principal  amount of the  Revolving  Loans,  (2) the
aggregate  Letter of Credit Amount of all Letters of Credit  outstanding and (3)
the  aggregate  amount of  unreimbursed  drawings  under all  Letters  of Credit
exceeds the amount of the Aggregate Revolving Commitment as so reduced, together
with accrued interest on the amount being prepaid to the date of such prepayment
(or,  with  respect to  outstanding  Letters of Credit,  make a cash  collateral
deposit  in an amount  equal to such  excess to the  extent  such  excess is not
corrected by the foregoing prepayment) and (c) compensate such Lenders for their
funding costs, if any, in accordance with Section 3.1.

         2.2      Issuance of Letters of Credit.
                  -----------------------------

         (i) The  Borrower  shall be entitled to request the issuance of standby
and/or  commercial  Letters of Credit from time to time from and  including  the
Closing Date to but excluding the date which is seven Business Days prior to the
Revolving  Termination  Date by giving the Agent (a) a standby  Letter of Credit
Request at least three  Business Days before the  requested  date of issuance of
such standby  Letter of Credit and (b) a commercial  Letter of Credit Request no
later than the requested  date of issuance of such  commercial  Letter of Credit
(provided  that such Letter of Credit  Request is received by the Agent no later
than 10:00 a.m.,  Los  Angeles  time and any Letter of Credit  Request  received
after such time shall be deemed to have been  received on the next Business Day)
(which  date of  issuance  shall be a  Business  Day).  All  letters  of  credit
outstanding on the Closing Date which were issued under the Prior Loan Agreement
shall be deemed to have been issued  hereunder on and as of the Closing Date and
shall be subject to the terms and conditions  hereof.  No Letter of Credit shall
have an  expiration  date more than one year from its date of  issuance or after
the Revolving Termination Date. The aggregate Letter of Credit Amounts under all
outstanding Letters of Credit and the aggregate amount of unreimbursed  drawings
under Letters of Credit shall reduce, dollar for dollar, the Aggregate Available
Commitment.  The sum of (a) the aggregate Letter of Credit Amount of all Letters
of Credit  outstanding  and (b) the aggregate  amount of  unreimbursed  drawings
under  all  Letters  of  Credit  shall not at any time  exceed  $10,000,000.  In
addition,  the sum of (i) the aggregate  principal amount of all Revolving Loans
outstanding, (ii) the aggregate Letter of Credit Amount of all Letters of Credit
outstanding and (iii) the aggregate  amount of  unreimbursed  drawings under all
Letters  of  Credit  shall not  exceed,  at any time,  the  Aggregate  Revolving
Commitment.  Any Letter of Credit Request received by the Agent later than 10:00
a.m.,  Los  Angeles  time,  shall be deemed to have  been  received  on the next
Business Day. Each Letter of Credit  Request shall be made in writing,  shall be
signed by an Authorized  Officer,  shall be  irrevocable  and shall be effective
upon receipt by the Agent.  Provided  that a valid Letter of Credit  Request has
been  received  by the  Agent  and  upon  fulfillment  of the  other  applicable
conditions  set forth in Section 4.3, the Agent will issue the requested  Letter
of Credit from its office specified in Section 13.1.

         Commercial  Letters  of Credit  shall be used only for the  purpose  of
supporting  purchases of inventory by the Borrower and standby Letters of Credit
shall be used  solely to provide  support  for  leasing  (including  Capitalized
Leases) and insurance obligations of the Borrower.

         (ii) Immediately upon the issuance of each Letter of Credit,  the Agent
shall be deemed to have sold and  transferred  to each  Lender,  and each Lender
shall be deemed to have  purchased  and  received  from the Agent,  in each case
irrevocably and without any further action by any party,  an undivided  interest
and  participation  in such Letter of Credit,  each drawing  thereunder  and the
obligations of the Borrower under this Agreement in respect thereof in an amount
equal to the product of (a) such Lender's  Revolving  Commitment  Percentage and
(b) the  maximum  amount  available  to be drawn  under  such  Letter  of Credit
(assuming  compliance  with all  conditions to drawing).  The Agent shall advise
each Lender  having a  Revolving  Commitment  of the  issuance of each Letter of
Credit,  the Letter of Credit Amount of such Letter of Credit, any change in the
face amount or expiration  date of such Letter of Credit,  the  cancellation  or
other  termination of such Letter of Credit and any drawing under such Letter of
Credit.

    (iii) The  payment by the Agent of a draft  drawn under any Letter of Credit
shall  first be made from any cash  collateral  deposit  held by the Agent  with
respect to such  Letter of Credit.  After any such cash  collateral  deposit has
been  applied,  the  payment by the Agent of a draft  drawn  under any Letter of
Credit shall  constitute  for all purposes of this  Agreement  the making by the
Agent in its individual  capacity as a Lender  hereunder (in such capacity,  the
"Drawing  Lender") of a Revolving Loan bearing  interest at the Base Rate in the
amount of such payment  (but  without any  requirement  of  compliance  with the
conditions  set forth in  Section  4.3).  In the event that any such Loan by the
Drawing Lender resulting from a drawing under any Letter of Credit is not repaid
by the Borrower by 10:00 a.m.,  Los Angeles  time, on the day of payment of such
drawing,  the Agent shall  promptly  notify each other Lender having a Revolving
Commitment.  Each such Lender shall, on the day of such notification (or if such
notification  is not given by 11:00 a.m., Los Angeles time, on such day, then on
the next succeeding Business Day), make a Revolving Loan bearing interest at the
Base Rate, which shall be used to repay the applicable  portion of the Revolving
Loan of the Drawing Lender with respect to such Letter of Credit drawing,  in an
amount equal to the amount of such  Lender's  participation  in such drawing for
application  to repay  the  Drawing  Lender  (but  without  any  requirement  of
compliance  with the  applicable  conditions set forth in Section 4.3) and shall
deliver to the Agent for the account of the Drawing  Lender,  on the day of such
notification  (or if such  notification  is not given by 11:00 a.m., Los Angeles
time, on such day, then on the next succeeding  Business Day) and in immediately
available  funds,  the  amount of such  Revolving  Loans.  In the event that any
Lender  fails to make  available  to the Agent for the  account  of the  Drawing
Lender the amount of such  Revolving  Loan, the Drawing Lender shall be entitled
to recover such amount on demand from such Lender together with interest thereon
at  the  Federal  Funds   Effective  Rate  for  each  day  such  amount  remains
outstanding.

         (iv) The  obligations  of the  Borrower  with  respect to any Letter of
Credit,  any Letter of Credit  Request  and any other  agreement  or  instrument
relating  to any Letter of Credit  and any  Revolving  Loan made  under  Section
2.2(iii)  shall be absolute,  unconditional  and  irrevocable  and shall be paid
strictly in accordance with the terms of the aforementioned  documents under all
circumstances, including the following:

                  (a)  any lack of validity or  enforceability of any  Letter of
Credit, this Agreement or any other Loan Document;

                  (b) the existence of any claim, setoff, defense or other right
that the Borrower may have at any time against any  beneficiary or transferee of
any Letter of Credit (or any Person for whom any such  beneficiary or transferee
may be acting),  the Agent,  any Lender  (other than the defense of payment to a
Lender in  accordance  with the terms of this  Agreement)  or any other  Person,
whether  in  connection  with this  Agreement,  any  other  Loan  Document,  the
transactions contemplated hereby or thereby or any unrelated transaction;

                  (c) any statement or other document presented under any Letter
of Credit  proving to be forged,  fraudulent,  invalid  or  insufficient  in any
respect,  or any  statement  therein  being untrue or  inaccurate in any respect
whatsoever;

                  (d)  payment by the Agent  under any Letter of Credit  against
presentation of a draft or certificate that does not comply on its face with the
terms of such Letter of Credit;

                  (e) any exchange,  release or nonperfection of any collateral,
or any  release,  amendment  or  waiver  of or  consent  to  departure  from any
Guarantee, other Loan Document or other guarantee, for any of the Obligations of
the Borrower in respect of the Letters of Credit; and

                  (f) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.

         (v) The Borrower  shall pay to the Agent with respect to each Letter of
Credit issued hereunder, the following fees:

                  (a) for each  commercial  Letter of Credit for the period from
and  including  the day such  commercial  Letter  of  Credit  is  issued  to but
excluding the day such commercial Letter of Credit expires, the letter of credit
fees  payable to the Agent for the benefit of the Lenders  shall be as set forth
on the  Agent's  published  Schedule of Fees:  Trade  Services;  provided  that,
notwithstanding  anything to the contrary in such  Schedule,  (A) issuance  fees
shall be equal to the  greater  of (x) the  product  of (i)  0.125% and (ii) the
Letter of Credit  Amount of such Letter of Credit to be issued or (y) $100 (such
issuance  fee to be payable on the date such Letter of Credit is issued) and (B)
negotiation  fees shall be equal to the greater of (x) the product of (i) 0.125%
and (ii) the  Letter of  Credit  Amount of such  Letter  of Credit  (or  portion
thereof) to be negotiated or (y) $100 (such negotiation fee to be payable on the
date such Letter of Credit (or portion thereof) is negotiated);

                  (b) for each  commercial  Letter of Credit,  a fronting fee to
the Agent for its benefit alone equal to (x) $100, if the  commercial  Letter of
Credit  Amount  is less than  $500,000  or (y)  0.125%  of the  Letter of Credit
Amount,  if the  commercial  Letter  of  Credit  Amount is equal to or more than
$500,000 (such fee to be payable on the date of issuance);

                  (c) for each standby Letter of Credit, for the period from and
including  the day such standby  Letter of Credit is issued to but excluding the
day such standby Letter of Credit  expires,  a letter of credit fee to the Agent
for the benefit of the Lenders equal to the  Revolving/Term A Applicable  Margin
(then in effect for LIBOR  Loans),  multiplied  by the  Letter of Credit  Amount
(such fee to be payable on the date of issuance);

                  (d) for each standby  Letter of Credit,  a fronting fee to the
Agent for its benefit  alone equal to 0.15% of the Letter of Credit Amount (such
fee to be payable on date of issuance); and

                  (e)  from  time to time,  such  additional  fees  and  charges
(including cable charges) as are generally associated with letters of credit, in
accordance with the Agent's standard  internal charge guidelines and the related
Letter of Credit Request.

         (vi) The  Borrower  agrees to the  provisions  in the  Letter of Credit
Request forms;  provided,  however,  that the terms of the Loan Documents  shall
take  precedence  if there is any  inconsistency  between  the terms of the Loan
Documents and the terms of said form.

         (vii) The  Borrower  assumes all risks of the acts or  omissions of any
beneficiary  or  transferee  of any Letter of Credit with  respect to its use of
such  Letter  of  Credit.  Neither  the Agent  nor any  Lender  nor any of their
respective  officers or directors shall be liable or responsible for (i) the use
that  may be made of any  Letter  of  Credit  or any  acts or  omissions  of any
beneficiary   or  transferee  in  connection   therewith;   (ii)  the  validity,
sufficiency or genuineness of documents,  or of any endorsement thereof, even if
such documents should prove to be in any or all respects invalid,  insufficient,
fraudulent  or forged;  (iii) in the absence of any gross  negligence or willful
misconduct by the Agent,  payment by the Agent against presentation of documents
that do not comply with the terms of any Letter of Credit,  including failure of
any  documents  to bear any  reference  or adequate  reference  to any Letter of
Credit; or (iv) any other  circumstance  whatsoever in making or failing to make
payment under any Letter of Credit.  In furtherance and not in limitation of the
foregoing,  the Agent may accept any document  that appears on its face to be in
order,  without  responsibility  for further  investigation,  regardless  of any
notice or information to the contrary.

         2.3  Fees.  The  Borrower  agrees  to  pay  to the  Lenders  an  unused
commitment  fee to be shared  among  Lenders  on the  basis of their  respective
Revolving Commitment  Percentages with respect to the Revolving  Commitments for
the period from and  including  the Closing Date to but  excluding the Revolving
Termination  Date,  computed at the applicable  percentage,  as follows,  of the
daily amount of the Aggregate Available  Commitment from time to time in effect:
(a)  if the  Facility  Usage  Amount  equals  or  exceeds  50% of the  Aggregate
Revolving Commitment,  0.25% per annum, (b) if the Facility Usage Amount is less
than 50% of the Aggregate Revolving Commitment, but exceeds 25% of the Aggregate
Revolving  Commitment,  0.375%  per annum or (C) if the  Facility  Usage  Amount
equals  or is less than 25% of the  Aggregate  Revolving  Commitment,  0.50% per
annum.  Such fee shall be payable  quarterly in arrears on each Payment Date and
on the Revolving  Termination  Date,  commencing on the first such date to occur
after the Closing Date.

         2.4      Facility A Term Loans.
                  ---------------------

                  (i) Subject to the terms and  conditions  hereof,  each Lender
having a  Facility  A Term  Commitment  severally  agrees to make a term loan (a
"Facility  A Term  Loan") to the  Borrower  on the  Closing  Date in a principal
amount equal to the amount of the Facility A Term Commitment of such Lender. Any
Facility A Term Loan repaid or prepaid may not be reborrowed.

                  (ii) The  Facility  A Term Loan made by each  Lender  shall be
evidenced by a Facility A Term Note, with appropriate  insertions  therein as to
payee,  date and  principal  amount,  payable  to the order of such  Lender  and
representing  the  obligation  of the  Borrower  to  pay  the  aggregate  unpaid
principal  amount  of the  Facility  A Term  Loan  made  by such  Lender  to the
Borrower, with interest thereon as prescribed in Sections 2.8 and 2.9. Each such
Lender is hereby  authorized (but not required) to record the date and amount of
each payment or  prepayment of principal of its Facility A Term Loan made to the
Borrower, each continuation thereof, each conversion of all or a portion thereof
to another  Type and, in the case of LIBOR  Loans,  the length of each  Interest
Period with respect  thereto,  in the books and records of such Lender,  and any
such  recordation  shall  constitute prima facie evidence of the accuracy of the
information so recorded.  The failure of any Lender to make any such recordation
or  notation  in the  books and  records  of such  Lender  (or any error in such
recordation  or  notation)  shall not affect  the  obligations  of the  Borrower
hereunder  or under the Facility A Term Notes.  Each  Facility A Term Note shall
(a) be dated the  Closing  Date,  (b)  provide  for the  payment of  interest in
accordance  with  Sections  2.8  and  2.9 and (c) be  stated  to be  payable  in
installments of principal in accordance  with, and subject to the provisions of,
Section 2.4(iv).

                  (iii) The Borrower  shall give the Agent  irrevocable  written
notice  substantially  in the form of  Exhibit F hereto  (which  notice  must be
received by the Agent prior to 10:00 a.m.,  Los Angeles  time,  one Business Day
prior to the Closing Date)  requesting that the Lenders having a Facility A Term
Commitment  make the Facility A Term Loans in accordance  with their  respective
Facility A Term  Commitments  on the Closing Date.  Upon receipt of such notice,
the Agent shall  promptly  notify each such Lender  thereof not later than 11:00
a.m.,  Los Angeles time,  on the date of receipt of such notice.  Not later than
1:00 p.m.,  Los Angeles  time,  on the Closing  Date each such Lender shall make
available  to the Agent at its office  specified  in Section  13.1 the amount of
such Lender's  aggregate  Facility A Term  Commitment in  immediately  available
funds.  The notice  pursuant to this Section shall be irrevocable and binding on
the  Borrower.  The Agent may,  in the absence of  notification  from any Lender
having a Facility A Term  Commitment  that such Lender has not made its pro rata
share available to the Agent,  on such date,  credit the account of the Borrower
on the  books of such  office  or the Agent  with the  aggregate  amount of such
Facility A Term Loans.

                  (iv) On each  reduction  date set forth in this  Section,  the
Borrower  shall on a pro rata basis repay the  principal  of the Facility A Term
Notes in an  aggregate  amount  equal to the amount set forth below  (subject to
Sections 2.17 and 2.18) (each such amount a "Facility A Reduction Installment"):

                October 30, 1999, January 29, 2000,
                April 29, 2000 and July 29, 2000             $1,687,500.00

                October 28, 2000,
                February 3, 2001, May 5, 2001
                and August 4, 2001                           $1,687,500.00

                November 3, 2001,
                February 2, 2002, May 4, 2002
                and August 3, 2002                           $2,250,000.00

                November 2, 2002,
                February 1, 2003, May 3, 2003
                and August 2, 2003                           $2,812,500.00

                November 1, 2003
                January 31, 2004 and May 1, 2004             $2,812,500.00

; provided,  that the final Facility A Reduction Installment paid shall be in an
amount equal to all amounts owed by the Borrower on the Facility A Term Notes.

         All outstanding  Facility A Term Loans shall be due and payable, to the
extent not previously paid in accordance with the terms hereof,  on the Facility
A Termination Date.

         2.5      Facility B Term Loans.
                  ---------------------

                  (i) Subject to the terms and  conditions  hereof,  each Lender
having a  Facility  B Term  Commitment  severally  agrees to make a term loan (a
"Facility  B Term  Loan") to the  Borrower  on the  Closing  Date in a principal
amount equal to the amount of the Facility B Term Commitment of such Lender. Any
Facility B Term Loan repaid or prepaid may not be reborrowed.

                  (ii) The  Facility  B Term Loan made by each  Lender  shall be
evidenced by a Facility B Term Note, with appropriate  insertions  therein as to
payee,  date and  principal  amount,  payable  to the order of such  Lender  and
representing  the  obligation  of the  Borrower  to  pay  the  aggregate  unpaid
principal  amount  of the  Facility  B Term  Loan  made  by such  Lender  to the
Borrower, with interest thereon as prescribed in Sections 2.8 and 2.9. Each such
Lender is hereby  authorized (but not required) to record the date and amount of
each payment or  prepayment of principal of its Facility B Term Loan made to the
Borrower, each continuation thereof, each conversion of all or a portion thereof
to another  Type and, in the case of LIBOR  Loans,  the length of each  Interest
Period with respect  thereto,  in the books and records of such Lender,  and any
such  recordation  shall  constitute prima facie evidence of the accuracy of the
information so recorded.  The failure of any Lender to make any such recordation
or  notation  in the  books and  records  of such  Lender  (or any error in such
recordation  or  notation)  shall not affect  the  obligations  of the  Borrower
hereunder  or under the Facility B Term Notes.  Each  Facility B Term Note shall
(a) be dated the  Closing  Date,  (b)  provide  for the  payment of  interest in
accordance  with  Sections  2.8  and  2.9 and (c) be  stated  to be  payable  in
installments of principal in accordance  with, and subject to the provisions of,
Section 2.5(iv).

                  (iii) The Borrower  shall give the Agent  irrevocable  written
notice  substantially  in the form of  Exhibit F hereto  (which  notice  must be
received by the Agent prior to 10:00 a.m.,  Los Angeles  time,  one Business Day
prior to the Closing Date)  requesting that the Lenders having a Facility B Term
Commitment  make the Facility B Term Loans in accordance  with their  respective
Facility B Term  Commitments  on the Closing Date.  Upon receipt of such notice,
the Agent shall  promptly  notify each such Lender  thereof not later than 11:00
a.m.,  Los Angeles time,  on the date of receipt of such notice.  Not later than
1:00 p.m.,  Los Angeles  time,  on the Closing  Date each such Lender shall make
available  to the Agent at its office  specified  in Section  13.1 the amount of
such Lender's  aggregate  Facility B Term  Commitment in  immediately  available
funds.  The notice  pursuant to this Section shall be irrevocable and binding on
the  Borrower.  The Agent may,  in the absence of  notification  from any Lender
having a Facility B Term  Commitment  that such Lender has not made its pro rata
share available to the Agent,  on such date,  credit the account of the Borrower
on the  books of such  office  or the Agent  with the  aggregate  amount of such
Facility B Term Loans.

                  (iv) On each  reduction  date set forth in this  Section,  the
Borrower  shall on a pro rata basis repay the  principal  of the Facility B Term
Notes in an  aggregate  amount  equal to the amount set forth below  (subject to
Sections 2.17 and 2.18) (each such amount a "Facility B Reduction Installment"):

                October 30, 1999, January 29, 2000,
                April 29, 2000 and July 29, 2000             $137,500.00

                October 28, 2000,
                February 3, 2001, May 5, 2001
                and August 4, 2001                           $137,500.00

                November 3, 2001,
                February 2, 2002, May 4, 2002
                and August 3, 2002                           $137,500.00

                November 2, 2002,
                February 1, 2003, May 3, 2003
                and August 2, 2003                           $137,500.00

                November 1, 2003,
                January 31, 2004, May 1, 2004
                and July 31, 2004                            $137,500.00

                October 30, 2004,
                January 29, 2005, April 30, 2005
                and July 30, 2005                          $4,812,500.00

                October 29, 2005
                January 28, 2006 and April 29, 2006        $8,250,000.00

; provided,  that the final Facility B Reduction Installment paid shall be in an
amount equal to all amounts owed by the Borrower on the Facility B Term Notes.

         All outstanding  Facility B Term Loans shall be due and payable, to the
extent not previously paid in accordance with the terms hereof,  on the Facility
B Termination Date.

         2.6 Types of Loans. The Loans may from time to time be (i) LIBOR Loans,
             --------------
(ii)  Base Rate  Loans or (iii) a  combination  thereof,  as  determined  by the
Borrower   and   notified  to  the  Agent  in   accordance   with  Section  2.7.
Notwithstanding the foregoing,  the initial Loans made on the Closing Date shall
be made as Base Rate  Loans and shall be subject to  conversion  to LIBOR  Loans
pursuant  to Section  2.7.  Each  Lender may make or  maintain  its Loans to the
Borrower by or through any Applicable Lending Office. At no time shall more than
ten Advances be outstanding.

         2.7 Voluntary Conversion of Advances.  The Borrower may on any Business
             --------------------------------
Day,  upon  written  notice  (substantially  in the form of  Exhibit G  attached
hereto, in the case of a conversion,  and substantially in the form of Exhibit H
attached  hereto,  in the case of a  continuation)  given to the Agent not later
than 12:00 noon,  Los Angeles time, on the third Business Day before the date of
the proposed  conversion  and/or  continuation  and subject to the provisions of
Section 2.6,  convert and/or  continue any Advance (or portion  thereof) into an
Advance  of  another  Type or of the same  Type;  provided,  however,  that with
respect  to a  conversion  from  a  LIBOR  Loan  into  a  Base  Rate  Loan  or a
continuation of a LIBOR Loan, any such conversion and/or  continuation  shall be
made on, and only on, the last day of the  Interest  Period for such Loan.  Each
such notice of a conversion and/or  continuation  shall, within the restrictions
specified  above,  specify (i) the Loan to be converted or  continued,  (ii) the
type of Loan into which such Loan is to be converted (if  applicable)  and (iii)
the requested date for such conversion and/or continuation.  Upon receipt of any
such notice the Agent shall  promptly  notify each Lender  thereof.  Any part of
outstanding LIBOR Loans and Base Rate Loans may be converted as provided herein,
provided (a) no Revolving Loan may be converted into a LIBOR Loan after the date
that is one month prior to the  Revolving  Termination  Date,  (b) no Facility A
Term Loan may be  converted  into a LIBOR  Loan after the date that is one month
prior to the  Facility A  Termination  Date,  (c) no Facility B Term Loan may be
converted  into a LIBOR  Loan  after  the date  that is one  month  prior to the
Facility B  Termination  Date and (d) the  Borrower  shall not have the right to
continue  or  convert to a LIBOR Loan if a Default  shall have  occurred  and be
continuing.  However,  if the Borrower  shall fail to give any required  notices
described  above  in this  Section  or if  such  continuation  is not  permitted
pursuant to the preceding sentence,  such Loans shall be automatically converted
to Base Rate Loans on the last day of such then-expiring Interest Period.

         2.8 Interest.  A Base Rate Loan shall bear interest on the  outstanding
             --------
principal amount thereof,  for each day from and including the date such Loan is
made or is converted from a LIBOR Loan into a Base Rate Loan pursuant to Section
2.7 to (but not  including) the date it becomes due or is converted into a LIBOR
Loan pursuant to Section 2.7 hereof,  at a rate per annum equal to the Base Rate
for such day.  Changes in the rate of interest on any Loan  maintained as a Base
Rate Loan will take effect simultaneously with each change in the Corporate Base
Rate.  Each LIBOR Loan shall bear  interest  from and including the first day of
the Interest  Period  applicable  thereto to (but not including) the last day of
such  Interest  Period at the LIBOR Rate  determined as applicable to such LIBOR
Loan.

         For  purposes  of  determining  the  Applicable  Margin  for all Loans,
interest  rates on the Loans shall be  calculated on the basis of the Total Debt
Ratio set forth in the most recent  certificate of an Authorized  Officer of the
Borrower   delivered  pursuant  to  Section  6.1(v)  (a  "Leverage  Ratio  Level
Certificate").  For accrued and unpaid  interest only (no changes being made for
interest  payments  previously  made),  changes in  interest  rates on the Loans
attributable  to  changes  in the  Applicable  Margin  caused by  changes in the
applicable  Leverage  Ratio Level  shall be  calculated  upon the  delivery of a
Leverage Ratio Level  Certificate  and such change shall be effective (y) in the
case of a Base Rate Loan, on the day  subsequent to the delivery of the Leverage
Ratio Level  Certificate and (z) in the case of a LIBOR Loan, from the first day
of the Interest Period applicable to such LIBOR Loans subsequent to the delivery
of the Leverage Ratio Level Certificate.  If, for any reason, the Borrower shall
fail to deliver a Leverage Ratio Level  Certificate  when due in accordance with
Section 6.1(v), and such failure shall continue for a period of twenty days, the
Revolving/Term A Leverage Ratio Level shall be deemed to be Level 5 and the Term
B Leverage  Ratio Level shall be deemed to be Level 2, in each case  retroactive
to the date on which the Borrower  should have  delivered  such  Leverage  Ratio
Level  Certificate  and shall continue until a Leverage Ratio Level  Certificate
indicating a different  Revolving/Term A Leverage Ratio Level or Term B Leverage
Ratio Level (as  applicable)  is  delivered  to the Agent.  Notwithstanding  the
foregoing,  for the period from the Closing Date until five  Business Days after
the Agent  has  received  the  Borrower's  quarterly  financial  statements  and
Compliance  Certificate  for the fiscal period ended  October 30, 1999,  (i) the
Revolving/Term A Applicable  Margin shall be that applicable to Revolving/Term A
Leverage  Ratio  Level 5 and  (ii) the Term B  Applicable  Margin  shall be that
applicable to Term B Leverage Ratio Level 2.

         2.9 Rates  Applicable  After Default.  Notwithstanding  anything to the
             --------------------------------
contrary  contained in Section 2.6 or 2.7, during the continuance of an Event of
Default no Loan may be made as,  converted  into or  continued  as a LIBOR Loan.
During the continuance of an Event of Default each Loan shall bear interest at a
rate per annum equal to the Base Rate otherwise applicable to the Base Rate Loan
plus 3% per annum. All such interest shall be payable on demand of the Agent.

         2.10 Method of Payment. All payments of the Obligations hereunder shall
              -----------------
be made, without setoff,  deduction,  or counterclaim,  in immediately available
funds to the Agent at the Agent's address  specified  pursuant to Article 13, or
at any other Applicable  Lending Office of the Agent specified in writing by the
Agent to the Borrower, by 12:00 noon, Los Angeles time, on the date when due and
shall be applied ratably by the Agent among the Lenders.  Each payment delivered
to the Agent for the account of any Lender  shall be  delivered  promptly by the
Agent to such  Lender in the same type of funds that the Agent  received  at its
address  specified  pursuant to Article 13 or at any  Applicable  Lending Office
specified  in a notice  received  by the Agent  from such  Lender.  The Agent is
hereby  authorized  (but not  obligated)  to charge the account of the  Borrower
maintained  with UBOC for each  payment of  principal,  interest  and fees as it
becomes due hereunder.

         2.11 Telephonic Notices. The Borrower hereby authorizes the Lenders and
              ------------------
the Agent to convert or continue  Loans and effect  selections of Types of Loans
based on  telephonic  notices  made by any  person or  persons  the Agent or any
Lender in good  faith  believes  to be acting  on  behalf of the  Borrower.  The
Borrower agrees to deliver promptly to the Agent a written confirmation, if such
confirmation is requested by the Agent or any Lender,  of each telephonic notice
signed by an  Authorized  Officer.  If the written  confirmation  differs in any
material respect from the action taken by the Agent and the Lenders, the records
of the Agent and the Lenders shall govern absent manifest error.

         2.12 Interest Payment Dates;  Interest and Fee Basis.  Interest accrued
              ----------------------
on each Base Rate Loan shall be payable on each Payment  Date,  commencing  with
the first such date to occur after the date hereof,  on any date on which a Base
Rate Loan is prepaid, whether due to acceleration or otherwise, and at maturity.
Interest accrued on that portion of the outstanding principal amount of any Base
Rate Loan  converted  into a LIBOR Loan on a day other than a Payment Date shall
be payable on the date of conversion.  Interest accrued on each LIBOR Loan shall
be payable on the last day of its  applicable  Interest  Period,  on any date on
which the LIBOR Loan is prepaid,  whether by acceleration  or otherwise,  and at
maturity.  Interest  accrued on each LIBOR Loan having an Interest Period longer
than three  months  shall  also be  payable on the last day of each  three-month
interval during such Interest Period.

         Interest on Loans and  commitment  fees shall be calculated  for actual
days elapsed on the basis of a 360-day year.  Interest  shall be payable for the
day a Loan is made  but not for the day of any  payment  on the  amount  paid if
payment is received  prior to 12:00  noon,  Los  Angeles  time,  at the place of
payment.  Whenever any payment to be made hereunder shall be stated to be due on
a day  that is not a  Business  Day,  such  payment  shall  be made on the  next
succeeding  Business  Day,  and such  extension  of time  shall in such  case be
included in the computation of payment of interest;  provided, however, that, if
such extension  would cause any payment of interest on or principal of any LIBOR
Loan to be made in the next following  calendar  month,  then such payment shall
instead be made on the next  preceding  Business  Day, and such  shortened  time
shall in such case be used in the  computation  of  payment  of  interest.  Each
determination  by the Lender of an interest rate  hereunder  shall be conclusive
and binding for all purposes, absent manifest error.

         2.13 Notification of Loan,  Interest Rates,  Prepayments and Commitment
              ------------------------------------------------------------------
Reductions. Promptly after receipt thereof, the Agent will notify each Lender of
----------
the contents of a borrowing notice, Conversion/Continuation Notice and repayment
notice  received  by it  hereunder.  The Agent will  notify  each  Lender of the
interest rate applicable to each LIBOR Loan promptly upon  determination of such
interest  rate and will give each  Lender  prompt  notice of each  change in the
Corporate Base Rate.

         Each  determination  of an interest  rate by the Agent  pursuant to any
provision of this Agreement  shall be conclusive and binding on the Borrower and
the Lenders in the absence of manifest error.

         2.14 Applicable Lending Offices.  Each Lender may book its Loans at any
              --------------------------
Applicable  Lending Office selected by such Lender and may change its Applicable
Lending Office from time to time. All terms of this Agreement shall apply to any
such Applicable Lending Office and the Notes shall be deemed held by each Lender
for the benefit of such Applicable  Lending Office.  Each Lender may, by written
or telex notice to the Agent and the Borrower,  designate an Applicable  Lending
Office  through  which the Loans will be made by it and for whose  account  Loan
payments are to be made.

         2.15  Non-Receipt  of Funds by the  Agent.  Unless  the  Borrower  or a
               -----------------------------------
Lender,  as the case may be, notifies the Agent prior to the date on which it is
scheduled  to make  payment  to the  Agent of (i) in the case of a  Lender,  the
proceeds of a Loan or (ii) in the case of the Borrower,  a payment of principal,
interest or fees to the Agent for the account of the  Lenders,  that it does not
intend to make such  payment,  the Agent may assume  that such  payment has been
made.  The Agent may,  but shall not be  obligated  to,  make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such  Lender  or the  Borrower,  as the case may be,  has not in fact  made such
payment to the Agent,  the  recipient  of such payment  shall,  on demand by the
Agent,  repay to the Agent the amount so made  available  together with interest
thereon in respect  of each day  during the period  commencing  on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (a) in the case of payment by a Lender,  the
Federal Funds  Effective  Rate for such day or (b) in the case of payment by the
Borrower, the interest rate applicable to the relevant Loan.

         2.16  Withholding  Tax Exemption.  At least five Business Days prior to
               --------------------------
the first date on which  interest or fees are payable  hereunder for the account
of any Lender, each Lender that is not incorporated under the laws of the United
States of America,  or a state  thereof,  agrees that it will deliver to each of
the  Borrower  and the Agent two duly  completed  copies  of the  following,  as
applicable,  in each case  certifying  that such  Lender is  entitled to receive
payments under this Agreement and the Notes without  deduction or withholding of
any United States  federal  income taxes:  (i) United  States  Internal  Revenue
Service Form W-9, W-8BEN or W-8ECI (as applicable to it), or (ii) in the case of
a Lender that is claiming an exemption from United States  withholding tax under
Section  871(h) or 881(c) of the Code with  respect to  payments  of  "portfolio
interest", (A) an Internal Revenue Service Form W-8 or successor applicable form
and (ii) a certificate of such Lender (a "Tax  Compliance  Certificate")  to the
effect that (1) such Lender is not (x) a "bank" for  purposes of Section  881(c)
of the Code, (y) a 10% shareholder  (within the meaning of Section  871(h)(3)(B)
of the Code) of the  Borrower  or any  Subsidiary  or (z) a  controlled  foreign
corporation  related to the  Borrower or any  Subsidiary  (within the meaning of
Section  864(d)(4)  of the Code)  and (2) such  Lender is  entitled  to  receive
payments  under this  Agreement  without  deduction or withholding of any United
States federal income taxes.  Each Lender which so delivers a Form W-9,  W-8BEN,
W-8ECI or Tax Compliance  Certificate  further  undertakes to deliver to each of
the  Borrower and the Agent two  additional  copies of such form (or a successor
form), or a new Tax Compliance Certificate, as applicable, on or before the date
that such form expires or becomes  obsolete or after the occurrence of any event
requiring a change in the most recent forms or  certificate  so delivered by it,
and  such  amendments  thereto  or  extensions  or  renewals  thereof  as may be
reasonably  requested by the Borrower or the Agent, in each case certifying that
such Lender is entitled to receive  payments  under this  Agreement and the Note
without  deduction or  withholding  of any United States  federal  income taxes,
unless an event  (including  without  limitation  any change in  treaty,  law or
regulation)  has  occurred  prior to the date on which any such  delivery  would
otherwise  be  required  which  renders  all  such  forms  or  such  Certificate
inapplicable  or which  would  prevent  such  Lender  from duly  completing  and
delivering  any such form or  Certificate  with  respect  to it and such  Lender
advises the Borrower and the Agent that it is not capable of receiving  payments
without any deduction or withholding of United States federal income tax.

         2.17  Optional  Prepayments.  The  Borrower  may on the last day of any
               ---------------------
Interest Period with respect thereto, in the case of LIBOR Loans, or at any time
and from time to time,  in the case of Base Rate  Loans,  prepay the  Loans,  in
whole or in part, without premium or penalty, upon at least three Business Days'
irrevocable  written notice,  in the case of LIBOR Loans,  and upon at least one
Business Day's irrevocable  written notice, in the case of Base Rate Loans, from
the  Borrower to the Agent,  specifying  the date and amount of  prepayment  and
whether  the  prepayment  is of LIBOR  Loans,  Base Rate Loans or a  combination
thereof,  and, if a  combination  thereof,  the amount  allocable to each.  Upon
receipt of any such notice from the Borrower,  the Agent shall  promptly  notify
each Lender thereof.  If any such notice is given,  the amount specified in such
notice shall be due and payable by the Borrower on the date  specified  therein,
together  with  accrued  interest  to such date on the amount  prepaid.  Partial
prepayments of Loans shall be in an aggregate  principal amount of $1,000,000 or
an integral multiple thereof.  Partial prepayments of Facility A Term Loans made
on a day other than a day  specified  in Section  2.4(iv) or any payment made on
such day in excess of the  Facility A Reduction  Installment  specified  therein
shall be applied pro rata to each Facility A Reduction  Installment remaining as
of the date of such  prepayment or payment.  Partial  prepayments  of Facility B
Term Loans made on a day other than a day  specified  in Section  2.5(iv) or any
payment  made on such day in  excess of the  Facility  B  Reduction  Installment
specified  therein  shall be  applied  pro  rata to each  Facility  B  Reduction
Installment remaining as of the date of such prepayment or payment.

         2.18  Mandatory  Prepayments.  On the day of receipt by the Borrower or
               ----------------------
any  Subsidiary  of any Net Proceeds  (a) with  respect to an asset  disposition
where the Net Proceeds from such asset  disposition,  plus the Net Proceeds from
all prior asset  dispositions  consummated  on or after the Closing Date exceeds
$5,000,000 in the aggregate or (b) with respect to an issuance of equity or debt
securities of the Borrower or any of its Subsidiaries, the Borrower shall prepay
the Loans with 75% of Net Proceeds  from such  issuance of equity and such asset
disposition  and 100% of the Net Proceeds from such issuance of debt  securities
as  follows:  Prepayment  shall  first be applied to each  Facility A  Reduction
Installment  and  Facility  B  Reduction  Installment,  pro  rata  based  on the
aggregate  outstanding  principal amount of Facility A Term Loans and Facility B
Term Loans, (such prepayment to be applied to any Reduction Installment on a pro
rata basis) and,  when the  Facility A Term Loans and the  Facility B Term Loans
are  paid  in  full,   shall  be  applied  to   outstanding   Revolving   Loans.
Nothwithstanding the foregoing,  the $5,000,000 threshold referred to above with
respect  to asset  dispositions  shall not apply  during  any period in which an
Event of Default has occurred and is continuing.  Prepayments of Revolving Loans
with Net  Proceeds  from asset  dispositions  shall also  result in a  permanent
reduction  of the  Aggregate  Revolving  Commitment  by an amount  equal to such
prepayment  amounts.  The  Borrower  agrees  to give the  Agent  at least  seven
Business Days'  irrevocable  written notice of any prepayment under this Section
2.18.  Upon  receipt  of any such  notice  from the  Borrower,  the Agent  shall
promptly  notify each Lender  thereof.  If,  within  five  Business  Days' after
receipt by the  Facility B Term  Lenders of such  notice,  the Agent  shall have
received  written  notice from the  Required  Facility B Term  Lenders that such
Lenders decline to receive their share of such prepayment, then, notwithstanding
any provision  herein to the contrary,  amounts which would have  otherwise been
applied to the Facility B Term Loans under this  Section  2.18 shall  instead be
applied to the Facility A Term Loans.

         2.19 Commitment Obligations.  Neither the Agent nor any Lender shall be
              ----------------------
responsible  for the  obligation  or  Available  Commitment  of any other Lender
hereunder,  nor will the  failure of any Lender to comply with the terms of this
Agreement relieve any other Lender or the Borrower of its obligations under this
Agreement  and the Notes.  Nothing  herein shall be deemed to relieve any Lender
from its  obligation  to fulfill its  Commitments  hereunder or to prejudice any
rights which the Borrower may have against any Lender as a result of any default
by such Lender hereunder.

         2.20  Commitment Termination.  The Revolving Commitment of each Lender
               ----------------------
and  the  Aggregate  Revolving  Commitment  shall  terminate  on  the  Revolving
Termination Date.

         2.21 Required Payments.  The outstanding  Revolving Loans and all other
              -----------------
unpaid Obligations with respect thereto shall be paid in full by the Borrower on
the Revolving  Termination  Date. The outstanding  Facility A Term Loans and all
other  unpaid  Obligations  with  respect  thereto  shall be paid in full by the
Borrower on the Facility A Termination  Date.  The  outstanding  Facility B Term
Loans and all other unpaid  Obligations  with respect  thereto  shall be paid in
full by the Borrower on the Facility B Termination Date.

                                    ARTICLE 3

                             CHANGE IN CIRCUMSTANCES

         3.1      Yield Protection.
                  ----------------

         (i) If any repayment of principal of, or conversion  of, any LIBOR Loan
is made other than on the last day of an Interest Period  therefor,  as a result
of a prepayment,  payment or conversion,  or an  acceleration of the maturity of
the Loan  pursuant  to Section 8, or for any other  reason,  or if the  Borrower
shall fail to borrow a LIBOR Loan after requesting one, then the Borrower shall,
upon demand by the Agent pay to the Lenders any amounts  required to  compensate
them for any additional losses, costs or expenses that they may reasonably incur
as a result of such  repayment,  conversion or failure to borrow,  including any
loss (including loss of anticipated profits), cost or expense incurred by reason
of the  liquidation  or  reemployment  of deposits or other funds  acquired by a
Lender to fund or maintain such LIBOR Loan.

         (ii) If, due to either (a) the  introduction  of or any change in or in
the interpretation of any Governmental Rule or (b) the compliance by the Lenders
with any  Governmental  Rule (whether or not having the force of law),  there is
any increase in the cost to the Lenders of agreeing to make, making,  funding or
maintaining  any LIBOR Loan,  then the  Borrower  shall from time to time,  upon
written demand by the Agent, pay to the Agent additional  amounts  sufficient to
compensate the Lenders for such  increased  cost. A certificate as to the amount
of such  increased  cost,  submitted  to the  Borrower  by the  Agent,  shall be
conclusive and binding for all purposes, absent manifest error.

         (iii)  Notwithstanding  any other provision of this  Agreement,  if the
introduction of or any change in or in the  interpretation  of any  Governmental
Rule makes it unlawful,  or any Governmental Person asserts that it is unlawful,
for any Lender to perform its  obligations  hereunder  to make LIBOR Loans or to
continue to fund or maintain LIBOR Loans hereunder,  then, on notice thereof and
demand therefor by the Agent to the Borrower,  (a) the obligation of such Lender
to make LIBOR  Loans and to convert  Base Rate  Loans  into  LIBOR  Loans  shall
terminate and (b) the Borrower  shall  forthwith  prepay in full all LIBOR Loans
then outstanding,  together with interest accrued thereon,  unless the Borrower,
within five  Business  Days of such notice and demand,  converts all LIBOR Loans
then outstanding into Base Rate Loans in accordance with Section 2.7.

         (iv) If, (A) with  respect to any LIBOR Loan,  the Agent  notifies  the
Borrower that LIBOR for such Loan will not adequately reflect the cost to one or
more  Lenders (as  determined  by such  Lender(s)  in good faith on the basis of
market conditions then in effect) of making, funding or maintaining such Loan or
(B) with respect to any LIBOR Loan requested by the Borrower, the Agent notifies
the Borrower  that by reason of  circumstances  affecting  the relevant  market,
adequate and reasonable means do not exist for ascertaining  LIBOR,  then (a) in
the case of (A) above, such Loan will automatically, on the last day of the then
existing  Interest  Period  therefor,  convert  into a Base Rate Loan and (b) in
either case, the obligation of the affected Lender (or each Lender,  in the case
of (B)) to make,  or to  convert  Base Rate  Loans  into  LIBOR  Loans  shall be
suspended until the Agent notifies the Borrower that the  circumstances  causing
such suspension no longer exist.

    (v)  If  either  (a)  the  introduction  of or  any  change  in  or  in  the
interpretation  of any Governmental  Rule regarding  capital adequacy or (b) the
compliance by the Lenders with any such Governmental Rule (whether or not having
the force of law),  affects  the amount of capital  required  or  expected to be
maintained by any Lender or any  corporation  controlling  any Lender,  and such
Lender (taking into consideration such Lender's or such corporations's  policies
with  respect  to  capital  adequacy)  determines  that the  amount  of  capital
maintained by such Lender or such corporation  which is attributable to or based
upon the Loans, the Letters of Credit, the Commitments or this Agreement must be
increased  as a  consequence  of such  introduction  or change then the Borrower
shall from time to time,  upon  written  demand by the  Agent,  pay to the Agent
additional  amounts sufficient to compensate such Lender or such corporation for
the increased cost to such Lender or corporation  of such increased  capital.  A
certificate as to the amount of such increased  cost,  submitted to the Borrower
by the Agent, shall be conclusive and binding for all purposes,  absent manifest
error.

         3.2 Taxes.  (a) All payments by or on behalf of the Borrower  hereunder
shall be made  without  set-off or  counterclaim  and in such  amounts as may be
necessary in order that all such payments (after deduction or withholding for or
on account of any  present or future  taxes,  levies,  imposts,  duties or other
charges of whatsoever nature imposed by any Governmental  Person, other than any
tax on or measured  by the overall net income of the Agent or a Lender  pursuant
to the income tax laws of the United States,  the jurisdiction where the Agent's
or such  Lender's  principal  office is  located  or any  political  subdivision
thereof  (collectively,  the  "Taxes"))  shall  not be  less  than  the  amounts
otherwise  specified to be paid  hereunder.  A certificate  as to any additional
amounts payable to the Agent or a Lender hereunder  submitted to the Borrower by
the Agent shall show in reasonable  detail the amount  payable to the Agent or a
Lender and the  calculations  used to  determine  in good faith such  amount and
shall be conclusive  absent manifest error.  Any amounts payable by the Borrower
hereunder  with respect to past payments  shall be due within ten days following
receipt by the  Borrower of such  certificate  from the Agent;  and such amounts
payable  with respect to future  payments  shall be due  concurrently  with such
future payments. With respect to each deduction or withholding for or on account
of  any  Taxes,   the  Borrower  shall  promptly   furnish  to  the  Agent  such
certificates, receipts and other documents as may be required (in the reasonable
judgment  of the  Agent) to  establish  any tax  credit to which a Lender may be
entitled.  The agreements  and  obligations of the Borrower under this paragraph
shall survive the payment in full of the Loans.

         (b)  Notwithstanding  any provision in this  Agreement to the contrary,
any Lender that is not a U.S.  Person and is not a "bank"  within the meaning of
Section  881(c)(3)(A)  of the Code (a "Portfolio Debt Lender") shall request the
Borrower (through the Agent),  and the Borrower agrees  thereupon,  to record on
the Tax  Register  any Loans held by such  Lender  under this  Agreement.  Loans
recorded  on the Tax  Register  ("Registered  Loans")  may not be  evidenced  by
promissory  notes other than  Registered  Notes as defined  below and,  upon the
registration  of any Loan,  any promissory  note (other than a Registered  Note)
evidencing  the  same  shall be null and  void  and  shall  be  returned  to the
Borrower.  The Borrower agrees to execute and deliver to each Lender that is the
holder of Registered Loans a Revolving Note,  Facility A Term Note or Facility B
Term Note, as applicable,  in registered  form to evidence each such  Registered
Loan (i.e.,  containing  the optional  registered  note language as indicated in
Exhibits A-1, A-2 and A-3 hereto,  as applicable)  and registered as provided in
Section 9.6(h) (a "Registered  Note").  A Loan once recorded on the Tax Register
may not be removed from the Tax Register so long as it remains outstanding and a
Registered  Note  may  not be  exchanged  for a  promissory  note  that is not a
Registered Note.  Notwithstanding  the foregoing,  a Lender which is a holder of
Registered  Loans may transfer such Registered  Loans to any Lender permitted by
this Agreement (whether or not such Lender is a Portfolio Debt Lender), although
the Loans so transferred  shall remain Registered Loans and the Notes evidencing
such Loans shall remain Registered Notes.

                                    ARTICLE 4

                              CONDITIONS PRECEDENT
                              --------------------

         4.1 Initial Loan or Letter of Credit. The Lenders shall not be required
             --------------------------------
to make their  initial  Loans or  participate  in the  initial  Letter of Credit
hereunder,  or refinance the loans and letters of credit under the Existing Loan
Agreement,  unless the Borrower has  furnished to the Agent (except as otherwise
permitted by Section 4.4):

                (i)   this  Agreement,  the  Notes and the Collateral Documents,
duly executed by the Borrower;

                (ii)  the  Guaranties  and  the Guarantor  Collateral Documents,
duly executed by each Guarantor;

                (iii) the formation and governance documents of the Borrower and
each  Guarantor  certified by the  Secretary  of State (or similar  governmental
official) of the relevant jurisdiction of formation;

                (iv)  Resolutions of the Board of Directors (or other  governing
body, as applicable) of the Borrower and each Guarantor approving the execution,
delivery  and  performance  by the  Borrower  and  each  Guarantor,  of the Loan
Documents to which the Borrower and each Guarantor is a party,  certified by the
Secretary (or other authorized  officer, as applicable) of the Borrower and each
Guarantor to be true and correct and in full force and effect;

                (v)   an   Incumbency   Certificate of the   Borrower  and  each
Guarantor;

                (vi)  evidence that all amounts outstanding under the Prior Loan
Agreement have been paid in full or refinanced under this Agreement;

                (vii) all fees and expenses to be paid on the Closing Date;

                (viii)a copy of the limited  partnership agreement of  Petcetera
L.P.,  certified  by an  Authorized  Officer  of  the  Borrower to be a true and
correct  copy  thereof  with  no amendments  thereto, and  to  be in  full force
and effect;

                (ix) evidence  that the insurance  required by Section 6.6 is in
full force and effect,  together with appropriate  evidence showing the Agent as
an  additional  named  insured or loss payee,  as  appropriate,  all in form and
substance reasonably satisfactory to the Agent;

                (x)  no statute, rule, regulation,  order, decree or preliminary
or permanent  injunction of any court or  administrative  agency or, to the best
knowledge of the Borrower, any such action threatened by any Person, shall be in
effect  that   prohibits  the  Lenders  from   consummating   the   transactions
contemplated by this Agreement and the other Loan Documents;

                (xi) the executed legal opinion of Latham & Watkins,  counsel to
the Borrower and the Guarantors,  in form and substance reasonably acceptable to
the Agent;

                (xii)good-standing  certificates  with  respect  to the Borrower
and each  Subsidiary,  each dated a recent date,  of the  Secretary of State (or
similar  governmental  official)  of each  jurisdiction  in which such Person is
formed;

                (xiii)original certificates representing all outstanding  shares
of stock of each  Subsidiary  which is a  corporation,  together with an undated
stock  power  for  each of  such  certificates,  duly  executed  in  blank by an
authorized officer of the Borrower;

                (xiv)copies of the Borrower's  consolidated  audited  financial
statements for the period ending January 30, 1999,  together with any management
letter prepared by the accountants  and unaudited  financial  statements for the
period ending May 1, 1999;

                (xv) evidence  satisfactory  to the  Agent that there shall have
been no material adverse change to the syndication markets for credit facilities
similar to this  Agreement and there shall not have occurred and be continuing a
material  disruption  of or material  adverse  change in  financial,  banking or
capital markets which would have an adverse effect on such  syndication  market,
as determined by the Agent in its sole discretion; and

                (xvi) such other  documents,  instruments  and  opinions  as the
Agent or its counsel may have reasonably requested.

         4.2      All Loans.  The Lenders shall not be required to make any Loan
                  ---------
(including the initial Loan) hereunder unless the  Borrower has furnished to the
Agent:

                 (i)  a  duly  completed  certificate executed by an  Authorized
Officer of the Borrower certifying that:

                           (a) there exists no Default or Event of Default;

                           (b) the representations  and warranties  contained in
         Article 5 hereof are true and correct as of the  borrowing  date except
         to the extent any such  representation  or warranty is stated to relate
         solely  to an  earlier  date,  in which  case  such  representation  or
         warranty shall be true and correct on and as of such earlier date; and

                           (c) no event has occurred, or condition exists, which
         could have a Material Adverse Effect.

                (ii) in  the  case  where  Loan  proceeds  are to be used for an
Acquisition and such  Acquisition  will result in the Borrower being required to
file an SEC  Report,  executed  copies  of each  of the  Acquisition  Documents,
certified by an Authorized  Officer,  together with the other documents required
by Section 6.14;

                (iii)in the case  where  Loan  proceeds  are  to be  used for an
Acquisition,   evidence   satisfactory   to  the  Agent  that  the   Acquisition
contemplated  by  the  relevant   Acquisition   Documents  will  immediately  be
consummated upon the funding of the Loan; and

                (iv) such other documents as the  Agent or its  counsel may have
reasonably requested.

         4.3 All Letters of Credit. The Agent shall not be required to issue any
             ---------------------
Letter of Credit and the Lenders  shall not be required  to  participate  in any
Letter of Credit  (including the initial Letter of Credit)  hereunder unless the
Borrower has furnished to the Agent:

                  (i)  a completed Letter of Credit Request with regard to each
such Letter of Credit;

                  (ii) all fees to be paid to the Agent in connection with each
Letter of Credit shall have been paid; and

                  (iii) such  other  documents  as the Agent,  any Lender or its
respective counsel may have reasonably requested.

         Any Letter of Credit  Request  delivered to the Agent shall be deemed a
representation and warranty to the Agent and the Lenders that:

                  (i)  there exists no Default or Event of Default;

                  (ii) the representations and warranties contained in Article 5
hereof are true and  correct as of the  issuance  date of each  Letter of Credit
except to the extent any such  representation  or  warranty  is stated to relate
solely to an earlier date, in which case such  representation  or warranty shall
be true and correct on and as of such earlier date; and

                  (iii)  no event has occurred, or condition exists, which could
have a Material Adverse Effect.

         4.4  Post-Closing  Conditions.  On or before  the date which is 90 days
              ------------------------
after the Closing  Date,  the  Borrower  agrees to deliver the  following to the
Agent:

         (i) a Guarantee and Guarantor Security Agreement, in form and substance
satisfactory to the Agent, duly executed by the Yukon Subsidiary, along with (A)
evidence  that such  agreements  have been duly  authorized  and (B) such  other
documents,  instruments,  agreements, filings and other actions as the Agent may
request to create a perfected  security  interest in the property  owned by such
Subsidiary;

         (ii) original  certificates  representing 60% of the outstanding shares
of stock of the Yukon Subsidiary, along with such other documents,  instruments,
agreements,  filings  and other  actions  as the Agent may  request  to create a
perfected security interest in such stock;

         (iii)  the  executed  legal  opinion  of  local  counsel  to the  Yukon
Subsidiary  in form  and  substance,  and from a firm of  attorneys,  reasonably
acceptable to the Agent; and

         (iv)  evidence  acceptable to the Agent that all Liens not permitted by
Section 6.22 shall have been terminated or released,  as appropriate,  including
but not  limited to those Liens  referred  to on  Schedule 6 (provided  that the
Borrower shall not be obligated to obtain the termination or release of any such
Lien if (A) the Borrower has been unable to do so on a best effort basis and (B)
the Agent has  determined  in its  reasonable  discretion  that the value of any
property  subject to all such unreleased or  unterminated  Liens does not exceed
$2,000,000 in the aggregate).

                                    ARTICLE 5

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

         The Borrower represents and warrants to the Lenders that:

         5.1  Authorization.  The  execution,  delivery and  performance  by the
              -------------
Borrower and each Subsidiary of the Loan Documents to which the Borrower or such
Subsidiary,  as  applicable,  is a  party  are  within  the  Borrower's  or such
Subsidiary's  corporate or partnership  powers,  as  applicable,  have been duly
authorized  by  all  necessary  corporate  or  partnership  action  and  do  not
contravene any  applicable  law,  rule,  regulation or order or any  contractual
restriction binding on or affecting the Borrower or its Subsidiaries.

         5.2 Governmental Action. No authorization, approval or other action by,
             -------------------
or notice to or filing  with,  any  Governmental  Person is required for the due
execution,  delivery and performance by the Borrower or its  Subsidiaries of the
Loan Documents to which the Borrower or its Subsidiaries is a party.

         5.3  Enforceability.  Each Loan  Document to which the  Borrower or any
              --------------
Subsidiary is a party is the legal, valid and binding obligation of the Borrower
or such  Subsidiary,  as  applicable,  enforceable  against the Borrower or such
Subsidiary,  as  applicable,  in  accordance  with  its  terms,  except  as  the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally.

         5.4 Use of Proceeds. The Borrower will use the proceeds of the Facility
             ---------------
A Term Loans and the Facility B Term Loans  solely for the  repayment of amounts
outstanding  under the Prior Loan  Agreement and to refinance  costs incurred in
connection with certain  acquisitions  and  conversions of stores.  The Borrower
will use the  proceeds  of the  Revolving  Loans  solely  (i) to make  permitted
Acquisitions,  (ii) to make permitted  Capital  Expenditures,  (iii) for working
capital  purposes and (iv) for general  corporate  purposes  (including  but not
limited to the investments contemplated by Sections 6.29 and 6.30). The Borrower
will use the  Letters  of Credit  solely for the  purposes  set forth in Section
2.2(i). No action has been taken or is currently planned by the Borrower, or any
agent  acting on its behalf,  which would cause this  Agreement  or the Notes to
violate  Regulation U or any other  regulation  of the Board of Governors of the
Federal Reserve System or to violate the Securities and Exchange Act of 1934, in
each  case as in  effect  now or as the same may  hereafter  be in  effect.  The
Borrower is not engaged in the business of  extending  credit for the purpose of
purchasing or carrying margin stock as one of its important  activities and none
of the  proceeds  of the Loans or Letters  of Credit  will be used  directly  or
indirectly for such purpose.

         5.5  Litigation.  Except  as set  forth  on  Schedule  7,  there  is no
              ----------
litigation,  tax claim,  proceeding,  arbitration or dispute pending, or, to the
best  knowledge of the Borrower,  threatened  against or affecting the Borrower,
any Subsidiary,  or the Property of the Borrower or any  Subsidiary,  an adverse
determination in which could have a Material Adverse Effect.

         5.6 Financial Statements.  The consolidated financial statements of the
             --------------------
Borrower  dated  January 30,  1999,  copies of which have been  delivered to the
Lenders,  fairly and accurately reflect the financial  condition of the Borrower
and its  Subsidiaries  as of such  date,  and since  such date there has been no
Material Adverse Effect.

         5.7 Taxes.  The Borrower and each  Subsidiary has filed all tax returns
             -----
and reports required to be filed and has paid all applicable federal,  state and
local franchise and income taxes which are due and payable.

         5.8  Subsidiaries.  Schedule 2 hereto  contains an accurate list of (i)
              ------------
all of the presently existing Subsidiaries of the Borrower,  setting forth their
respective  jurisdictions of incorporation or organization and the percentage of
their respective  capital stock or ownership  interests owned by the Borrower or
other Subsidiaries,  and (ii) all shareholder agreements,  management agreements
and similar agreements executed in connection  therewith.  All of the issued and
outstanding  shares  of  capital  stock  of such  Subsidiaries  have  been  duly
authorized and issued and are fully paid and non-assessable.

         5.9 ERISA.  The Unfunded  Liabilities  do not in the  aggregate  exceed
             -----
$1,000,000. Each Single Employer Plan complies in all material respects with all
applicable  requirements of law and  regulations,  except to the extent that the
failure  to  comply  therewith  does  not have a  Material  Adverse  Effect.  No
Reportable  Event has occurred with respect to any Single Employer Plan,  except
to the extent that such Reportable Event has no Material Adverse Effect. Neither
the Borrower nor any Subsidiary (a) is a party to any Multiemployer  Plan or (b)
has withdrawn from any Multiemployer  Plan, except to the extent such actions do
not have a Material Adverse Effect.

         5.10  Accuracy  of  Information.  No  information,  exhibit  or  report
               -------------------------
furnished  by the  Borrower  or any of its  Subsidiaries  to the Agent or to any
Lender in  connection  with the  negotiation  of, or compliance  with,  the Loan
Documents  contained  any  material  misstatement  of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein not
misleading in any material respect.

         5.11  Organization  and Existence.  The Borrower and each Subsidiary is
               ---------------------------
duly  organized,  validly  existing and in good  standing  under the laws of its
jurisdiction  of formation  and it has the  corporate or  partnership  power and
authority, as applicable, and the legal right, to own and operate its Properties
and to conduct  the  business in which it is  currently  engaged and in which it
proposes to be engaged after the Closing Date and is duly qualified as a foreign
entity  and in good  standing  under  the laws of each  jurisdiction  where  its
ownership,  lease or  operation  of  Property  or the  conduct  of its  business
requires  such  qualification  except to the extent  that the  failure to comply
thereunder  could  not,  in the  aggregate,  reasonably  be  expected  to have a
Material Adverse Effect and is in compliance with all Requirements of Law except
to the extent that the failure to comply  therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.

         5.12 Consents.  No consent or authorization of, or filing with or other
              --------
act by or in respect  of, any  Governmental  Authority,  or any other  Person is
required in connection with the Loans hereunder or with the execution, delivery,
performance,  validity or  enforceability  of this  Agreement,  the Notes or the
other Loan Documents. The execution, delivery and performance of this Agreement,
the Notes and the other Loan Documents, the Loans, the Letters of Credit and the
use  of  the  proceeds  thereof  will  not  violate  any  Governmental  Rule  or
contractual obligation of the Borrower or any of its Subsidiaries which could be
reasonably expected to have a Material Adverse Effect and will not result in, or
require,  the  creation  or  imposition  of any  Lien  on  any  of its or  their
respective  Properties  or revenues  pursuant to any such  Governmental  Rule or
contractual  obligation,  except  pursuant to the Loan Documents or otherwise as
permitted hereunder,  which Lien could reasonably be expected to have a Material
Adverse Effect.

         5.13 Intellectual  Property.  The Borrower and each of its Subsidiaries
              ----------------------
owns, or is licensed to use, all trademarks,  tradenames,  patents,  copyrights,
material permits, licenses or other intangibles necessary for the conduct of its
business as currently conducted, except to the extent that the failure to own or
license  such  property  could not  reasonably  be  expected  to have a Material
Adverse Effect.

         5.14     Default.  There exists no Default or Event of Default.
                  -------

         5.15  Nature  of  Business.   Neither  the  Borrower  nor  any  of  its
               --------------------
Subsidiaries  is engaged in any material  business  other than the ownership and
operation  of  pet  food  and  supply  retail  stores  and  the  manufacture  or
procurement of pet food and supplies.

         5.16 Ranking of Loans.  This  Agreement and the other Loan Documents to
              ----------------
which the Borrower is a party,  when executed,  and the Loans, when borrowed are
and will be the direct and general  obligations of the Borrower.  The Borrower's
obligations  hereunder and thereunder  will rank at least pari passu in priority
of payment with all other senior Debt, except to the extent otherwise  permitted
hereunder.

         5.17 Compliance with Laws. The Borrower and each of its Subsidiaries is
              --------------------
in compliance with all Governmental  Rules except to the extent that the failure
to comply therewith could not, in the aggregate,  reasonably be expected to have
a Material Adverse Effect.

         5.18     Investment  Company  Acts;  Other  Regulations.   Neither  the
                  ----------------------------------------------
Borrower nor any of its Subsidiaries is an  "investment company,"  or a  company
"controlled" by an  "investment company," within the  meaning of the  Investment
Company Act of 1940, as amended.

         5.19  Environmental  Matters.  The Borrower and its Subsidiaries are in
               ----------------------
compliance in all material respects with all applicable  environmental laws, and
there is no contamination at, under or about any of their respective Properties,
or violation of any  environmental  law with respect to any of their  respective
Properties or the business conducted at any of their respective Properties which
involves a matter or matters which has caused or is reasonably likely to cause a
Material Adverse Effect.

         5.20 Title.  Except for assets  which may have been  disposed of in the
              -----
ordinary  course of  business,  the Borrower  and each  Subsidiary  has good and
marketable  title to all of the property  reflected in its financial  statements
delivered  to the  Lenders,  to all  property  acquired  by the  Borrower or any
Subsidiary  since  the date of said  financial  statements  and to all  property
necessary  for the  conduct  of its  business,  free  and  clear  of all  Liens,
encumbrances,  security  interests and adverse claims except those  permitted by
Section 6.22 hereof.

         5.21  Solvency.  Immediately  prior  to  and  upon  execution  of  this
               --------
Agreement  and the  funding  of the Loans and the  issuance  of any  Letters  of
Credit, the Borrower was, is and will be Solvent.

         5.22 Year 2000.  The  Borrower has  implemented  a plan to address Year
              ---------
2000 problems that might occur in the  Borrower's or any  Subsidiary's  computer
hardware, software, operating systems, telecommunications, building systems, and
data  exchange  with its  critical  vendors  and  customers.  The  Borrower  has
allocated adequate staff and financial resources and will be Year 2000 Compliant
for all  mission-critical  systems of it or its  Subsidiaries  by the earlier of
such date as the Borrower has  appointed in its Year 2000  remediation  plan, or
midnight,  Pacific Coast Time, December 31, 1999, except where the failure to be
Year 2000 Compliant could not reasonably be expected to have a Material  Adverse
Effect.  "Year  2000  Compliant"  means  the  state  and  point in time when the
Borrower's and each Subsidiary's information processing,  financial and business
operations,   systems  and  technologies  (collectively,   "Technologies")  will
accurately  process date/time data (including  without  limitation  calculating,
comparing and  sequencing)  from,  into and between the years 1999 and 2000, for
its own  account and when used in  combination  with the  Technologies  of third
parties.  Upon request,  the Borrower will provide to the Agent  evidence of the
Borrower's and each Subsidiary's compliance with the terms of this Section.

                                    ARTICLE 6

                                    COVENANTS

         During the term of this  Agreement,  unless the Required  Lenders shall
otherwise consent in writing:

         6.1      Financial Reporting.  The  Borrower  will maintain, for itself
                  -------------------
and each Subsidiary, a  system of  accounting  established and  administered  in
accordance with Agreement Accounting Principles, and furnish to the Lenders:

               (i)As soon as available and in any event within 45 days after the
                  end of each quarterly fiscal period of each fiscal year of the
                  Borrower  (except  the  last  fiscal  quarter),   consolidated
                  statements of income,  retained  earnings and cash flow of the
                  Borrower and its consolidated Subsidiaries for such period and
                  for the period from the  beginning  of the  respective  fiscal
                  year to the end of such period,  and the related  consolidated
                  balance   sheets  of  the   Borrower   and  its   consolidated
                  Subsidiaries  as at the end of such period,  setting  forth in
                  each case in comparative form the  corresponding  consolidated
                  figures for the  corresponding  period in the preceding fiscal
                  year, accompanied by a certificate of an Authorized Officer of
                  the  Borrower,   which  certificate  shall  state  that  those
                  consolidated   financial   statements   fairly   present   the
                  consolidated  financial condition and results of operations of
                  the Borrower and its consolidated  Subsidiaries,  in each case
                  in   accordance   with   Agreement   Accounting    Principles,
                  consistently  applied,  as at the end of, and for, such period
                  (subject to normally recurring audit adjustments).

             (ii) As soon as available and in any event within 90 days after the
                  end  of  each  fiscal  year  of  the  Borrower,   consolidated
                  statements of income,  retained  earnings and cash flow of the
                  Borrower  and its  consolidated  Subsidiaries  for such fiscal
                  year  and  the  related  consolidated  balance  sheets  of the
                  Borrower and its  consolidated  Subsidiaries  as at the end of
                  such fiscal year,  setting  forth in each case in  comparative
                  form the corresponding  consolidated figures for the preceding
                  fiscal   year,   and   accompanied,   in  the  case  of  those
                  consolidated  statements and balance sheet of the Borrower, by
                  a  unqualified   opinion  of  independent   certified   public
                  accountants  of recognized  national  standing,  which opinion
                  shall  state  that  those  consolidated  financial  statements
                  fairly  present  the  consolidated   financial  condition  and
                  results of  operations  of the Borrower  and its  consolidated
                  Subsidiaries  as at the end of, and for,  such  fiscal year in
                  accordance with Agreement Accounting Principles,  consistently
                  applied.

         (iii)    Promptly upon the filing thereof,  copies of all  registration
                  statements  and annual,  quarterly,  monthly or other  regular
                  reports or statutory  statements  which the Borrower or any of
                  its  Subsidiaries  files  with  the  SEC or any  insurance  or
                  regulatory agency.

             (iv) As soon as  available,  but in any event no later than 45 days
                  subsequent  to  the  beginning  of  each  fiscal  year  of the
                  Borrower,   based  on  the  best  information  then  currently
                  available,  a copy  of the  plan  and  forecast  (including  a
                  projected consolidated balance sheet, income statement,  funds
                  flow  statement  and  a  budget  for  Capital   Expenditures),
                  prepared on a quarterly  format basis, of the Borrower and its
                  Subsidiaries for such fiscal year.

               (v)Together  with the  financial  statements  required in Section
                  6.1(i) and (ii) (commencing with the fiscal period ending July
                  31, 1999), a compliance  certificate in substantially the form
                  of Exhibit B hereto (a "Compliance  Certificate") signed by an
                  Authorized  Officer  showing  the  calculations  necessary  to
                  determine  compliance  with this Agreement and stating that no
                  Default or Event of Default exists, or if any Default or Event
                  of Default exists, stating the nature and status thereof.

             (vi) As soon as possible, but in any event within 45 days after the
                  end of each quarter (except the last fiscal quarter,  in which
                  case within 90 days after the end of such quarter), a Leverage
                  Ratio Level Certificate in substantially the form of Exhibit D
                  hereto signed by an Authorized Officer.

           (vii)  As soon as possible  and in any event within 10 days after the
                  Borrower  knows that any  Reportable  Event has occurred  with
                  respect to any Single Employer Plan, a statement, signed by an
                  Authorized  Officer,  describing said Reportable Event and the
                  action  which  the  Borrower  proposes  to take  with  respect
                  thereto.

         (viii)   As soon as  possible  and in any event  within  10 days  after
                  receipt by the Borrower,  a copy of (a) any notice or claim to
                  the effect that the Borrower or any of its  Subsidiaries is or
                  may be liable to any Person as a result of the  release by the
                  Borrower, any of its Subsidiaries,  or any other Person of any
                  toxic or hazardous  waste or substance  into the  environment,
                  and (b) any notice  alleging  any  violation  of any  federal,
                  state  or  local  environmental,   health  or  safety  law  or
                  regulation by the Borrower or any of its Subsidiaries,  which,
                  in either case, could have a Material Adverse Effect.

             (ix) Promptly upon the furnishing  thereof to the  shareholders  of
                  the Borrower, copies of all financial statements,  reports and
                  proxy statements so furnished.

             (x)  Such other information (including  non-financial  information)
                  as the Agent may from time to time reasonably request.

         6.2 Use of Proceeds. The Borrower will use the proceeds of the Facility
             ---------------
A Term Loans and the Facility B Term Loans  solely for the  repayment of amounts
outstanding  under the Prior Loan  Agreement and to refinance  costs incurred in
connection with certain  acquisitions and conversion of stores, and the proceeds
of the Revolving Loans solely (i) to make permitted  Acquisitions,  (ii) to make
permitted Capital Expenditures,  (iii) for working capital purposes and (iv) for
general  corporate  purposes  (including  but  not  limited  to the  investments
contemplated  by Sections  6.29 and 6.30).  The Borrower will use the Letters of
Credit only for the purposes specified in Section 2.2(i). The Borrower will not,
nor will it permit any  Subsidiary  to, use any of the  proceeds of the Loans to
purchase or carry any "margin stock" (as defined in Regulation U).

         6.3  Notice  of  Default.  The  Borrower  will,  and  will  cause  each
              -------------------
Subsidiary  to, give prompt (but in any case,  within 5 Business Days) notice in
writing to the Lenders of the  occurrence of any Default or Event of Default and
of any other  development,  financial or otherwise,  which could have a Material
Adverse Effect.

         6.4  Conduct  of  Business.  The  Borrower  will,  and will  cause each
              ---------------------
Subsidiary  to,  carry on and  conduct  its  business in the pet food and supply
business  and related  fields and to do all things  necessary  to remain in good
standing  in  its  jurisdiction  of  organization  and  maintain  all  requisite
authority to conduct its business in each  jurisdiction in which its business is
conducted.  The Borrower shall not, and shall not permit any of its Subsidiaries
to,  make any  material  change  in the  nature  of its  business  as  presently
conducted; provided that the foregoing shall not be construed as a limitation on
Acquisitions permitted hereunder.

         6.5 Records. The Borrower will, and will cause each Subsidiary to, keep
             -------
adequate  records and books of account,  in which full and correct entries shall
be made in  accordance  with  Agreement  Accounting  Principles of all financial
transactions of the Borrower,  its  Subsidiaries,  their  respective  assets and
their respective business.

         6.6 Insurance.  The Borrower  will, and will cause each  Subsidiary to,
             ---------
maintain insurance on all their Property in such amounts and covering such risks
as is consistent with sound business practice,  and the Borrower will furnish to
any Lender upon request full information as to the insurance carried.

         6.7  Compliance  with  Laws.  The  Borrower  will,  and will cause each
              ----------------------
Subsidiary to, comply in all material  respects with all applicable laws, rules,
regulations and orders, such compliance to include,  without limitation,  paying
before the same  become  delinquent,  all taxes,  assessments  and  governmental
charges imposed upon it or upon its property, except such taxes, assessments and
governmental  charges  as are  being  contested  in good  faith  by  appropriate
proceedings and as to which appropriate reserves are maintained.

         6.8  Maintenance of Properties.  The Borrower will, and will cause each
              -------------------------
Subsidiary to, do all things necessary to maintain,  preserve,  protect and keep
its Property in good repair, working order and condition, and make all necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times.

         6.9  Inspection.  At any  reasonable  time and from  time to time  upon
              ----------
reasonable  notice, the Borrower will, and will cause each Subsidiary to, permit
the Agent, by its respective  representatives  and agents, to inspect any of the
Property,  corporate  books  and  financial  records  of the  Borrower  and each
Subsidiary,  to  examine  and make  copies  of the books of  accounts  and other
financial  records of the  Borrower  and each  Subsidiary,  and to  discuss  the
affairs,  finances and accounts of the Borrower and each Subsidiary with, and to
be advised as to the same by, their respective officers at such reasonable times
and intervals as the Lenders may designate.

         6.10     Debt. The Borrower will not, nor will it permit any Subsidiary
                  ----
to, create, incur or suffer to exist any Debt, except:

         (i)   Debt  of  the  Borrower  and  the  Subsidiaries  under  the  Loan
Documents;

         (ii)  Debt in existence on the date hereof, as set forth on Schedule 3;

         (iii) trade Debt incurred to  acquire goods, supplies, and services and
incurred in the ordinary course of business;

         (iv)  Debt  of any wholly-owned  Subsidiary to the  Borrower or another
wholly-owned Subsidiary, or Debt of the Borrower to any wholly-owned Subsidiary;
and

         (v)   Debt secured by Liens permitted pursuant to Section 6.22.

         6.11 Merger.  The Borrower will not, nor will it permit any  Subsidiary
              ------
to, enter into any merger, consolidation or amalgamation,  or liquidate, wind up
or dissolve itself (or suffer any liquidation or dissolution),  or convey, sell,
lease, assign, transfer or otherwise dispose of, all or substantially all of its
property,   business  or  assets;  provided  that  the  Borrower  may  merge  or
consolidate   with  another   Person  if  (i)  the  Borrower  is  the  surviving
corporation, (ii) the Borrower will at all times be in pro forma compliance with
all provisions of this Agreement  subsequent to such merger or  consolidation as
long as any Loans or any  Commitment is  outstanding  and (iii) the Borrower has
filed the SEC Report (if required to do so by law).

         6.12 Sale of  Assets.  The  Borrower  will not,  nor will it permit any
              ---------------
Subsidiary to, lease,  sell or otherwise  dispose of its Property,  to any other
Person except for (i) sales of inventory in the ordinary  course of business and
(ii) leases, sales or other dispositions of its Property that, together with all
other Property of the Borrower and its Subsidiaries  previously leased,  sold or
disposed  of (other  than  inventory  in the  ordinary  course of  business)  as
permitted by this Section  during the term of this  Agreement do not require the
Borrower  to file an SEC  Report;  provided  that  the  foregoing  shall  not be
construed as  prohibiting a transfer of assets from a Subsidiary to the Borrower
or the merger of a Subsidiary into the Borrower.

         6.13 Sale of Accounts.  The  Borrower  will not, nor will it permit any
              ----------------
Subsidiary  to, sell or otherwise  dispose of any notes  receivable  or accounts
receivable,  with or without recourse, except the Borrower or any Subsidiary may
assign accounts  receivable  (previously  expensed by the Borrower as bad debts)
for collection, with or without recourse.

         6.14  Acquisitions.  The  Borrower  will not,  nor will it  permit  any
               ------------
Subsidiary to, enter into any agreement,  contract,  binding commitment or other
arrangement  providing  for any  Acquisition,  or take any action to solicit the
tender of  securities  or  proxies  in  respect  thereof  in order to effect any
Acquisition, unless:

         (i) the  Person to be (or whose  assets  are to be)  acquired  does not
oppose  such  Acquisition  and the line or lines of business of the Person to be
acquired  are  substantially  the same as one or more line or lines of  business
conducted by the Borrower and its Subsidiaries,

    (ii) no Default or Event of Default  shall have  occurred and be  continuing
either  immediately  prior  to  or  immediately  after  giving  effect  to  such
Acquisition,

   (iii) if any  Acquisition  would  require the Borrower to file an SEC Report,
the  Borrower  shall  have  furnished  to the  Agent  (A) pro  forma  historical
financial statements as of the end of the most recently completed fiscal year of
the Borrower and most recent  interim  fiscal  quarter,  if  applicable,  giving
effect  to such  Acquisition  and (B) a  Compliance  Certificate  prepared  on a
historical pro forma basis giving effect to such Acquisition,  which certificate
shall  demonstrate  that no Default or Event of Default would exist  immediately
after  giving  effect  thereto  (provided,  however,  that in each  case if such
information is not then available for such periods with respect to Borrower, any
Subsidiary  or the  Person  being  acquired  (or  from  whom  assets  are  being
acquired),  then such statements may be based instead upon reasonable  estimates
made by  Borrower  as to the  financial  performance  of such  Persons  for such
periods) and

    (iv) the  Person  acquired  shall be a  Subsidiary,  or be  merged  into the
Borrower or a Subsidiary,  immediately upon  consummation of the Acquisition (or
if  assets  are  being  acquired,  the  acquiror  shall  be  the  Borrower  or a
Subsidiary).

         6.15  Affiliates.  The  Borrower  will  not,  and will not  permit  any
               ----------
Subsidiary to, enter into any transaction  (including,  without limitation,  the
purchase  or sale of any  Property  or  service)  with,  or make any  payment or
transfer  to,  any  Affiliate  except in the  ordinary  course of  business  and
pursuant to the reasonable  requirements of the Borrower's or such  Subsidiary's
business and upon fair and reasonable terms no less favorable to the Borrower or
such  Subsidiary  than  the  Borrower  or  such  Subsidiary  would  obtain  in a
comparable  arms-length  transaction;  provided that the foregoing  shall not be
construed as  prohibiting a transfer of assets from a Subsidiary to the Borrower
or the merger of a Subsidiary into the Borrower.

         6.16     ERISA.  The  Borrower  will  not, and  will  not  permit  any
                  -----
Subsidiary to, become a party to any Multiemployer Plan.

         6.17 Capital  Expenditures.  The Borrower will not, and will not permit
              ---------------------
any  Subsidiary  to,  make or  commit  to make  (by  way of the  acquisition  of
securities of a person or entity or otherwise) any Capital  Expenditure,  except
for Capital  Expenditures  not  exceeding  $55,000,000  in the  aggregate in any
fiscal  year,  and with  respect  to  fiscal  year  2000 and  each  fiscal  year
thereafter, an additional aggregate amount equal to the amount (if any) by which
the actual Capital  Expenditures in the immediately  preceding  fiscal year were
less than those permitted  hereunder for such fiscal year.  Notwithstanding  the
foregoing,  any Capital  Expenditure made by a Person which is the subject of an
Acquisition by the Borrower, prior to such Acquisition, shall not be included in
determining compliance by the Borrower and its Subsidiaries with this Section.

         6.18  Total  Debt  Ratio.  The  Borrower  and  its  Subsidiaries  on  a
               ------------------
consolidated  basis shall not permit,  as of the end of each fiscal  quarter for
the four  consecutive  fiscal  quarters  then ended,  the Total Debt Ratio to be
greater  than (i)  2.50:1.00  with respect to any such four  consecutive  fiscal
quarters ending prior to February 2, 2002 and (ii) 2.25:1.00 with respect to any
such four consecutive fiscal quarters ending on or after February 2, 2002.

         6.19 Payment of Obligations.  The Borrower and each Subsidiary will pay
              ----------------------
and discharge promptly all taxes, assessments and other governmental charges and
claims levied or imposed upon it or its Property, or any part thereof, provided,
however,  that the  Borrower and its  Subsidiaries  shall have the right in good
faith to contest any such taxes, assessments, charges or claims and, pending the
outcome  of such  contest,  to delay or refuse  payment  thereof  provided  that
adequately  funded  reserves are established by it to pay and discharge any such
taxes assessments, charges and claims.

         6.20 Consolidated Net Worth. The Borrower and its Subsidiaries shall at
              ----------------------
all times  maintain  Consolidated  Net Worth,  determined  as of the end of each
fiscal quarter,  of not less than $160,000,000 plus 50% of cumulative Net Income
for the period  commencing on May 2, 1999 through the end of such fiscal quarter
plus 75% of any Net Proceeds  obtained from any public equity offering.  (In the
event that the Borrower and its  Subsidiaries  have a consolidated  net loss for
any fiscal quarter, Net Income for purposes of this Section shall be deemed zero
for such fiscal quarter).

         6.21 Restricted  Junior Payments.  The Borrower shall not and shall not
              ---------------------------
permit any  Subsidiaries  to declare or pay any dividends  (other than dividends
payable  solely in common  stock of the Borrower or its  Subsidiaries  and other
than dividends payable by its Subsidiaries to the Borrower) on any shares of any
class of capital  stock of  Borrower  or its  Subsidiaries  or any  warrants  or
options to purchase any such stock, whether now or hereafter outstanding.

         6.22 Encumbrances and Liens. The Borrower will not, and will not permit
              ----------------------
any Subsidiary  to,  create,  assume or suffer to exist any Lien (other than for
taxes not delinquent and for taxes being contested in good faith) on Property of
any kind, whether real, personal or mixed, now owned or hereafter  acquired,  or
upon the  income or  profits  thereof,  except  for (i) minor  encumbrances  and
easements on real property which do not materially affect its market value; (ii)
future  purchase  money  security   interests   encumbering  only  the  property
purchased; (iii) statutory liens of bankers, carriers, warehousemen,  mechanics,
materialmen,  and other similar Liens imposed by law,  which are incurred in the
ordinary  course of business for sums not more than 30 days  delinquent or which
are being contested in good faith by appropriate proceedings; (iv) deposits made
in the ordinary  course of business to secure  liability to insurance  carriers;
(v) attachment and judgment  Liens securing  claims less than  $1,000,000 in the
aggregate  (excluding for purposes of said  calculation any such Liens for which
execution  has been  stayed,  payment is covered  in full by  insurance,  or the
Borrower is prosecuting an appeal in good faith by appropriate proceedings); and
(vi)  monetary  obligations  of  the  Borrower  under  any  leasing  or  similar
arrangement  which,  in accordance  with  Agreement  Accounting  Principles,  is
classified  as a  Capitalized  Lease.  Notwithstanding  the  foregoing:  (i) the
Borrower shall not (and shall not permit any Subsidiary to) at any time encumber
any real property with a purchase  money  security  interest if (A)  immediately
after giving  effect to such  encumbrances,  the purchase  money Debt secured by
said  encumbrance  will  exceed  75% of the fair  market  value of the  Property
encumbered by the  encumbrance  or (B)  immediately  after giving effect to such
encumbrance,  the  aggregate  Debt of the  Borrower  secured by  purchase  money
security  interests  in real  property  will  exceed  5% of total  assets of the
Borrower and its  Subsidiaries  on a consolidated  basis;  and (ii) the Borrower
shall  not at any  time  encumber  its  Property  with  an  additional  Lien  or
encumbrance  if,  immediately  after  giving  effect  to such  encumbrance,  the
Borrower would be required to file an SEC Report.

         6.23 Loans,  Advances  and  Guaranties.  Except as permitted by Section
              ---------------------------------
6.29 or 6.30 or set forth on Schedule  4, the  Borrower  will not,  and will not
permit any Subsidiary to, except in the ordinary course of business as currently
conducted  and subject to Section  6.28,  make any loans or  advances,  become a
guarantor  or surety,  pledge its credit or  properties  in any manner or extend
credit;  provided that the  foregoing  shall not be construed as a limitation on
guaranties or any Liens permitted hereunder.

         6.24  Investments.  Except as permitted by Section 6.14,  6.29 or 6.30,
               -----------
the Borrower will not, and will not permit any Subsidiary to,  purchase the Debt
or equity of another Person except for:

     (i)  certificates  of deposit,  time  deposits,  Eurodollar  time deposits,
repurchase agreements,  reverse repurchase agreements,  or bankers' acceptances,
having in each case a maturity date of not more than twelve months from the date
of acquisition by the Borrower,  issued by a Lender or any U.S.  commercial bank
or any branch or agency of a non-U.S.  bank licensed to conduct  business in the
U.S.  having  combined  capital and surplus or not less than  $50,000,000  whose
short term  securities  are rated at least "A" by Standard & Poor's  Corporation
(or the equivalent  rating provided by any of Moody's Investors  Service,  Inc.,
Duff & Phelps Credit Rating Co. or Fitch Investors Services, Inc.);

         (ii) interest  bearing or discounted  obligations  of the United States
Government,  any agency thereof  (including  without limitation the Federal Home
Loan Mortgage  Corporation,  the Government National Mortgage  Association,  the
Federal National Mortgage Association and the Federal Farm Credit System) or any
entities or pools of mortgages or other instruments  formed by the United States
Government or any such agencies,  and in any case only if such  obligation has a
maturity  date not more than twelve months from the date of  acquisition  by the
Borrower;

     (iii) obligations issued by states and local governments or their agencies,
instrumentalities,  authorities or  subdivisions,  if such issuer has received a
rating of at least  "A" by  Standard  & Poor's  Corporation  (or the  equivalent
rating provided by any of Moody's Investors Service,  Inc., Duff & Phelps Credit
Rating  Co. or Fitch  Investors  Services,  Inc.),  and in any case only if such
obligation  has a maturity  date of not more than twelve months from the date of
acquisition by the Borrower;

     (iv) commercial  paper of an issuer rated at least "A" by Standard & Poor's
Corporation  (or the  equivalent  rating  provided  by any of Moody's  Investors
Service,  Inc.,  Duff & Phelps  Credit Rating Co. or Fitch  Investors  Services,
Inc.), and in any case only if such obligation has a maturity date not more than
twelve months from the date of acquisition by the Borrower; or

     (v) investments in money market funds including short-term  adjustable rate
money market funds.

         6.25  Minimum  Fixed  Charge  Coverage  Ratio.  The  Borrower  and  its
               ---------------------------------------
Subsidiaries  on a  consolidated  basis  shall at all  times  maintain  a ratio,
determined as of the end of each fiscal quarter, for the four consecutive fiscal
quarters then ended, of EBITDAR to  Consolidated  Fixed Charges of not less than
1.25:1.0.

         6.26  Capitalized Rent Expense Ratio. The Borrower and its Subsidiaries
               ------------------------------
on a consolidated  basis shall not permit,  as of the end of each fiscal quarter
for the four  consecutive  fiscal  quarters  then ended,  the  Capitalized  Rent
Expense Ratio to be greater than 0.85:1:00.

         6.27 Guaranties,  Etc. The Borrower will cause each of its Subsidiaries
              ----------------
hereafter formed or acquired to deliver to the Agent promptly upon the formation
or  acquisition  thereof  each of the  following:  (i) a  Guarantee  in form and
substance   satisfactory   to  the  Agent,   guaranteeing   the  Obligations  on
substantially the same terms as the other Guarantors,  (ii) a Guarantor Security
Agreement,  in form and  substance  satisfactory  to the Agent,  granting to the
Agent,  for the benefit of the  Lenders,  security  interests in the property of
such Subsidiary on substantially the same terms as the other  Guarantors,  (iii)
appropriate UCC-1 Financing  Statements and Lien searches requested by the Agent
indicating the Lenders'  first  priority Lien on such  property,  (iv) the stock
certificates  representing  the issued and  outstanding  shares of stock of such
Subsidiaries,  together with undated stock powers  executed in blank (or, in the
case of limited  liability  company or partnership  Subsidiaries,  such filings,
notices or other  actions as the Agent may  reasonably  request  with respect to
perfecting a first-priority  security interest therein), (v) a favorable written
opinion of counsel satisfactory to the Agent as to such matters relating thereto
as any Lender  through the Agent may reasonably  request,  in form and substance
satisfactory  to  the  Agent,  (vi)  certified  copies  of  the   organizational
documents, resolutions and incumbency certificates of such Subsidiaries, in each
case in form and  substance  satisfactory  to the  Agent and  (vii)  such  other
agreements,  instruments, approvals or other documents as any Lender through the
Agent may reasonably  request.  Notwithstanding  the foregoing,  with respect to
Foreign  Subsidiaries the Borrower shall be required to pledge to the Agent, for
the benefit of the Lenders,  only such of its equity  interests  therein as will
not cause the Borrower to incur material adverse tax consequences  under U.S tax
law as a result of such pledge.

         6.28 Lease Obligations. The Borrower shall not and shall not permit any
              -----------------
of its  Subsidiaries  to,  create,  incur,  guaranty  or suffer  to  exist,  any
obligations as lessee for the payment of lease expenses for any real or personal
property  under  leases  or   arrangements   to  lease   (collectively,   "Lease
Obligations"),  other than rental  expense  with  respect to  Capitalized  Lease
obligations and long-term operating leases.

         6.29 Petcetera L.P. Investment. Except as set forth on Schedule 4 or 5,
              -------------------------
the Borrower will not, and will not permit any  Subsidiary to, make or commit to
make any investment in Petcetera L.P. (whether in the form of equity,  advances,
loans,  extensions of credit,  guaranties,  the pledging of collateral,  capital
contributions,  purchase  of debt  or  otherwise)  except  for  investments  not
exceeding  $10,000,000  in the aggregate in any fiscal year, and with respect to
fiscal year 2000 and each fiscal year thereafter, an additional aggregate amount
equal to the amount (if any) by which the actual  investment in the  immediately
preceding fiscal year was less than the investment  permitted hereunder for such
fiscal year.

         6.30 E-Commerce Investment.  The Borrower will not, and will not permit
              ---------------------
any Subsidiary to, make or commit to make any E-Commerce  Investment (whether in
the  form  of  equity,  loans,   extensions  of  credit,   guaranties,   capital
contributions,  purchase  of debt  or  otherwise)  except  for  investments  not
exceeding (i)  $10,000,000 in the aggregate in fiscal year 1999, (ii) $5,000,000
in the  aggregate in fiscal year 2000 and,  with respect to fiscal year 2000, an
additional  aggregate  amount  equal to the  amount (if any) by which the actual
investment  in fiscal  year 1999 was less than the  investment  permitted  under
clause (i) for such  fiscal  year and (iii) if the actual  investment  in fiscal
year 2000 was less than the  investment  permitted  under  clause  (ii) for such
fiscal year,  an aggregate  amount for fiscal year 2001 equal to the  difference
between such actual investment and such permitted amount.

                                    ARTICLE 7

                                    DEFAULTS
                                    --------

         The  occurrence  of any  one or  more  of the  following  events  shall
constitute an "Event of Default":

         7.1  Payment  Defaults.  The  Borrower  shall  fail to pay when due any
              -----------------
payment of  principal of any Loan,  or the  Borrower  shall fail to pay within 3
days of the date  when  due any  reimbursement  obligation  (with  respect  to a
drawing  under a Letter of Credit) or interest or other  charge or fee  required
under the terms of this Agreement or the other Loan Documents.

         7.2 Representations and Warranties. Any representation or warranty made
             ------------------------------
by the Borrower or any  Guarantor  under any Loan  Document  shall prove to have
been incorrect or misleading in any material respect when made.

         7.3 Other Loan Document  Defaults.  The Borrower or any Guarantor shall
             -----------------------------
fail to perform (a) any obligation set forth in subsections 4.4, 6.1, 6.3, 6.10,
6.11,  6.12,  6.13,  6.14, 6.17, 6.18, 6.21, 6.22, 6.23, 6.24, 6.25, 6.26, 6.28,
6.29 or 6.30 of the Agreement;  (b) any obligation set forth in subsections  6.2
or 6.20 of the Agreement and such failure shall  continue for 14 days  following
the occurrence thereof;  or (c) any other obligation  contained in the Agreement
or the other Loan  Documents,  and such failure shall continue for 30 days after
written notice thereof from the Lenders.

         7.4 Bankruptcy. (i) The Borrower or any Guarantor shall fail to pay its
             ----------
Debts  generally  as they  become due or shall file any  petition  or action for
relief under any bankruptcy,  insolvency,  reorganization,  moratorium, creditor
composition law, or any other law for the relief of or relating to debtors; (ii)
an  involuntary  petition  under any  bankruptcy  law shall be filed against the
Borrower or any  Guarantor  and shall not be dismissed or  discharged  within 60
days of  filing;  or (iii) a  custodian,  receiver,  trustee,  assignee  for the
benefit or  creditors,  or other  similar  official,  shall be appointed to take
possession,  custody  or  control  of  the  properties  of the  Borrower  or any
Guarantor and not be dismissed or discharged with 60 days of appointment.

         7.5 Other  Agreements.  The Borrower or any Guarantor shall fail to pay
             -----------------
when due principal or interest  payments  required under the terms of any bonds,
notes,  debentures or other agreements  evidencing,  in the aggregate,  at least
$10,000,000  of  indebtedness  (excluding,  for  purposes  of this  calculation,
payments  required under this Agreement or any of the other Loan  Documents) and
such non-payment shall continue beyond any period of grace provided with respect
thereto,  or the Borrower or any Guarantor  shall  default in the  observance or
performance  of  any  other  agreement  contained  in  any  such  bonds,  notes,
debentures or other agreements evidencing  indebtedness,  and the effect of such
failure or default is to cause the indebtedness  evidenced thereby to become due
prior to its stated date of maturity.

         7.6 ERISA. Any  Governmental  Person shall take any action under ERISA,
             -----
with respect to any Plan, that could have a Material  Adverse Effect or that the
unfunded liabilities exceed $1,000,000.

         7.7  Judgments.  A final  judgment or order for the payment of money in
              ---------
excess of  $10,000,000  (exclusive  of amounts  covered by  insurance)  shall be
rendered  against  the  Borrower  or any  Guarantor  and the same  shall  remain
undischarged  for a  period  of 30 days  during  which  execution  shall  not be
effectively stayed, or any judgment,  writ, warrant of attachment,  or execution
or similar process,  shall be issued or levied against a substantial part of the
Borrower's  or any  Guarantor's  property and such  judgment,  writ,  warrant of
attachment,  or execution  or similar  process,  shall not be released,  stayed,
vacated, bonded or otherwise dismissed within 20 days after its issue or levy.

         7.8 Loan  Documents.  The  Guaranties or any other Loan Document  shall
             ---------------
fail to remain  in full  force or  effect  or any  action  shall be taken by the
Borrower  or any  Guarantor  to  discontinue  or to  assert  the  invalidity  or
unenforceability  of any Guarantee or any other Loan Document,  or any Guarantor
denies that it has any further  liability  under any Guarantee or any other Loan
Document to which it is a party, or gives notice to such effect.

                                    ARTICLE 8

                      ACCELERATION, WAIVERS AND AMENDMENTS
                      ------------------------------------

         8.1  Acceleration.  If any Event of Default  described  in Section  7.4
              ------------
occurs with  respect to the  Borrower,  the  obligations  of the Lenders to make
Loans  and  issue  and   participate  in  Letters  of  Credit   hereunder  shall
automatically  terminate and the Obligations  shall  immediately  become due and
payable  without any  election or action on the part of the Agent or any Lender.
If any other Event of Default  occurs,  the  Required  Lenders may  terminate or
suspend the  obligations of the Lenders to make Loans and issue and  participate
in  Letters  of Credit  hereunder,  or  declare  the  Obligations  to be due and
payable,  or both,  whereupon the Obligations  shall become  immediately due and
payable,  without  presentment,  demand,  protest or notice of any kind,  all of
which the Borrower hereby expressly waives.

         8.2 Cash  Collateral.  To the  extent  that any  Letters  of Credit are
             ----------------
outstanding  at the time of any Event of Default,  the Borrower shall deliver to
the Agent,  for the  benefit of the  Lenders,  a cash  collateral  deposit in an
amount equal to the aggregate  Letter of Credit Amount for all Letters of Credit
then outstanding.

         8.3 Additional Remedies.  The rights,  powers and remedies given to the
             -------------------
Agent and the Lenders  hereunder  shall be cumulative  and not  alternative  and
shall be in addition to all rights,  powers and remedies  given to the Agent and
the Lenders by law against the Borrower or any other  Person,  including but not
limited to any Lender's right of setoff or banker's lien.

         8.4  Amendments.  Subject  to the  provisions  of this  Article  8, the
              ----------
Required  Lenders  (or the Agent with the  consent  in  writing of the  Required
Lenders) and the Borrower may enter into agreements  supplemental hereto for the
purpose of adding or modifying any  provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement shall,
without the consent of each Lender affected thereby:

         (i)      Extend the final  maturity  of any Loan or Note or forgive all
                  or any portion of the principal amount thereof,  or reduce the
                  rate or extend the time of payment of interest or fees thereon
                  or waive any payment of interest or fees  thereon owed to such
                  Lender.

         (ii)     Reduce the percentage specified in the definition of  Required
                  Lenders.

    (iii)Increase  the amount of the  Commitment  of any Lender  (other  than as
         contemplated  by Section  12.4)  hereunder  or permit the  Borrower  to
         assign its rights under this Agreement.

         (iv)     Amend this Section 8.4.

         (v)     Release any guarantor of the Obligations or modify any guaranty
                 in any material respect.

         (vi) Release any substantial amount of collateral securing the
              Obligations;

provided, further, that no such supplemental agreement shall,
--------  -------

         (A) without the consent of the Required  Revolving  Lenders,  modify or
         waive  any  provision  of  Section  2.18   regarding   application   of
         prepayments  in a manner  which would  adversely  affect any  Revolving
         Lender; or

         (B) without the consent of each Revolving Lender, reduce the percentage
         specified in the definition of Required Revolving Lenders; or

         (C) without the consent of the Required Facility A Term Lenders, modify
         or waive  any  provision  of  Section  2.18  regarding  application  of
         prepayments  in a manner  which would  adversely  affect any Facility A
         Term Lender; or

         (D) without the consent of each  Facility A Term Lender,  (y) modify or
         waive any  provision  of Section  2.4(iv) or (z) reduce the  percentage
         specified in the definition of Required Facility A Term Lenders; or

         (E) without the consent of the Required  Facility B Term  Lenders,  (x)
         modify or waive any provision of Section 2.18 regarding  application of
         prepayments  in a manner  which would  adversely  affect any Facility B
         Term Lender,  (y) modify or waive any  provision of Section  2.5(iv) or
         (z) reduce the  percentage  specified  in the  definition  of  Required
         Facility B Term Lenders.

No amendment of any provision of this  Agreement  relating to the Agent shall be
effective  without the written consent of the Agent. The Agent may waive payment
of the fees for its own account without obtaining the consent of any other party
to this Agreement.

         8.5 Preservation of Rights.  No delay or omission of the Lenders or the
             ----------------------
Agent to exercise any right under the Loan Documents  shall impair such right or
be construed to be a waiver of any Default or an acquiescence  therein,  and the
making of a Loan  notwithstanding the existence of a Default or the inability of
the  Borrower  to  satisfy  the  conditions  precedent  to such  Loan  shall not
constitute  any waiver or  acquiescence.  Any single or partial  exercise of any
such right shall not preclude other or further  exercise thereof or the exercise
of any other right,  and no waiver,  amendment or other  variation of the terms,
conditions or provisions of the Loan Documents  whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.4, and then only
to the extent in such writing  specifically set forth. All remedies contained in
the Loan  Documents  or by law  afforded  shall be  cumulative  and all shall be
available to the Agent and the Lenders until the  Obligations  have been paid in
full.

                                    ARTICLE 9

                               GENERAL PROVISIONS
                               ------------------

         9.1 Survival of Representations.  All representations and warranties of
             ---------------------------
the Borrower contained in this Agreement shall survive delivery of the Notes and
the  making  of  the  Loans  and  issuance  of  the  Letters  of  Credit  herein
contemplated.

         9.2      Governmental Regulation.  Anything contained in this Agreement
                  -----------------------
to the contrary notwithstanding, no Lender shall be obligated to  extend  credit
to the Borrower in violation of any limitation or  prohibition  provided  by any
applicable statute or regulation.

         9.3      Headings.  Section headings in the Loan  Documents are for and
                  --------
convenience of reference only, shall not govern the interpretation of any of the
provisions of the Loan Documents.

         9.4 Entire  Agreement.  The Loan Documents  embody the entire agreement
             -----------------
and  understanding  among the Borrower,  the Agent and the Lenders and supersede
all prior agreements and  understandings  among the Borrower,  the Agent and the
Lenders relating to the subject matter thereof.

         9.5 Several  Obligations;  Benefits of this  Agreement.  The respective
             --------------------
obligations  of the  Lenders  hereunder  are several and not joint and no Lender
shall be the  partner  or agent of any other  (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any of
its  obligations  hereunder  shall not relieve any other  Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit  upon any Person other than the parties to this  Agreement  and
their respective successors and assigns.

         9.6 Expenses;  Indemnification.  The Borrower shall reimburse the Agent
             --------------------------
for any costs,  internal charges and out-of-pocket  expenses paid or incurred by
the  Agent  in  connection  with  the  negotiation  and  documentation  of  this
Agreement.  The Borrower  shall also reimburse the Agent and each Lender for any
costs,  internal  charges  and  out-of-pocket   expenses  (including  reasonable
attorneys'  fees and time  charges of  attorneys  for the Agent and each Lender)
paid or incurred by the Agent or any Lender in  connection  with the  collection
and enforcement of the Loan Documents.  The Borrower further agrees to indemnify
the Agent and each Lender,  its  directors,  officers and employees  against all
losses,  claims,  damages,  penalties,   judgments,   liabilities  and  expenses
(including,  without  limitation,  all  expenses of  litigation  or  preparation
therefor whether or not the Agent or any Lender is a party thereto) which any of
them may pay or incur  arising out of or relating to this  Agreement,  the other
Loan Documents,  the transactions  contemplated hereby or the direct or indirect
application  or proposed  application  of the  proceeds of any Loan or Letter of
Credit hereunder, provided that no Person shall have the right to be indemnified
hereunder  for such  Person's  own gross  negligence  or willful  misconduct  as
determined by a court of competent jurisdiction.

         9.7 Numbers of Documents.  All statements,  notices, closing documents,
             --------------------
and  requests  hereunder  shall  be  furnished  to  the  Agent  with  sufficient
counterparts so that the Agent may furnish one to each of the Lenders.

         9.8  Accounting.  Except  as  provided  to  the  contrary  herein,  all
              ----------
accounting   terms  used  herein  shall  be   interpreted   and  all  accounting
determinations  hereunder shall be made in accordance with Agreement  Accounting
Principles;  provided that, if the Borrower notifies the Agent that the Borrower
wishes to amend any covenant  contained in Article 6 to eliminate  the effect of
any change after the date hereof in Agreement Accounting  Principles (which, for
purposes of this proviso  shall include the generally  accepted  application  or
interpretation  thereof) on the  operation  of such  covenants  (or if the Agent
notifies the Borrower that the Required  Lenders wish to amend any such covenant
for such purpose),  then the Borrower's  compliance  with such covenant shall be
determined on the basis of Agreement Accounting Principles in effect immediately
before the relevant change in Agreement Accounting  Principles became effective,
until either such notice is  withdrawn  or such  covenant is amended in a manner
satisfactory to the Borrower and the Required Lenders.

         9.9 Severability of Provisions. Any provision in any Loan Document that
             --------------------------
is held to be inoperative,  unenforceable, or invalid in any jurisdiction shall,
as to that  jurisdiction,  be  inoperative,  unenforceable,  or invalid  without
affecting  the  remaining  provisions  in that  jurisdiction  or the  operation,
enforceability,  or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.

         9.10 Nonliability of Lenders. The relationship between the Borrower and
              -----------------------
the Lenders and the Agent shall be solely that of borrower  and lender.  Neither
the  Agent nor any  Lender  shall  have any  fiduciary  responsibilities  to the
Borrower.  Neither the Agent nor any Lender undertakes any responsibility to the
Borrower to review or inform the Borrower of any matter in  connection  with any
phase of the Borrower's business or operations.

         9.11 CHOICE OF LAW. THE LOAN DOCUMENTS  (OTHER THAN THOSE  CONTAINING A
              -------------
CONTRARY  EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF CALIFORNIA, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

         9.12 CONSENT TO JURISDICTION.  THE BORROWER HEREBY IRREVOCABLY  SUBMITS
              -----------------------
TO THE  NON-EXCLUSIVE  JURISDICTION  OF ANY UNITED STATES  FEDERAL OR CALIFORNIA
STATE COURT SITTING IN LOS ANGELES IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY  IRREVOCABLY  AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING  MAY BE HEARD AND  DETERMINED
IN ANY SUCH COURT AND  IRREVOCABLY  WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT,  ACTION OR  PROCEEDING  BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN  INCONVENIENT  FORUM.  NOTHING HEREIN SHALL LIMIT
THE RIGHT OF THE AGENT OR ANY LENDER TO BRING  PROCEEDINGS  AGAINST THE BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER
AGAINST  THE AGENT OR ANY  LENDER OR ANY  AFFILIATE  OF THE AGENT OR ANY  LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED  WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN LOS
ANGELES, CALIFORNIA.

         9.13  WAIVER OF JURY  TRIAL.  THE  BORROWER,  THE AGENT AND EACH LENDER
               ---------------------
HEREBY WAIVE TRIAL BY JURY IN ANY  JUDICIAL  PROCEEDING  INVOLVING,  DIRECTLY OR
INDIRECTLY,  ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY  ARISING  OUT OF,  RELATED TO, OR  CONNECTED  WITH ANY LOAN  DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.

         9.14  Confidentiality.  The Lenders  shall take  normal and  reasonable
               ---------------
precautions  to  maintain  the  confidentiality  of all  non-public  information
obtained  pursuant  to  the  requirements  of  this  Agreement  which  has  been
identified as such by the Borrower but may, in any event,  make  disclosures (i)
reasonably  required by any bona fide  transferee,  assignee or  participant  in
connection  with  the  contemplated   transfer  or  assignment  of  any  of  the
Commitments or Loans or  participations  therein or participations in Letters of
Credit  or  (ii)  as  required  or  requested  by  any  governmental  agency  or
representative  thereof or as required pursuant to any legal process or (iii) to
its  attorneys and  accountants  or (iv) as required by law or (v) in connection
with  litigation  involving  any  Lender  or  (vi)  to any  direct  or  indirect
contractual  counterparty in respect of a Hedge  Agreement,  or such contractual
counterparty's professional advisor (so long as such contractual counterparty or
professional advisor to such contractual  counterparty agrees to be bound by the
provisions of this Section 9.14).

         9.15 Relationship with Prior Loan Agreement.  This Agreement amends and
              --------------------------------------
restates in its entirety the Prior Loan  Agreement.  This  Agreement  renews and
continues  the  Prior  Loan  Agreement   without  any  novation,   discharge  or
satisfaction of the underlying  obligations or  indebtedness  (or any collateral
security therefor),  all of which obligations,  indebtedness and security remain
outstanding under this Agreement and the Notes.  Notwithstanding anything herein
to the  contrary,  (a)  interest  and other  obligations  under  the Prior  Loan
Agreement  accrued and payable  prior to the date of amendment  and  restatement
hereof but remaining unpaid shall not be discharged and shall be due and payable
in accordance with the terms of the Prior Loan Agreement, (b) interest and other
obligations  under the Prior Loan Agreement  accrued and payable on or after the
date of amendment and restatement  hereof shall be due and payable in accordance
with the terms of this Agreement and (c) Letters of Credit outstanding under the
Prior Loan  Agreement  shall be deemed,  on and after the  Closing  Date,  to be
outstanding under this Agreement.

                                   ARTICLE 10

                                    THE AGENT
                                    ---------


         10.1  Appointment.  UBOC is hereby  appointed Agent hereunder and under
               -----------
each other Loan  Document,  and each of the Lenders  irrevocably  authorizes the
Agent to act as the agent of such  Lender.  The Agent agrees to act as such upon
the express conditions  contained in this Article 10. The Agent shall not have a
fiduciary  relationship  in respect of the  Borrower  or any Lender by reason of
this Agreement.

         10.2 Powers.  The Agent shall have and may  exercise  such powers under
              ------
the Loan  Documents as are  specifically  delegated to the Agent by the terms of
each thereof,  together with such powers as are reasonably  incidental  thereto.
The Agent shall have no implied duties to the Lenders,  or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.

         10.3  General  Immunity.  Neither  the Agent nor any of its  directors,
               -----------------
officers,  agents or employees shall be liable to the Borrower or any Lender for
any action  taken or omitted  to be taken by it or them  hereunder  or under any
other Loan  Document or in  connection  herewith or therewith  except for its or
their own gross negligence or willful misconduct.

         10.4 No Responsibility for Loans, Recitals,  etc. Neither the Agent nor
              -------------------------------------------
any of its directors,  officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify (i) any statement,  warranty
or  representation  made in  connection  with any Loan Document or any borrowing
hereunder;  (ii)  the  performance  or  observance  of any of the  covenants  or
agreements  of  any  obligor  under  any  Loan  Document,   including,   without
limitation,  any agreement by an obligor to furnish information directly to each
Lender;  (iii) the  satisfaction of any condition  specified in Article 4 except
receipt of items  required to be delivered to the Agent;  or (iv) the  validity,
effectiveness  or  genuineness  of any Loan Document or any other  instrument or
writing  furnished  in  connection  therewith.  The Agent  shall have no duty to
disclose to the Lenders  information that is not required to be furnished by the
Borrower to the Agent at such time, but is voluntarily furnished by the Borrower
to the Agent (either in its capacity as Agent or in its individual capacity).

         10.5 Action on Instructions of Lenders. The Agent shall in all cases be
              ---------------------------------
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan  Document  in  accordance  with  written  instructions  signed by the
Required  Lenders,  and such instructions and any action taken or failure to act
pursuant  thereto  shall be binding on all of the  Lenders and on all holders of
Notes.  The Agent  shall be fully  justified  in failing or refusing to take any
action  hereunder  and under any other Loan  Document  unless it shall  first be
indemnified  to its  satisfaction  by the Lenders  pro rata  against any and all
liability,  cost and expense that it may incur by reason of taking or continuing
to take any such action.

         10.6 Employment of Agents and Counsel. The Agent may execute any of its
              --------------------------------
duties  as Agent  hereunder  and under any other  Loan  Document  by or  through
employees,  agents,  and  attorneys-in-fact  and shall not be  answerable to the
Lenders,  except  as to money or  securities  received  by it or its  authorized
agents,  for the default or misconduct  of any such agents or  attorneys-in-fact
selected by it with  reasonable  care.  The Agent shall be entitled to advice of
counsel  concerning all matters  pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.

         10.7  Reliance on  Documents;  Counsel.  The Agent shall be entitled to
               --------------------------------
rely upon any Note, notice, consent,  certificate,  affidavit, letter, telegram,
statement,  paper or  document  believed  by it to be genuine and correct and to
have been  signed or sent by the proper  person or  persons,  and, in respect to
legal matters,  upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.

         10.8 Agent's  Reimbursement and  Indemnification.  The Lenders agree to
              -------------------------------------------
reimburse and  indemnify  the Agent  ratably in  proportion to their  respective
Commitments (i) for any expenses incurred by the Agent on behalf of the Lenders,
in connection with the  preparation,  execution,  delivery,  administration  and
enforcement  of the Loan  Documents and (ii) for any  liabilities,  obligations,
losses,  damages,  penalties,  actions,  judgments,  suits,  costs,  expenses or
disbursements  of any  kind and  nature  whatsoever  which  may be  imposed  on,
incurred by or asserted  against the Agent in any way relating to or arising out
of the Loan Documents or any other document delivered in connection therewith or
the transactions  contemplated  thereby,  or the enforcement of any of the terms
thereof or of any such other documents,  provided that no Lender shall be liable
for any of the  foregoing to the extent they arise from the gross  negligence or
willful  misconduct  of the Agent.  The  obligations  of the Lenders  under this
Section 10.8 shall survive  payment of the  Obligations  and termination of this
Agreement.

         10.9 Rights as a Lender. In the event the Agent is a Lender,  the Agent
              ------------------
shall  have the same  rights  and  powers  hereunder  and under  any other  Loan
Document  as any  Lender  and may  exercise  the same as  though it were not the
Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a
Lender,  unless  the  context  otherwise  indicates,  include  the  Agent in its
individual  capacity.  The Agent may accept  deposits  from,  lend money to, and
generally engage in any kind of trust,  debt,  equity or other  transaction,  in
addition to those  contemplated  by this  Agreement or any other Loan  Document,
with the  Borrower  or any of its  Subsidiaries  in which the  Borrower  or such
Subsidiary is not  restricted  hereby from  engaging with any other Person.  The
Agent shall, as long as it shall be the Agent, retain at least a 20% interest in
the  Aggregate  Commitment  (or,  with  respect  to  any  Commitment  which  has
terminated, in the Loans outstanding thereunder).

         10.10 Lender Credit  Decision.  Each Lender  acknowledges  that it has,
               -----------------------
independently  and without reliance upon the Agent or any other Lender and based
on the financial  statements  prepared by the Borrower and such other  documents
and information as it has deemed  appropriate,  made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents.  Each Lender
also  acknowledges  that it will,  independently  and without  reliance upon the
Agent or any other  Lender and based on such  documents  and  information  as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.

         10.11  Successor  Agent.  The  Agent  may  resign at any time by giving
                ----------------
written notice thereof to the Lenders and the Borrower,  such  resignation to be
effective upon the  appointment of a successor  Agent or, if no successor  Agent
has been appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. Upon any such resignation,  the Required Lenders shall have
the  right to  appoint,  with  the  consent  (which  shall  not be  unreasonably
withheld) of the  Borrower,  if no Default has occurred  and is  continuing,  on
behalf of the Borrower and the Lenders, a successor Agent. If no successor Agent
shall have been so appointed by the Required  Lenders  within  thirty days after
the  resigning  Agent's  giving  notice of its  intention  to  resign,  then the
resigning  Agent may  appoint,  on behalf of the  Borrower  and the  Lenders,  a
successor  Agent.  If the Agent has  resigned  and no  successor  Agent has been
appointed, the Lenders may perform all the duties of the Agent hereunder and the
Borrower shall make all payments in respect of the Obligations to the applicable
Lender and for all other  purposes  shall deal  directly  with the  Lenders.  No
successor  Agent shall be deemed to be appointed  hereunder until such successor
Agent  has  accepted  the  appointment.  Any  such  successor  Agent  shall be a
commercial  bank having capital and retained  earnings of at least  $50,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor  Agent,
such successor Agent shall  thereupon  succeed to and become vested with all the
rights,  powers,  privileges  and  duties  of  the  resigning  Agent.  Upon  the
effectiveness  of the  resignation  of the Agent,  the resigning  Agent shall be
discharged  from  its  duties  and  obligations  hereunder  and  under  the Loan
Documents.  After  the  effectiveness  of  the  resignation  of  an  Agent,  the
provisions  of this Article 10 shall  continue in effect for the benefit of such
Agent in respect of any actions  taken or omitted to be taken by it while it was
acting as the Agent hereunder and under the other Loan Documents.

                                   ARTICLE 11

                            SETOFF; RATABLE PAYMENTS
                            ------------------------

         11.1 Setoff.  Upon the  occurrence  and during the  continuance  of any
              ------
Event of Default, the Lenders are hereby authorized at any time and from time to
time, to the fullest  extent  permitted by law, to set off and apply any and all
deposits (general or special, time or demand,  provisional or final) at any time
held and other indebtedness at any time owing by any Lender to or for the credit
or the account of the Borrower  against any and all  obligations of the Borrower
now or hereafter  existing under the Loan Documents,  irrespective of whether or
not any Lender shall have made any demand under this Agreement and although such
obligations may be unmatured.  The Agent agrees to notify the Borrower  promptly
after any such setoff and application;  provided,  however,  that the failure to
give such notice shall not affect the  validity of such setoff and  application.
The rights of the Lenders under this Section are in addition to other rights and
remedies (including other rights of setoff) that the Lenders may have.

         11.2 Ratable Payments.  If any Lender,  whether by setoff or otherwise,
              ----------------
has payment made to it upon its Loans (other than payments  received pursuant to
Section  2.18,  3.1 or 3.2) in a greater  proportion  than that  received by any
other Lender, such Lender agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender,  whether in connection with
setoff or  amounts  which  might be  subject  to setoff or  otherwise,  receives
collateral or other  protection for its Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral ratably
in  proportion  to their  Loans.  In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made.

                                   ARTICLE 12

               BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS;
               --------------------------------------------------
                                 JOINING LENDERS
                                 ---------------

         12.1  Successors  and  Assigns.  The terms and  provisions  of the Loan
               ------------------------
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders  and  their  respective  successors  and  assigns,  except  that (i) the
Borrower shall not have the right to assign its rights or obligations  under the
Loan  Documents and (ii) any assignment by any Lender must be made in compliance
with Section 12.3.  Notwithstanding  clause (ii) of this Section, any Lender may
at any time, without the consent of the Borrower or the Agent, assign all or any
portion of its rights under this  Agreement  and its Notes to a Federal  Reserve
Bank;  provided,  however,  that no such assignment shall release the transferor
Lender from its obligations hereunder. The Agent may treat the payee of any Note
as the owner  thereof  for all  purposes  hereof  unless  and until  such  payee
complies with Section 12.3 in the case of an assignment  thereof or, in the case
of any other transfer, a written notice of the transfer is filed with the Agent.
Any  assignee  or  transferee  of a Note  and  each  Joining  Lender  agrees  by
acceptance  thereof  to be bound by all the  terms  and  provisions  of the Loan
Documents.  Any request,  authority or consent of any Person, who at the time of
making  such  request or giving such  authority  or consent is the holder of any
Note,  shall be conclusive and binding on any subsequent  holder,  transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.

         12.2     Participations.
                  --------------

                  (i)  Permitted  Participants;  Effect.  Any Lender may, in the
         ordinary  course of its business and in accordance with applicable law,
         at  any  time   sell  to  one  or  more   banks   or   other   entities
         ("Participants")  participating  interests  in any  Loan  owing to such
         Lender,  any Note held by such Lender, any Commitment of such Lender or
         any other  interest of such  Lender  under the Loan  Documents.  In the
         event of any such  sale by a Lender  of  participating  interests  to a
         Participant,  such Lender's  obligations under the Loan Documents shall
         remain  unchanged,  such Lender shall remain solely  responsible to the
         other parties  hereto for the  performance  of such  obligations,  such
         Lender shall remain the holder of any such Note for all purposes  under
         the Loan  Documents,  all amounts  payable by the  Borrower  under this
         Agreement  shall be  determined  as if such  Lender  had not sold  such
         participating  interests, and the Borrower and the Agent shall continue
         to deal solely and directly  with such Lender in  connection  with such
         Lender's rights and obligations under the Loan Documents.

                  (ii) Voting Rights. Each Lender shall retain the sole right to
         approve,  without  the  consent  of  any  Participant,  any  amendment,
         modification  or waiver of any  provision of the Loan  Documents  other
         than any amendment,  modification or waiver with respect to any Loan or
         Commitment in which such  Participant  has an interest  which  forgives
         principal,  interest  or  fees or  reduces  the  interest  rate or fees
         payable with respect to any such Loan or Commitment, postpones any date
         fixed for any regularly-scheduled  payment of principal of, or interest
         or fees on, any such Loan or  Commitment,  or releases any guarantor of
         any such Loan or any substantial amount of collateral securing any such
         Loan.

                  (iii)  Benefit  of  Setoff.  The  Borrower  agrees  that  each
         Participant  shall be deemed to have the  right of setoff  provided  in
         Section 11.1 in respect of its participating  interest in amounts owing
         under the Loan  Documents  to the same  extent as if the  amount of its
         participating  interest were owing directly to it as a Lender under the
         Loan  Documents,  provided  that each Lender  shall retain the right of
         setoff  provided  in  Section  11.1  with  respect  to  the  amount  of
         participating interests sold to each Participant.  The Lenders agree to
         share with each Participant,  and each  Participant,  by exercising the
         right of setoff  provided  in Section  11.1,  agrees to share with each
         Lender,  any amount  received  pursuant to the exercise of its right of
         setoff, such amounts to be shared in accordance with Section 11.2 as if
         each Participant were a Lender.

         12.3     Assignments.
                  -----------

                  (i)  Permitted  Assignments.  Any Lender may, in the  ordinary
         course of its business and in accordance  with  applicable  law, at any
         time assign to one or more Eligible Institutions  ("Purchasers") all or
         any part of its  rights  and  obligations  under  the  Loan  Documents,
         provided,  however,  such  assignments  must be in a minimum  amount at
         least equal to $5,000,000  (or such lesser amount as shall equal all of
         such Lender's  interest in the Commitment  (and/ or  outstanding  Loans
         under such Commitment) being assigned); provided, however, that if such
         Purchaser is a Lender or an Affiliate or an Approved Fund  thereof,  no
         minimum  amount  shall  be  applicable.   Such   assignment   shall  be
         substantially  in the form of Exhibit C hereto or in such other form as
         may be agreed to by the parties  thereto.  The consent of the  Borrower
         and the  Agent  shall  be  required  prior  to an  assignment  becoming
         effective  with  respect  to a  Purchaser  which is not a Lender  or an
         Affiliate or an Approved Fund  thereof;  provided,  however,  that if a
         Default has  occurred  and is  continuing,  the consent of the Borrower
         shall  not  be  required.  Such  consents  shall  not  be  unreasonably
         withheld.

                  (ii) Effect; Effective Date. Upon (i) delivery to the Agent of
         a notice of assignment, substantially in the form attached as Exhibit I
         to  Exhibit C hereto (a  "Notice  of  Assignment"),  together  with any
         consents required by Section 12.3(i),  and (ii) payment of a $3,000 fee
         to the Agent for processing  such  assignment,  such  assignment  shall
         become  effective  on the  effective  date  specified in such Notice of
         Assignment.  The Notice of Assignment shall contain a representation by
         the Purchaser to the effect that it is an Eligible Institution.  On and
         after the effective date of such  assignment,  such Purchaser shall for
         all  purposes be a Lender  party to this  Agreement  and any other Loan
         Document  executed  by the  Lenders  and shall  have all the rights and
         obligations of a Lender under the Loan Documents, to the same extent as
         if it were an original party hereto,  and no further  consent or action
         by the Borrower,  the Lenders or the Agent shall be required to release
         the  transferor  Lender with respect to the percentage of the Aggregate
         Commitment and Loans assigned to such Purchaser.  Upon the consummation
         of any assignment to a Purchaser pursuant to this Section 12.3(ii), the
         transferor  Lender,  the Agent and the Borrower shall make  appropriate
         arrangements  so that  replacement  Notes are issued to such transferor
         Lender and new Notes or, as appropriate,  replacement Notes, are issued
         to such Purchaser,  in each case in principal amounts  reflecting their
         Commitment, as adjusted pursuant to such assignment.

         12.4     Joining Lenders.
                  ---------------

                  (i) Permitted Joining Lenders. At the request of the Borrower,
         one or more  Eligible  Institutions  approved  by the  Agent  (each,  a
         "Joining Lender") shall become Lenders hereunder  pursuant to a Joining
         Lender Agreement  executed by each such Joining Lender and the Borrower
         and delivered to the Agent; provided,  that (A) any such Joining Lender
         must have an Aggregate  Commitment of at least  $5,000,000  and (B) the
         addition of such Joining  Lender's  Commitment or Commitments  will not
         cause the Maximum Aggregate Commitment to be exceeded.

                  (ii) Effect;  Effective  Date. Upon delivery to the Agent of a
         Joining Lender  Agreement  executed by a Joining Lender,  the Agent and
         the Borrower,  such agreement  shall become  effective on the effective
         date  specified in such Joining  Lender  Agreement.  The Joining Lender
         Agreement shall contain a  representation  by the Joining Lender to the
         effect that it is an Eligible  Institution.  On and after the effective
         date of such Joining  Lender  Agreement,  such Joining Lender shall for
         all  purposes be a Lender  party to this  Agreement  and any other Loan
         Document  executed  by the  Lenders  and shall  have all the rights and
         obligations of a Lender under the Loan Documents, to the same extent as
         if it were an original  party hereto.  Upon the addition of any Joining
         Lender pursuant to this Section 12.4(ii),  (A) the Borrower shall issue
         appropriate Note(s) to such Joining Lender to reflect its Commitment(s)
         and (B) the Agent  shall  forward to each  Lender and the  Borrower  an
         updated Schedule 1.

         12.5 Dissemination of Information.  The Borrower authorizes each Lender
              ----------------------------
and the Agent to disclose to any Participant, Joining Lender or Purchaser or any
other  Person  acquiring  an interest in the Loan  Documents by operation of law
(each a "Transferee") and any prospective  Transferee any and all information in
such Lender's possession concerning the creditworthiness of the Borrower and its
Subsidiaries,  provided  that each  prospective  Transferee  shall  execute  and
deliver  to the  Agent  a  confidentiality  agreement  (in  form  and  substance
reasonably satisfactory to the Borrower and the Agent).

         12.6  Tax  Treatment.  (a) If any  interest  in any  Loan  Document  is
               --------------
transferred  to  any  Transferee  which  is  organized  under  the  laws  of any
jurisdiction  other than the United States or any State thereof,  the transferor
Lender shall cause such Transferee,  concurrently with the effectiveness of such
transfer, to comply with the provisions of Sections 2.16 and 3.2.

         (b) The Borrower shall maintain, or cause to be maintained,  a register
(the "Tax  Register")  that,  at the request of the Borrower  (which  request is
hereby  made),  shall be kept by the  Agent on  behalf  of the  Borrower  at the
address  to which  notices  to the Agent are to be sent  hereunder,  on which it
enters the name of such Lender as the registered  owner of each  Registered Loan
held by such Lender.  A Registered  Loan (and the Registered Note evidencing the
same)  may be  assigned  or  otherwise  transferred  in whole or in part only by
registration of such assignment or transfer on the Tax Register.  Any assignment
or  transfer  of all or part of a  Registered  Loan  (and  the  Registered  Note
evidencing  the same) may be  effected by  registration  of such  assignment  or
transfer on the Tax Register, together with the surrender of the Registered Note
evidencing the same duly endorsed by (or accompanied by a written  instrument of
assignment  or transfer duly  executed by) the holder of such  Registered  Note,
whereupon  one or more new  Registered  Notes in the  same  aggregate  principal
amount shall be issued to the designated  assignee(s) or transferee(s).  The Tax
Register  shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.

                                   ARTICLE 13

                                     NOTICES
                                     -------

         13.1 Giving Notice.  Except as otherwise  permitted by Section 2.7 with
              -------------
respect to notices regarding conversion or continuation of Advances, all notices
and other  communications  provided to any party hereto under this  Agreement or
any other Loan  Document  shall be in writing or by facsimile  and  addressed or
delivered to the Borrower and the Agent at their respective  addresses set forth
below  its  signature  hereto  and to each  Lender at its  address  set forth on
Schedule 1 hereto or at such other address as may be designated by such party in
a notice to the other parties. Any notice, if mailed and properly addressed with
postage prepaid, shall be deemed given when received; any notice, if transmitted
by facsimile,  shall be deemed given when transmitted  (answerback  confirmed in
the case of telexes).

         13.2 Change of Address. The Borrower, the Agent and any Lender may each
              -----------------
change the  address  for service of notice upon it by a notice in writing to the
other parties hereto.

                                   ARTICLE 14

                                  COUNTERPARTS
                                  ------------

         This  Agreement may be executed in any number of  counterparts,  all of
which taken  together shall  constitute  one  agreement,  and any of the parties
hereto  may  execute  this  Agreement  by  signing  any such  counterpart.  This
Agreement shall be effective when it has been executed by the Borrower, the




Agent and the Lenders and each party has  notified  the Agent by  telecopier  or
telephone, that it has taken such action.

         IN  WITNESS  WHEREOF,  the  Borrower,  the  Lenders  and the Agent have
executed this Agreement as of the date first above written.

                        PETCO ANIMAL SUPPLIES, INC.


                        By:/s/James M. Myers
                           -----------------------------
                        Print Name: James M. Myers
                        Title: Senior Vice President and
                               Chief Financial Officer

                        9125 Rehco Road
                        San Diego, California 92121
                        Attention: James M. Myers
                                   Senior Vice President and
                                   Chief Financial Officer

                        Telecopier: (619) 638-2154

                        UNION BANK OF CALIFORNIA, N.A.,
                        as Agent and a Lender

                        By: /s/ Myra Juetten
                            -----------------------------
                        Print Name: Myra Juetten
                        Title:  Vice President

                        By:  /s/ Bruce Breslau
                             -----------------------------
                        Print Name: Bruce Breslau
                        Title: Regional Vice President

                        530 "B" Street, 4th Floor
                        San Diego, California 92101-4407
                        Attention: Bruce A. Breslau
                                   Regional Vice President

                        Telecopier: (619) 230-3766






                        FLEET NATIONAL BANK,
                        as a Lender
                        By: /s/ Christopher J. Kampe
                            ------------------------------
                        Print Name:  Christopher J. Kampe
                        Title: Vice President





                         FLOATING RATE PORTFOLIO,
                         as a Lender

                         By: INVESCO Senior Secured
                             Management, Inc.,
                             as Attorney in Fact

                             By: /s/ Anne M. McCarthy
                                 -------------------------
                             Print Name:  Anne M. McCarthy
                             Title:  Authorized Signatory




                         THE ING CAPITAL SENIOR SECURED HIGH
                         INCOME FUND, L.P.,
                         as a Lender

                         By:      ING Capital Advisors, LLC,
                                  as Investment Advisor

                                  By: /s/ Michael J. Campbell
                                      ---------------------------
                                  Print Name:  Michael J. Campbell
                                  Title:  Senior Vice President &
                                            Portfolio Manager




                         KZH ING-2 LLC,
                         as a Lender

                         By:  /s/ Virginia Conway
                              -----------------------------
                         Print Name:  Virginia Conway
                         Title:  Authorized Agent





                         KZH ING-3 LLC,
                         as a Lender

                         By: /s/ Virginia Conway
                             ------------------------------
                         Print Name:  Virginia Conway
                         Title:  Authorized Agent





                         LASALLE BANK NATIONAL ASSOCIATION,
                         as a Lender

                         By: /s/ Carol Morse
                             -----------------------------
                         Print Name:  Carol Morse
                         Title:  1st Vice President





                         LONGLANE MASTER TRUST IV,
                         as a Lender

                         By:      BankBoston, N.A.,
                                  as Trust Administrator

                                  By: /s/ Kevin Kearns
                                      --------------------------
                                  Print Name:  Kevin Kearns
                                  Title:  Managing Director





                         U.S. BANK NATIONAL ASSOCIATION,
                         as a Lender

                         By: /s/ Janet Jordan
                             --------------------------
                         Print Name:  Janet E. Jordan
                         Title:  Vice President





                                   SCHEDULE 1

                     LENDERS AND APPLICABLE LENDING OFFICES

<TABLE>
<CAPTION>
                                                                       Facility A                Facility B
    Lender & Applicable                        Revolving                 Term                      Term
     Lending Office                            Commitment              Commitment                Commitment
    -------------------                        ----------              ----------                ----------

<S>                                          <C>                       <C>                       <C>
Union Bank of California, N.A.               $18,421,052.63            $16,578,947.37            $30,000,000

530 "B" Street
4th Floor,

San Diego, CA 92101
Attn: Bruce A. Breslau
Fax: (619) 230-3766



Fleet National Bank                          $5,263,157.89             $4,736,842.11             $  0

One Federal Street
Boston, MA 02110

MA OF DO7I

Attn: Christopher Kampe
Fax: (617) 346-0689

Floating Rate Portfolio                      $0                        $0                        $5,000,000

c/o INVESCO Senior
 Secured Management,
 Inc.
1166 Avenue of the
 Americas

27th Floor
New York, NY 10036-2789
Attn: Anne McCarthy
Fax: (212) 278-9619

The ING Capital Senior                       $0                        $0                        $3,000,000
 Secured High Income
 Fund, L.P.

c/o ING Capital
 Advisors, LLC

333 S. Grand Avenue
Suite 4250
Los Angeles, CA 90071
Attn: Steve Gorski
Fax: (213) 346-3995


KZH ING-2 LLC                                $0                        $0                        $10,000,000

c/o The Chase Manhattan
 Bank

450 West 33rd Street
15th Floor
New York, NY 10001
Attn: Virginia Conway
Fax: (212) 946-7776

KZH ING-3 LLC                                $0                        $0                        $2,000,000

c/o The Chase Manhattan
 Bank

450 West 33rd Street
15th Floor
New York, NY 10001
Attn: Virginia Conway
Fax: (212) 946-7776

LaSalle Bank National Association            $13,157,894.74            $11,842,105.26            $  0

135 S. LaSalle Street
Suite 218
Chicago, IL 60603
Attn: Carol Morse
Fax: (312) 904-6469



LongLane Master Trust IV                     $0                        $0                        $5,000,000

c/o BankBoston, N.A., as
 Trust Administrator
100 Federal Street
Mail Stop 01-12-08
Boston, MA 02110
Attn: Matthew Rose
Fax: (617) 434-5617



U.S. Bank National Association               $13,157,894.74            $11,842,105.26            $  0

555 SW Oak Street, PL-4
Portland, OR 97204
Attn: Janet E. Jordan
Fax: (503) 275-5428

</TABLE>



                                                  SCHEDULE 2

                                                 SUBSIDIARIES
                                               (See Section 5.8)




                                                                    Jurisdiction
Investment          Owned                   Percent                 of
  In                By                      Ownership               Organization
----------          -----                   ---------               ------------


International       Borrower                100%                    California
  Pet Supplies
  and
  Distribution,
  Inc.


Pet Concepts        Borrower                100%                    California
 International


Pet Nosh,           Borrower                100%                    New York
 Consolidated
 Co., Inc.


Petco               Borrower                100%                    California
 Southwest, Inc.


Petco               Borrower                1%*                     California
 Southwest, L.P.


PM Management       Borrower                100%                    California
 Incorporated


17187 Yukon         Borrower                100%                    Yukon
                                                               Territory, Canada


* The Borrower has 1% ownership of Petco Southwest, L.P. as general partner.
Petco Southwest, Inc. has 99% percent ownership as limited partner.



Shareholder Agreements and/or Management Agreements

None



                                   SCHEDULE 3

                                      DEBT

                                      None