<PAGE>
                                                                    Exhibit 10.7


                                CREDIT AGREEMENT

                                   dated as of
                                 April 30, 2001

                                      among

                                 PETSMART, INC.
                              as Lead Borrower for:

                                 PETSMART, INC.
                              PETSMART DIRECT, INC.
                       PETSMART STORE SUPPORT GROUP, INC.
                               PETSMART.COM., INC.
                                PET CATALOG, LLC
                                  as Borrowers

                            The LENDERS Party Hereto

                               FLEET NATIONAL BANK
                                 as Issuing Bank

                            FLEET RETAIL FINANCE INC.
                  as Administrative Agent and Collateral Agent

                    CONGRESS FINANCIAL CORPORATION (WESTERN)
                                   as Co-Agent

                                       and

                              FLEET SECURITIES INC.
                        as Syndication Agent and Arranger

                           ---------------------------
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                       PAGE
<S>                                                                                                    <C>
ARTICLE I............................................................................................    1

Definitions..........................................................................................    1

         SECTION 1.1....................................................................Defined Terms    1

         SECTION 1.2..................................................................Terms Generally   21

         SECTION 1.3...........................................................Accounting Terms; GAAP   21

ARTICLE II...........................................................................................   21

Amount and Terms of Credit...........................................................................   21

         SECTION 2.1........................................................Commitment of the Lenders   21

         SECTION 2.2....................................................Reserves; Changes to Reserves   22

         SECTION 2.3..................................................................Making of Loans   23

         SECTION 2.4.....................................................................Overadvances   24

         SECTION 2.5..................................................................Swingline Loans   24

         SECTION 2.6................................................................Letters of Credit   25

         SECTION 2.7......................................................Settlements Amongst Lenders   29

         SECTION 2.8........................................................Notes; Repayment of Loans   30

         SECTION 2.9................................................................Interest on Loans   30

         SECTION 2.10................................................................Default Interest   31

         SECTION 2.11....................................................................Certain Fees   31

         SECTION 2.12...........................................................Unused Commitment Fee   31

         SECTION 2.13...........................................................Letter of Credit Fees   31

         SECTION 2.14..................................................................Nature of Fees   32

         SECTION 2.15.........................................Termination or Reduction of Commitments   32

         SECTION 2.16......................................................Alternate Rate of Interest   33

         SECTION 2.17............................................Conversion and Continuation of Loans   33

         SECTION 2.18...................Mandatory Prepayment; Commitment Termination; Cash Collateral   34

         SECTION 2.19..........................Optional Prepayment of Loans; Reimbursement of Lenders   35
</TABLE>


                                      (ii)
<PAGE>
<TABLE>
<S>                                                                                                     <C>
         SECTION 2.20..............................Maintenance of Loan Account; Statements of Account   37

         SECTION 2.21...................................................................Cash Receipts   37

         SECTION 2.22.........................................................Application of Payments   39

         SECTION 2.23.................................................................Increased Costs   40

         SECTION 2.24..............................................................Change in Legality   41

         SECTION 2.25.....................................................Payments; Sharing of Setoff   41

         SECTION 2.26...........................................................................Taxes   43

         SECTION 2.27................................................Security Interests in Collateral   44

         SECTION 2.28..................................Mitigation Obligations; Replacement of Lenders   45

ARTICLE III..........................................................................................   45

Representations and Warranties.......................................................................   45

         SECTION 3.1.............................................................Organization; Powers   45

         SECTION 3.2....................................................Authorization; Enforceability   46

         SECTION 3.3.............................................Governmental Approvals; No Conflicts   46

         SECTION 3.4..............................................................Financial Condition   46

         SECTION 3.5.......................................................................Properties   46

         SECTION 3.6.............................................Litigation and Environmental Matters   47

         SECTION 3.7..............................................Compliance with Laws and Agreements   47

         SECTION 3.8............................................Investment and Holding Company Status   47

         SECTION 3.9............................................................................Taxes   47

         SECTION 3.10...........................................................................ERISA   48

         SECTION 3.11......................................................................Disclosure   48

         SECTION 3.12....................................................................Subsidiaries   48

         SECTION 3.13.......................................................................Insurance   48

         SECTION 3.14...................................................................Labor Matters   48

         SECTION 3.15..............................................................Security Documents   49

         SECTION 3.16.....................................................Federal Reserve Regulations   49

         SECTION 3.17........................................................................Solvency   49

ARTICLE IV...........................................................................................   49
</TABLE>


                                     (iii)
<PAGE>
<TABLE>
<S>                                                                                                     <C>
Conditions...........................................................................................   49

         SECTION 4.1.....................................................................Closing Date   49

         SECTION 4.2......................Conditions Precedent to Each Loan and Each Letter of Credit   52

ARTICLE V............................................................................................   53

Affirmative Covenants................................................................................   53

         SECTION 5.1.......................................Financial Statements and Other Information   53

         SECTION 5.2.......................................................Notices of Material Events   55

         SECTION 5.3.................................................Information Regarding Collateral   55

         SECTION 5.4...................................................Existence; Conduct of Business   56

         SECTION 5.5...........................................................Payment of Obligations   56

         SECTION 5.6........................................................Maintenance of Properties   56

         SECTION 5.7........................................................................Insurance   56

         SECTION 5.8........................................................Casualty and Condemnation   57

         SECTION 5.9...................................Books and Records; Inspection and Audit Rights   57

         SECTION 5.10............................................................Compliance with Laws   58

         SECTION 5.11...........................................Use of Proceeds and Letters of Credit   58

         SECTION 5.12.........................................................Additional Subsidiaries   58

         SECTION 5.13..............................................................Further Assurances   59

ARTICLE VI...........................................................................................   59

Negative Covenants...................................................................................   59

         SECTION 6.1...............................................Indebtedness and Other Obligations   59

         SECTION 6.2............................................................................Liens   61

         SECTION 6.3..............................................................Fundamental Changes   62

         SECTION 6.4........................Investments, Loans, Advances, Guarantees and Acquisitions   62

         SECTION 6.5......................................................................Asset Sales   64

         SECTION 6.6............................Restricted Payments; Certain Payments of Indebtedness   64

         SECTION 6.7.....................................................Transactions with Affiliates   65

         SECTION 6.8...........................................................Restrictive Agreements   65
</TABLE>


                                      (iv)
<PAGE>
<TABLE>
<S>                                                                                                     <C>
         SECTION 6.9..................................................Amendment of Material Documents   66

         SECTION 6.10.........................................................Additional Subsidiaries   66

         SECTION 6.11.............................................................Financial Covenants   66


ARTICLE VII..........................................................................................   66


Events of Default....................................................................................   66

         SECTION 7.2..................................................................When Continuing   69

         SECTION 7.3..............................................................Remedies on Default   69

         SECTION 7.4..........................................................Application of Proceeds   70


ARTICLE VIII.........................................................................................   70


The Agents...........................................................................................   70

         SECTION 8.1...........................................Administration by Administrative Agent   70

         SECTION 8.2.............................................................The Collateral Agent   70

         SECTION 8.3.......................................................Sharing of Excess Payments   70

         SECTION 8.4....................................................Agreement of Required Lenders   71

         SECTION 8.5..............................................................Liability of Agents   71

         SECTION 8.6................................................Reimbursement and Indemnification   72

         SECTION 8.7.................................................................Rights of Agents   73

         SECTION 8.8.............................................Independent Lenders and Issuing Bank   73

         SECTION 8.9...............................................................Notice of Transfer   73

         SECTION 8.10.................................................................Successor Agent   73

         SECTION 8.11................................................Reports and Financial Statements   73

         SECTION 8.12........................................Co-Agent, Syndication Agent and Arranger   74


ARTICLE IX...........................................................................................   74


Miscellaneous........................................................................................   74

         SECTION 9.1..........................................................................Notices   74

         SECTION 9.2..............................................................Waivers; Amendments   74
</TABLE>


                                      (v)
<PAGE>
<TABLE>
<S>                                                                                                     <C>
         SECTION 9.3...............................................Expenses; Indemnity; Damage Waiver   76

         SECTION 9.4.................................Designation of Lead Borrower as Borrowers' Agent   77

         SECTION 9.5...........................................................Successors and Assigns   79

         SECTION 9.6.........................................................................Survival   81

         SECTION 9.7.........................................Counterparts; Integration; Effectiveness   81

         SECTION 9.8.....................................................................Severability   82

         SECTION 9.9..................................................................Right of Setoff   82

         SECTION 9.10......................Governing Law; Jurisdiction; Consent to Service of Process   82

         SECTION 9.11............................................................WAIVER OF JURY TRIAL   83

         SECTION 9.12........................................................................Headings   83

         SECTION 9.13........................................................Interest Rate Limitation   83

         SECTION 9.14..............................................................Additional Waivers   84

         SECTION 9.15..................................................Designated Senior Indebtedness   85
</TABLE>


                                      (vi)
<PAGE>
                                    EXHIBITS


A.       Assignment and Acceptance
B-1.     Notes
B-2      Swingline Note
C.       Opinion of Counsel to Loan Parties
D.       Borrowing Base Certificate


                                     (vii)
<PAGE>
                                    SCHEDULES


1.1    Lenders and Commitments
1.2    Existing Synthetic Lease Documents
1.3    Facility Guarantors
1.4    Investment Policy
2.21(a)DDAs
2.21(b)Credit Card Arrangements
2.21(c)Blocked Accounts
3.05(c)(i) Title to Properties; Real Estate Owned
3.05(c)(ii) Leased Properties
3.06   Disclosed Matters
3.12   Subsidiaries
3.13   Insurance
5.01(c)Monthly Board Report
5.01(i)Financial Reporting Requirements
6.01   Indebtedness
6.02   Liens
6.04   Investments


                                     (viii)
<PAGE>
CREDIT AGREEMENT dated as of April 30, 2001 among

      PETSMART, INC., a Delaware corporation, having a principal place of
      business at 19601 North 27th Avenue, Phoenix, Arizona 85027, as Lead
      Borrower for the Borrowers, being

            said PETSMART, INC., and

            PETSMART DIRECT, INC., a New York corporation, having a principal
            place of business at 1989 Transit Way, Brockport, New York 14420;

            PETSMART STORE SUPPORT GROUP, INC., a Delaware corporation, having a
            principal place of business at 19601 North 27th Avenue, Phoenix,
            Arizona 85027;

            PETSMART.COM., INC., a Delaware corporation, having a principal
            place of business at 35 Hugus Alley, Suite 200, Pasadena, California
            91103; and

            PET CATALOG, LLC, a Delaware limited liability company, having a
            principal place of business at 19601 North 27th Avenue, Phoenix,
            Arizona 85027

      the LENDERS party hereto; and

      FLEET NATIONAL BANK, as Issuing Bank, a national banking association
      having a place of business at 100 Federal Street, Boston, Massachusetts
      02110; and

      FLEET RETAIL FINANCE INC., as Administrative Agent and Collateral Agent
      for the Lenders, a Delaware corporation, having its principal place of
      business at 40 Broad Street, Boston, Massachusetts 02109; and

      CONGRESS FINANCIAL CORPORATION (WESTERN), as Co-Agent.

in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.

                                    ARTICLE I

                                   Definitions

      SECTION 1.1 Defined Terms. As used in this Agreement, the following terms
have the meanings specified below:

      "ACH" shall mean automated clearing house transfers.

      "Account" shall mean any right to payment for goods sold or leased or for
services rendered, whether or not earned by performance, or any right to payment
for credit extended for goods sold or leased or services rendered.


                                       1
<PAGE>
      "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.

      "Administrative Agent" means FRF, in its capacity as administrative agent
for the Lenders hereunder.

      "Affiliate" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

      "Agents" shall mean collectively, the Administrative Agent and the
Collateral Agent.

      "Alternate Base Rate" shall mean, for any day, the higher of (a) the
annual rate of interest then most recently announced by Fleet at its head office
in Boston, Massachusetts as its "Base Rate" and (b) the Federal Funds Effective
Rate in effect on such day plus -1/2 of 1% (0.50%) per annum. If for any reason
the Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability or failure of the
Administrative Agent to obtain sufficient quotations thereof in accordance with
the terms hereof, the Alternate Base Rate shall be determined without regard to
clause (b) of the first sentence of this definition, until the circumstances
giving rise to such inability no longer exist. Any change in the Alternate Base
Rate due to a change in Fleet's Base Rate or the Federal Funds Effective Rate
shall be effective on the effective date of such change in Fleet's Base Rate or
the Federal Funds Effective Rate, respectively.

      "Applicable Margin" means initially, the rates for Base Rate Loans and
Eurodollar Loans, set forth in Level 2, below:

<TABLE>
<CAPTION>
      Level    Performance Criteria      Base Rate Loans     Eurodollar Loans
<S>            <C>                       <C>                 <C>
      1         Excess Availability      0.50%               2.50%
               less than or equal to
                    $50,000,000


      2         Excess Availability      0.25%               2.25%
                    greater than
                $50,000,000 but less
                  than or equal to
                    $150,000,000


      3         Excess Availability      0%                  2.00%
                    greater than
                    $150,000,000
</TABLE>

The Applicable Margin will remain at Level 2 through April 30, 2002, provided
that the Applicable Margin shall be immediately increased to the percentages set
forth in Level 1 at any time on or after August 1, 2001 that the Excess
Availability requirements of Level 2 are not satisfied; in the event that the
Applicable Margin is increased to Level 1 prior to April 30, 2002,


                                       2
<PAGE>
the Applicable Margin shall not thereafter be reduced to Level 2 unless and
until Excess Availability is greater than $50,000,000 for thirty (30)
consecutive days. In no event shall the Applicable Margin be set at Level 3 from
the Closing Date through April 30, 2002 (even if the Excess Availability
requirements for Level 3 have been met). Commencing May 1, 2002, the Applicable
Margin shall be adjusted monthly as of the first day of each calendar month,
based upon the average Excess Availability for the immediately preceding
calendar month. Upon the occurrence of an Event of Default, the Applicable
Margin shall be immediately increased to the percentages set forth in Level 1
(even if the Excess Availability requirements for another Level have been met)
and interest shall be determined in the manner set forth in Section 2.10.

      "Appraisal Percentage" shall mean 85%.

      "Appraised Value" means the net appraised liquidation value of the
Borrowers' and Canadian Operating Subsidiary's Inventory as set forth in the
Borrowers' stock ledger (expressed as a percentage of the Cost of such
Inventory) as determined from time to time by the Administrative Agent in
accordance with its standard procedures and with the assistance of an
independent appraiser satisfactory to the Administrative Agent.

      "Arranger" means FSI.

      "Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.05), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.

      "Availability Reserves" means such reserves as the Administrative Agent
from time to time determines in the Administrative Agent's reasonable discretion
as being appropriate to reflect the impediments to the Agents' ability to
realize upon the Collateral. Without limiting the generality of the foregoing,
Availability Reserves may include (but are not limited to) reserves based on (i)
Rent; (ii) Gift Certificates and Merchandise Credit Liability; (iii) Frequent
Shopper Programs; (iv) Layaways and Customer Deposits; (v) customs, duties, and
other costs to release Inventory which is being imported into the United States;
and (vi) outstanding taxes and other governmental charges, including, ad
valorem, real estate, personal property, and other taxes which might have
priority over the interests of the Collateral Agent in the Collateral.

      "Base Rate Loan" shall mean any Loan bearing interest at a rate determined
by reference to the Alternate Base Rate in accordance with the provisions of
Article II.

      "Blocked Account Agreements" has the meaning set forth in Section 2.21(c).

      "Blocked Account Banks" shall mean the banks with whom the Borrowers have
entered into Blocked Account Agreements.

      "Blocked Accounts" shall have the meaning set forth in Section 2.21(c).

      "Board" means the Board of Governors of the Federal Reserve System of the
United States of America.


                                       3
<PAGE>
      "Bonds" means the convertible subordinated notes issued by the Lead
Borrower and dated November 7, 1997 and November 14, 1997.

      "Borrowers" means collectively, PETsMART, Inc., a Delaware corporation,
PETsMART Direct, Inc., a New York corporation, PETsMART Store Support Group,
Inc., a Delaware corporation, PETsMART.com., Inc., a Delaware corporation, and
Pet Catalog, LLC, a Delaware limited liability company.

      "Borrowing" shall mean (a) the incurrence of Loans of a single Type, on a
single date and having, in the case of Eurodollar Loans, a single Interest
Period, or (b) a Swingline Loan.

      "Borrowing Base" means, at any time of calculation, an amount equal to

      (a)   the Receivables Advance Rate of the face amount of Eligible Credit
            Card Receivables; plus

      (b)   the lesser of (i) Appraisal Percentage of the Appraised Value of
            Eligible Inventory, or (ii) the Inventory Advance Rate of (A) the
            Cost of Eligible Inventory minus (B) Inventory Reserves; plus

      (c)   100% of all Eligible Cash on Hand, provided that Eligible Cash on
            Hand included in the Borrowing Base may not be withdrawn from the
            deposit account at Fleet, thereby reducing the Borrowing Base,
            unless and until the Lead Borrower furnishes the Administrative
            Agent with (i) notice of such intended withdrawal and (ii) a
            Borrowing Base Certificate as of the date of such proposed
            withdrawal reflecting that, after giving effect to such withdrawal,
            no Overadvance will result; minus

      (d)   the then amount of all Availability Reserves.

      "Borrowing Base Certificate" has the meaning assigned to such term in
Section 5.01(f).

      "Borrowing Request" means a request by the Lead Borrower on behalf of the
Borrowers for a Borrowing in accordance with Section 2.03.

      "Breakage Costs" shall have the meaning set forth in Section 2.19(b).

      "Business Day" means any day that is not a Saturday, Sunday or other day
on which commercial banks in Boston, Massachusetts are authorized or required by
law to remain closed, provided that, when used in connection with a Eurodollar
Loan, the term "Business Day" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank market.

      "Canadian Operating Subsidiary" means 3003300 Nova Scotia Company.

      "Capital Expenditures" means, for any period, the additions to property,
plant and equipment and other capital expenditures of the Borrowers that are (or
would be) set forth in a consolidated statement of cash flows of the Borrowers
for such period prepared in accordance with GAAP.


                                       4
<PAGE>
      "Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP. "Cash Collateral Account" shall mean an interest-bearing account
established by the Borrowers with the Collateral Agent at Fleet under the sole
and exclusive dominion and control of the Collateral Agent designated as the
"PETsMART Cash Collateral Account".

      "Cash Control Event" means that Excess Availability is less than (a)
$35,000,000.00 from the Closing Date through June 30, 2001, or (b)
$50,000,000.00 at all times from and after July 1, 2001. For purposes of Section
2.21(h) hereof, the occurrence of a Cash Control Event shall be deemed
continuing notwithstanding that Excess Availability may thereafter exceed the
amount set forth in the preceding sentence unless and until Excess Availability
exceeds such amounts for sixty (60) consecutive days, in which case a Cash
Control Event shall no longer be deemed to be continuing for purposes of Section
2.21(h) hereof; provided that a Cash Control Event shall be deemed continuing
(even if Excess Availability exceeds the required amounts for sixty consecutive
days) if a Cash Control Event has occurred and been discontinued on three (3)
occasions in any twelve month period.

      "Cash Receipts" has the meaning provided therefor in Section 2.21(c).

      "CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq.

      "Change in Control" means, at any time, (a) occupation of a majority of
the seats (other than vacant seats) on the board of directors of the Lead
Borrower by Persons who were neither (i) nominated by the board of directors of
the Lead Borrower nor (ii) appointed by directors so nominated; or (b) the
acquisition of thirty-five percent (35%) or more of the capital stock of the
Lead Borrower by any Person or group of Persons, or (c) the failure of the Lead
Borrower to own, directly or indirectly, 100% of the capital stock of all of the
other Borrowers and the Canadian Operating Subsidiary.

      "Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change, after the date of this
Agreement, in any law, rule or regulation or in the interpretation or
application thereof by any Governmental Authority, or (c) compliance by any
Lender or the Issuing Bank (or, for purposes of Section 2.23(b), by any lending
office of such Lender or by such Lender's or the Issuing Bank's holding company,
if any) with any request, guideline or directive (whether or not having the
force of law) of any Governmental Authority made or issued after the date of
this Agreement.

      "Charges" has the meaning provided therefor in Section 9.13.

      "Closing Date" means the date on which the conditions specified in Section
4.01 are satisfied (or waived in accordance with Section 9.02).

      "Code" means the Internal Revenue Code of 1986, as amended from time to
time.


                                       5
<PAGE>
      "Collateral" means any and all "Collateral" as defined in any applicable
Security Document.

      "Collateral Agent" means FRF, in its capacity as collateral agent under
the Security Documents.

      "Commercial Letter of Credit" means any Letter of Credit issued for the
purpose of providing the primary payment mechanism in connection with the
purchase of any materials, goods or services by the Borrowers in the ordinary
course of business of the Borrowers.

      "Commitment" shall mean, with respect to each Lender, the aggregate
commitment of such Lender hereunder in the amount set forth opposite its name on
SCHEDULE 1.1 hereto or as may subsequently be set forth in the Register from
time to time, as the same may be reduced from time to time pursuant to Section
2.15.

      "Commitment Fee" has the meaning provided therefor in Section 2.12.

      "Commitment Percentage" shall mean, with respect to each Lender, that
percentage equivalent to such Lender's Commitment divided by the Total
Commitments hereunder; each Lender's Commitment Percentage shall initially be in
the amount set forth opposite its name on SCHEDULE 1.1 hereto.

      "Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. The
terms "Controlling" and "Controlled" have meanings correlative thereto.

      "Cost" means the average cost of purchases, as reported on the Borrowers'
stock ledger, based upon the Borrowers' accounting practices which are in effect
on the date of this Agreement. "Cost" does not include inventory capitalization
costs or other non-purchase price charges (such as freight) used in the
Borrowers' calculation of cost of goods sold.

      "Credit Card Notifications" has the meaning provided therefor in Section
2.21(c).

      "Credit Extensions" as of any day, shall be equal to the sum of (a) the
principal balance of all Loans then outstanding, and (b) the then amount of the
Letter of Credit Outstandings.

      "DDAs" means any checking or other demand deposit account maintained by
any Borrower.

      "DDA Notification" has the meaning provided therefor in Section 2.21(c).

      "Default" means any event or condition that constitutes an Event of
Default or that upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.

      "Discontinued Subsidiaries" means each of Pet City (ESOT Trustee LTD UK),
PETsMART (UK) LTD, PETsMART (N. Ireland) LTD, Pet City (N. Ireland) LTD, 3000970


                                       6
<PAGE>
Nova Scotia, Limited, 3003970 Nova Scotia Incorporated, PETsMART Direct.com,
Inc., and State Line Tack of Texas, Inc.

      "dollars" or "$" refers to lawful money of the United States of America.

      "Early Termination Fees" shall have the meaning set forth in Section
2.15(b).

      "Eligible Cash On Hand" means cash of a Borrower or the Canadian Operating
Subsidiary from time to time deposited in a DDA in the name of a Borrower or the
Canadian Operating Subsidiary maintained with Fleet (excluding any amounts on
deposit in the Cash Collateral Account or in any other escrow, or special
purpose or restricted account, such as an account specifically designated for
payroll or sales taxes), which DDA is subject to a first perfected security
interest in favor of the Collateral Agent for the benefit of itself and the
Secured Parties.

      "Eligible Credit Card Receivables" means Accounts due to a Borrower or the
Canadian Operating Subsidiary on a non-recourse basis from Visa, Mastercard,
American Express Co., Discovercard, and other major credit card processors
reasonably acceptable to the Administrative Agent as arise in the ordinary
course of business, which have been earned by performance and are deemed by the
Administrative Agent in its reasonable discretion to be eligible for inclusion
in the calculation of the Borrowing Base. Without limiting the foregoing, unless
otherwise approved in writing by the Administrative Agent, none of the following
shall be deemed to be Eligible Credit Card Receivables:

            (a)   Accounts that have been outstanding for more than seven (7)
                  Business Days from the date of sale;

            (b)   Accounts with respect to which a Borrower or the Canadian
                  Operating Subsidiary does not have good, valid and marketable
                  title thereto, free and clear of any Encumbrance (other than
                  Encumbrances granted to the Collateral Agent, for its benefit
                  and the ratable benefit of the Secured Parties, pursuant to
                  the Security Documents);

            (c)   Accounts that are not subject to a first priority security
                  interest in favor of the Collateral Agent, for the benefit of
                  itself and the Secured Parties.

            (d)   Accounts which are disputed, are with recourse, or with
                  respect to which a claim, counterclaim, offset or chargeback
                  has been asserted (to the extent of such claim, counterclaim,
                  offset or chargeback); or

            (e)   Accounts which the Administrative Agent determines in its
                  reasonable discretion to be uncertain of collection.

      "Eligible Inventory" shall mean, as of the date of determination thereof,
items of Inventory of the Borrowers and the Canadian Operating Subsidiary that
are finished goods, merchantable and readily saleable to the public in the
ordinary course deemed by the Administrative Agent in its reasonable discretion
to be eligible for inclusion in the calculation of the Borrowing Base. Without
limiting the foregoing, unless otherwise approved in writing by the
Administrative Agent, none of the following shall be deemed to be Eligible
Inventory:


                                       7
<PAGE>
            (a)   Inventory that is not owned solely by the Borrowers or the
      Canadian Operating Subsidiary, or is leased or on consignment or the
      Borrowers or the Canadian Operating Subsidiary do not have good and valid
      title thereto;

            (b)   Inventory (including any portion thereof in transit from
      vendors) that is not located at property that is owned or leased by the
      Borrowers or the Canadian Operating Subsidiary;

            (c)   Inventory that represents (i) goods damaged, defective or
      otherwise unmerchantable, (ii) goods that do not conform in all material
      respects to the representations and warranties contained in this Agreement
      or any of the Security Documents, or (iii) goods to be returned to the
      vendor;

            (d)   Inventory that is not located in the United States of America
      (excluding territories and possessions thereof) or Canada;

            (e)   Inventory that is not subject to a perfected first-priority
      security interest in favor of the Collateral Agent for the benefit of
      itself and the Secured Parties;

            (f)   Inventory which consists of samples, labels, bags, packaging,
      and other similar non-merchandise categories;

            (g)   Inventory as to which insurance in compliance with the
      provisions of Section 5.07 hereof is not in effect;

            (h)   Inventory which has been sold but not yet delivered or as to
      which any Borrower or the Canadian Operating Subsidiary has accepted a
      deposit;

            (i)   Inventory consisting of live stock, animals, fish and other
      similar Inventory;

            (j)   Inventory consisting of work-in-process; or

            (k)   Inventory consigned by the Borrowers or the Canadian Operating
      Subsidiary to any other Person, including without limitation, Webvan
      Group, Inc.

      "Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, preservation or reclamation
of natural resources, handling, treatment, storage, disposal, Release or
threatened Release of any Hazardous Material or to health and safety matters.

      "Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, natural resource damage, costs of
environmental remediation, administrative oversight costs, fines, penalties or
indemnities), of any Borrower directly or indirectly resulting from or based
upon (a) violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials, (c)
exposure to any Hazardous Materials, (d) the release or threatened release of
any


                                       8
<PAGE>
Hazardous Materials into the environment or (e) any contract, agreement or other
consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

      "ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Lead Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.

      "ERISA Event" means (a) any "reportable event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Lead Borrower or any of its ERISA Affiliates of
any liability under Title IV of ERISA with respect to the termination of any
Plan; (e) the receipt by the Lead Borrower or any ERISA Affiliate from the PBGC
or a plan administrator of any notice relating to an intention to terminate any
Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence
by the Lead Borrower or any of its ERISA Affiliates of any liability with
respect to the withdrawal or partial withdrawal from any Plan or Multiemployer
Plan; or (g) the receipt by the Lead Borrower or any ERISA Affiliate of any
notice, or the receipt by any Multiemployer Plan from the Lead Borrower or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
or a determination that a Multiemployer Plan is, or is expected to be, insolvent
or in reorganization, within the meaning of Title IV of ERISA.

      "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.

      "Eurodollar Loan" shall mean any Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.

      "Event of Default" has the meaning assigned to such term in Section 7.01.

      "Excess Availability" means, as of any date of determination, the excess,
if any, of (a) the lesser of the Borrowing Base or the aggregate Commitments,
over (b) the sum of (i) the outstanding Credit Extensions, and (ii) all then
held checks, accounts payable which are beyond credit terms then accorded the
Borrowers and overdrafts.

      "Excluded Taxes" means, with respect to the Agents, any Lender, the
Issuing Bank or any other recipient of any payment to be made by or on account
of any obligation of the Borrowers hereunder, (a) income or franchise taxes
imposed on (or measured by) its gross or net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which any Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by a


                                       9
<PAGE>
Borrower under Section 2.28(b), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.26(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrowers with respect to such withholding tax
pursuant to Section 2.26(a).

      "Existing Synthetic Leases" means the Synthetic Leases with respect to the
properties described on SCHEDULE 1.2 and evidenced by the instruments,
documents, and agreements described on SCHEDULE 1.2 hereto. "FRF" means Fleet
Retail Finance Inc., a Delaware corporation.

      "FRF Concentration Account" shall have the meaning set forth in Section
2.21(c).

      "FSI" means Fleet Securities, Inc., a Massachusetts corporation.

      "Facility Guarantee" means the Guaranty executed by the Facility
Guarantors in favor of the Agents, the Issuing Bank and the Lenders.

      "Facility Guarantors" means the Persons listed on SCHEDULE 1.3 hereto and
all other Subsidiaries of each Borrower now existing or hereafter created other
than Foreign Subsidiaries.

      "Facility Guarantors Collateral Documents" means all security agreements,
mortgages, pledge agreements, deeds of trust, and other instruments, documents
or agreements executed and delivered by any Facility Guarantor to secure the
Facility Guarantee.

      "Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by Fleet from three Federal funds brokers of recognized
standing selected by it.

      "Fee Letter" means the letter entitled "Fee Letter" among the Borrowers
and the Administrative Agent of even date herewith, as such letter may from time
to time be amended.

      "Financial Officer" means, with respect to any Borrower, the chief
financial officer, controller or assistant controller of such Borrower.

      "Fleet" means Fleet National Bank, a national banking association.

      "Fleet Disbursement Accounts" has the meaning provided therefor in Section
2.21(f).

      "Foreign Lender" means any Lender that is organized under the laws of a
jurisdiction other than the United States of America, any State thereof or the
District of Columbia.


                                       10
<PAGE>
      "Foreign Subsidiary" means any Subsidiary that is organized under the laws
of a jurisdiction other than the United States of America or any State thereof
or the District of Columbia.

      "GAAP" means generally accepted accounting principles in the United States
of America.

      "Gift Certificate and Merchandise Credit Liability" means, at any time,
the aggregate face value at such time of (a) outstanding gift certificates and
gift cards of the Borrowers and/or the Canadian Operating Subsidiary entitling
the holder thereof to use all or a portion of the certificate to pay all or a
portion of the purchase price for any Inventory, and (b) outstanding merchandise
credits of the Borrowers and the Canadian Operating Subsidiary.

      "Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.

      "Guarantee" of or by any Person (the "guarantor") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation, provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business.

      "Hazardous Materials" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law, including any material listed as a hazardous substance under
Section 101(14) of CERCLA.

      "Hedging Agreement" means any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement, or other
interest or currency exchange rate or commodity price hedging arrangement.

      "Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property


                                       11
<PAGE>
acquired by such Person, (e) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, provided that if such Indebtedness of others is non-recourse to
the credit of such Person, then the amount of Indebtedness ascribed to such
Person shall not exceed the fair market value of the property securing such
Indebtedness of others, (g) all Guarantees by such Person of Indebtedness of
others (including, without limitation, under any Synthetic Leases), (h) all
Capital Lease Obligations of such Person, (i) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit,
(j) all obligations, contingent or otherwise, of such Person in respect of
bankers' acceptances, (k) all Hedging Agreements, and (l) the principal and
interest portions of all rental obligations of such Person under any Synthetic
Lease, tax retention operating lease, off-balance sheet loan or similar
off-balance sheet financing where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an operating lease in
accordance with GAAP. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that such Person is
not liable therefor.

      "Indemnified Taxes" means Taxes other than Excluded Taxes.

      "Indemnitee" has the meaning provided therefor in Section 9.03(b).

      "Interest Payment Date" means (a) with respect to any Base Rate Loan
(including a Swingline Loan), the last day of each calendar month, and (b) with
respect to any Eurodollar Loan, the last day of the Interest Period applicable
to the Borrowing of which such Loan is a part, provided that if any Interest
Period for a Eurodollar Loan exceeds three (3) months, the Interest Payment Date
shall also mean the date which is three (3) months after the commencement of
such Interest Period.

      "Interest Period" means, with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Lead Borrower may elect, provided that (a) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day, and (b) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period, and (c) any Interest Period which would otherwise
end after the Maturity Date shall end on the Maturity Date. For purposes hereof,
the date of a Borrowing initially shall be the date on which such Borrowing is
made and thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.

      "Inventory" has the meaning assigned to such term in the Security
Agreement.


                                       12
<PAGE>
      "Inventory Advance Rate" means sixty-five percent (65%).

      "Inventory Reserves" means such reserves as may be established from time
to time by the Administrative Agent in the Administrative Agent's reasonable
discretion with respect to the determination of the saleability, at retail, of
the Eligible Inventory or which reflect such other factors as affect the market
value of the Eligible Inventory. Without limiting the generality of the
foregoing, Inventory Reserves may include (but are not limited to) reserves
based on (i) obsolescence; (ii) seasonality; (iii) Shrink; (iv) imbalance; (v)
change in Inventory character; (vi) change in Inventory composition; (vii)
change in Inventory mix; (viii) markdowns (both permanent and point of sale);
(ix) retail markons and markups inconsistent with prior period practice and
performance; industry standards; current business plans; or advertising calendar
and planned advertising events.

      "Investment Policy" means the investment policy of the Lead Borrower
adopted by the board of directors of the Lead Borrower and annexed hereto as
SCHEDULE 1.4, as such policy may be modified from time to time, with the prior
written consent of the Administrative Agent.

      "Issuing Bank" means Fleet, in its capacity as the issuer of Letters of
Credit hereunder, and any successor to Fleet in such capacity as selected by the
Administrative Agent. The Issuing Bank may, in its discretion, arrange for one
or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in
which case the term "Issuing Bank" shall include any such Affiliate with respect
to Letters of Credit issued by such Affiliate.

      "L/C Disbursement" means a payment made by the Issuing Bank pursuant to a
Letter of Credit.

      "Lead Borrower" means PETsMART, Inc., a Delaware corporation.

      "Lenders" shall mean the Persons identified on SCHEDULE 1.1 hereto and
each assignee that becomes a party to this Agreement as set forth in Section
9.05(b).

      "Letter of Credit" shall mean a letter of credit, in form and substance
reasonably satisfactory to the Issuing Bank, that is issued pursuant to this
Agreement for the account of any Borrower, and shall include, without
limitation, a Standby Letter of Credit or Commercial Letter of Credit issued in
connection with the purchase of Inventory by any Borrower, to support
obligations of a Borrower under the Existing Synthetic Leases, and for other
purposes for which a Borrower has historically obtained letters of credit, or
for any other purpose that is reasonably acceptable to the Administrative Agent.

      "Letter of Credit Fees" shall mean the fees payable in respect of Letters
of Credit pursuant to Section 2.13.

      "Letter of Credit Outstandings" shall mean, at any time, the sum of (a)
with respect to Letters of Credit outstanding at such time, the aggregate
maximum amount that then is or at any time thereafter may become available for
drawing or payment thereunder plus (b) all amounts theretofore drawn or paid
under Letters of Credit for which the Issuing Bank has not then been reimbursed.


                                       13
<PAGE>
      "LIBO Rate" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate of interest (rounded upwards, if necessary to the next
1/16 of 1%) determined by the Administrative Agent to be the highest prevailing
rate per annum at which deposits in dollars are offered to Fleet by first class
banks in the London interbank market in which Fleet participates at 10:00 a.m.
(Boston time) not less than two Business Days before the first day of the
Interest Period for the subject Eurodollar Borrowing, for a deposit
approximately in the amount of the subject Borrowing and for a period of time
approximately equal to such Interest Period.

      "Lien" means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset and (c) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.

      "Line Fee" means a fee equal to 0.375% per annum (on the basis of actual
days elapsed in a year of 365/366 days, as applicable) of the average daily
balance of the difference between (x) each Lender's Commitment and (y) the sum
of (i) such Lender's Commitment Percentage of the principal amount of Loans then
outstanding, and (ii) such Lender's Commitment Percentage of the then Letter of
Credit Outstandings for each day commencing on the date hereof and ending on but
excluding the Termination Date.

      "Loan Documents" means this Agreement, the Notes, the Letters of Credit,
the Fee Letter, all Borrowing Base Certificates, the Blocked Account Agreements,
the DDA Notifications, the Credit Card Notifications, the Security Documents,
the Facility Guarantee, and any other instrument or agreement executed and
delivered in connection therewith.

      "Loan Party or Loan Parties" means the Borrowers and the Facility
Guarantors.

      "Loans" shall mean all loans (including, without limitation, Swingline
Loans) at any time made to the Borrowers or for account of the Borrowers
pursuant to this Agreement.

      "Margin Stock" has the meaning assigned to such term in Regulation U.

      "Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property, assets, or financial condition of the Lead
Borrower and its Subsidiaries taken as a whole, or (b) the validity or
enforceability of this Agreement or any of the other Loan Documents or any of
the material rights or remedies of the Administrative Agent, the Collateral
Agent or the Lenders hereunder or thereunder.

      "Material Indebtedness" means Indebtedness (other than the Loans and
Letters of Credit) or obligations in respect of one or more Hedging Agreements
of any one or more of the Borrowers in an aggregate principal amount exceeding
$5,000,000.00. For purposes of determining the amount of Material Indebtedness
at any time, the "principal amount" of the obligations in respect of any Hedging
Agreement at such time shall be the maximum aggregate amount that a Borrower
would be required to pay if such Hedging Agreement were terminated at that time.

      "Maturity Date" means April 30, 2004.


                                       14
<PAGE>
      "Maximum Rate" has the meaning provided therefor in Section 9.13.

      "Minority Lenders" has the meaning provided therefor in Section 9.02(d).

      "Moody's" means Moody's Investors Service, Inc.

      "Mortgages" means the Mortgages/Deeds of Trust, Security Agreements and
Assignments between the Loan Party owning any real estate encumbered thereby and
the Collateral Agent for the benefit of the Secured Parties.

      "Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.

      "Net Proceeds" means, with respect to any event, (a) the cash proceeds
received in respect of such event, including (i) any cash received in respect of
any non-cash proceeds, but only as and when received, (ii) in the case of a
casualty, insurance proceeds, and (iii) in the case of a condemnation or similar
event, condemnation awards and similar payments, in each case net of (b) the sum
of (i) all reasonable fees and out-of-pocket expenses (including appraisals, and
brokerage, legal, title and recording tax expenses and commissions) paid by any
Borrower to third parties (other than Affiliates) in connection with such event,
and (ii) in the case of a sale or other disposition of an asset (including
pursuant to a casualty or condemnation), the amount of all payments required to
be made by any Borrower as a result of such event to repay (or to establish an
escrow for the repayment of) Indebtedness (other than Loans) which is secured by
such asset and constitutes a Permitted Encumbrance that is senior to the Lien of
the Collateral Agent.

      "Noncompliance Notice" has the meaning provided therefor in Section
2.05(b).

      "Notes" shall mean (i) the promissory notes of the Borrowers substantially
in the form of Exhibit B-1, each payable to the order of a Lender, evidencing
the Loans, and (ii) the promissory note of the Borrowers substantially in the
form of Exhibit B-2, payable to the Swingline Lender, evidencing the Swingline
Loans.

      "Obligations" has the meaning assigned to such term in the Security
Agreement.

      "Other Taxes" means any and all current or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.

      "Overadvance" means, at any time of calculation, a circumstance in which
the Credit Extensions exceed the lesser of (a) the Commitments or (b) the
Borrowing Base.

      "PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.

      "Payment Conditions" means, at the time of determination, that (a) no
Default or Event of Default then exists or would arise as a result of the making
of the subject payment, and (b)


                                       15
<PAGE>
prior to, and immediately after giving effect to, the subject payment, and on a
pro forma six months basis thereafter, Excess Availability shall be equal to or
greater than $85,000,000.00.

      "Perfection Certificate" means a certificate in the form of Annex 1 to the
Security Agreement or any other form approved by the Collateral Agent.

      "Permitted Encumbrances" means:

            (a)   Liens imposed by law for taxes that are not yet due or are
      being contested in compliance with Section 5.05;

            (b)   carriers', warehousemen's, mechanics', materialmen's,
      repairmen's and other like Liens imposed by law, arising in the ordinary
      course of business and securing obligations that are not overdue by more
      than 60 days or are being contested in compliance with Section 5.05;

            (c)   pledges and deposits made in the ordinary course of business
      in compliance with workers' compensation, unemployment insurance and other
      social security laws or regulations;

            (d)   deposits to secure the performance of bids, trade contracts,
      leases, statutory obligations, surety and appeal bonds, performance bonds
      and other obligations of a like nature, in each case in the ordinary
      course of business;

            (e)   judgment liens in respect of judgments that do not constitute
      an Event of Default under clause (k) of Article VII;

            (f)   easements, zoning restrictions, rights-of-way and similar
      encumbrances on real property imposed by law or arising in the ordinary
      course of business that do not secure any monetary obligations and do not
      materially detract from the value of the affected property or interfere
      with the ordinary conduct of business of the Borrowers or any Subsidiary;

            (g)   leases and subleases and licenses and sublicenses of property
      which do not materially interfere with the ordinary conduct of the
      business of the Lead Borrower and its Subsidiaries; and

            (h)   Liens arising solely by virtue of any statutory or common law
      provisions relating to banker's liens, liens in favor of securities
      intermediaries, rights of set-off or similar rights and remedies as to
      deposit accounts or securities accounts or other funds maintained with
      depository institutions or securities intermediaries.

provided that, except as provided in any one or more of clauses (a) through (f)
above, the term "Permitted Encumbrances" shall not include any Lien securing
Indebtedness.

      "Permitted Investments" means each of the following:

            (a)   direct obligations of, or obligations the principal of and
      interest on which are unconditionally guaranteed by, the United States of
      America (or by any agency


                                       16
<PAGE>
      thereof to the extent such obligations are backed by the full faith and
      credit of the United States of America), in each case maturing within one
      year from the date of acquisition thereof;

            (b)   investments in commercial paper maturing within 270 days from
      the date of acquisition thereof and having, at such date of acquisition,
      the highest credit rating obtainable from S&P or from Moody's;

            (c)   investments in certificates of deposit, banker's acceptances
      and time deposits maturing within 180 days from the date of acquisition
      thereof issued or guaranteed by or placed with, and demand deposit and
      money market deposit accounts issued or offered by, any domestic office of
      any commercial bank organized under the laws of the United States of
      America or any State thereof that has a combined capital and surplus and
      undivided profits of not less than $500,000,000;

            (d)   fully collateralized repurchase agreements with a term of not
      more than 30 days for securities described in clause (a) above (without
      regard to the limitation on maturity contained in such clause) and entered
      into with a financial institution satisfying the criteria described in
      clause (c) above or with any primary dealer; and

            (e)   Investments made pursuant to the Investment Policy.

provided that, notwithstanding the foregoing, no such investments shall be
permitted when any Loans are outstanding unless (i) the investment is a
temporary investment pending expiration of an Interest Period for a Eurodollar
Loan, the proceeds of which investment will be applied to the Obligations after
the expiration of such Interest Period, and (ii) such investments are pledged to
the Administrative Agent as additional collateral for the Obligations pursuant
to such agreements as may be reasonably required by the Administrative Agent.

      "Permitted Overadvance" means an Overadvance determined by the
Administrative Agent, in its reasonable discretion, (a) which is made to
maintain, protect or preserve the Collateral and/or the Lenders' rights under
the Loan Documents, or (b) which is otherwise in the Lenders' interests;
provided that Permitted Overadvances shall not (i) exceed five percent (5%) of
the then Borrowing Base in the aggregate outstanding at any time or (ii) remain
outstanding for more than forty-five (45) consecutive Business Days, unless in
either case the Required Supermajority Lenders otherwise agree; and provided
further that the foregoing shall not (1) modify or abrogate any of the
provisions of Section 2.06(f) hereof regarding the Lender's obligations with
respect to L/C Disbursements, or (2) result in any claim or liability against
the Administrative Agent (regardless of the amount of any Overadvance) for
"inadvertent Overadvances" (i.e. where an Overadvance results from changed
circumstances beyond the control of the Administrative Agent (such as a
reduction in the collateral value)), and further provided that in no event shall
the Administrative Agent make an Overadvance, if after giving effect thereto,
the principal amount of the Credit Extensions would exceed the Commitments.

      "Person" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.


                                       17
<PAGE>
      "Plan" means any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which the Lead Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

      "Pledge Agreement" means the Pledge Agreement dated as of April 30, 2001
among certain Borrowers, certain Facility Guarantors, and the Collateral Agent
for the benefit of the Secured Parties, as amended and in effect from time to
time.

      "Prepayment Event" means any of the following events:

            (a)   any sale, transfer or other disposition (including pursuant to
      a sale and leaseback transaction) of any property or asset of a Borrower;

            (b)   any casualty or other insured damage to, or any taking under
      power of eminent domain or by condemnation or similar proceeding of, any
      property or asset of a Borrower;

            (c)   the issuance by a Borrower of any equity securities, other
      than any such issuance of equity securities to another Borrower; or

            (d)   the incurrence by a Borrower of any Indebtedness of the type
      described in clause (a), (b) or (c) of the definition of the term
      "Indebtedness".

      "Real Estate" means all land, together with the buildings, structures,
parking areas, and other improvements thereon, now or hereafter owned or leased
by any Borrower, including all easements, rights-of-way, and similar rights
relating thereto and all leases, tenancies, and occupancies thereof.

      "Receivables Advance Rate" means eighty-five percent (85%).

      "Register" has the meaning set forth in Section 9.05(c).

      "Regulation U" means Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

      "Regulation X" means Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

      "Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.

      "Release" has the meaning set forth in Section 101(22) of CERCLA.

      "Required Lenders" shall mean, at any time, Lenders having Commitments at
least equal to 51% of the Commitments, or if the Commitments have been
terminated, Lenders whose


                                       18
<PAGE>
percentage of the outstanding Obligations (after settlement and repayment of all
Swingline Loans by the Lenders) aggregate not less than 51% of all such
Obligations.

      "Required Supermajority Lenders" shall mean, at any time, Lenders having
Commitments outstanding representing at least 66 2/3% of the total Commitments
outstanding or if the Commitments have been terminated, Lenders whose percentage
of the outstanding Obligations (after settlement and repayment of all Swingline
Loans by the Lenders) aggregate not less than 66 2/3% of all such Obligations.

      "Reserves" means all (if any) Inventory Reserves, and Availability
Reserves.

      "Restricted Payment" means any dividend or other distribution (whether in
cash, securities or other property) with respect to any shares of any class of
capital stock or membership interests of any Borrower or any Subsidiary, or any
payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of (a) any such shares of capital stock
or membership interests of any Borrower or any Subsidiary or (b) any option,
warrant or other right to acquire any such shares of capital stock or membership
interests of any Borrower or any Subsidiary.

      "S&P" means Standard & Poor's. "Secured Parties" has the meaning assigned
to such term in the Security Agreement.

      "Security Agreement" means the Security Agreement dated as of April 30,
2001 among the Borrowers and the Collateral Agent for the benefit of the Secured
Parties, as amended and in effect from time to time.

      "Security Documents" means the Security Agreement, the Pledge Agreement,
the Facility Guarantors Collateral Documents, the Mortgages, and each other
security agreement or other instrument or document executed and delivered
pursuant to Section 5.12 to secure any of the Obligations.

      "Settlement Date" has the meaning provided in Section 2.07(b) hereof.

      "Shrink" means Inventory which has been lost, misplaced, stolen, or is
otherwise unaccounted for.

      "Solvent" means, with respect to any Person on a particular date, that on
such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair saleable value of the properties and assets
of such Person is not less than the amount that would be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in a business or a transaction, and is not about to engage in a business or
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged.


                                       19
<PAGE>
      "Standby Letter of Credit" means any Letter of Credit other than a
Commercial Letter of Credit.

      "Statutory Reserve Rate" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.

      "Subsidiary" means, with respect to any Person (the "parent") at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.

      "Swingline Lender" means FRF, in its capacity as lender of Swingline Loans
hereunder.

      "Swingline Loan" shall mean a Loan made by the Swingline Lender to the
Borrowers pursuant to Section 2.05 hereof.

      "Synthetic Lease" means any lease or other agreement for the use or
possession of property creating obligations which do not appear as Indebtedness
on the balance sheet of the lessee thereunder but which, upon the insolvency or
bankruptcy of such Person, may be characterized as Indebtedness of such lessee
without regard to the accounting treatment.

      "Taxes" means any and all current or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.

      "Termination Date" shall mean the earliest to occur of (i) the Maturity
Date, or (ii) the date on which the maturity of the Loans is accelerated and the
Commitments are terminated, or (iii) the date of the occurrence of any Event of
Default pursuant to Section 7.01(h) or 7.01(i) hereof.

      "Total Commitment" shall mean, at any time, the sum of the Commitments at
such time.


                                       20
<PAGE>
      "Type", when used in reference to any Loan or Borrowing, refers to whether
the rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

      "Unused Commitment" shall mean, on any day, (a) the then Total Commitment
minus (b) the sum of (i) the principal amount of Loans then outstanding
(including the principal amount of Swingline Loans then outstanding) and (ii)
the then Letter of Credit Outstandings.

      "Withdrawal Liability" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.

      SECTION 1.2 Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

      SECTION 1.3 Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time, provided that, in the
event that there is any change occurring after the date hereof in GAAP such that
the covenants contained in Section 6.11(b) would then be calculated in a
different manner or with different components, the parties hereto agree to amend
this Agreement in such respects as are necessary to conform those covenants as
criteria for evaluating the Borrowers' financial condition to substantially the
same criteria as were effective prior to such change in GAAP.

                                   ARTICLE II

                           Amount and Terms of Credit

      SECTION 2.1 Commitment of the Lenders.


                                       21
<PAGE>
      (a)   Each Lender severally and not jointly with any other Lender, agrees,
upon the terms and subject to the conditions herein set forth, to extend credit
to the Borrowers on a revolving basis, in the form of Loans and Letters of
Credit and in an amount not to exceed the lesser of such Lender's Commitment or
such Lender's Commitment Percentage of the Borrowing Base, subject to the
following limitations:

                  (i)   The aggregate outstanding amount of the Loans and
            Letters of Credit Outstandings shall not at any time exceed the
            lower of (i) $250,000,000 or, in each case, any lesser amount to
            which the Commitments have then been reduced by the Borrowers
            pursuant to Section 2.15, and (ii) the then amount of the Borrowing
            Base.

                  (ii)  No Lender shall be obligated to issue any Letter of
            Credit, and Letters of Credit shall be available from the Issuing
            Bank, subject to the ratable participation of all Lenders, as set
            forth in Section 2.06. The Borrowers will not at any time permit the
            aggregate Letter of Credit Outstandings to exceed $150,000,000.

                  (iii) Subject to all of the other provisions of this
            Agreement, Loans that are repaid may be reborrowed prior to the
            Termination Date. No new Credit Extension, however, shall be made to
            the Borrowers after the Termination Date.

      (b)   Each Borrowing of Loans (other than Swingline Loans) shall be made
by the Lenders pro rata in accordance with their respective Commitments. The
failure of any Lender to make any Loan shall neither relieve any other Lender of
its obligation to fund its Loan in accordance with the provisions of this
Agreement nor increase the obligation of any such other Lender.

      SECTION 2.2 Reserves; Changes to Reserves.

      (a)   The initial Inventory and Availability Reserves as of the date of
this Agreement are the following:

                  (i)   Rent (an Availability Reserve): An amount equal to two
            months base rents for a leased premises located in Canada, in the
            states of Washington, Virginia, Pennsylvania and any other state
            which grants a landlord a priority lien for unpaid rent.

                  (ii)  Shrink (an Inventory Reserve): An amount equal to one
            percent (1%) of the gross sales from each of the Borrowers' and the
            Canadian Operating Subsidiary's stores since the date of the last
            physical inventory at each such store.

                  (iii) Gift Certificate and Merchandise Credit Liability (an
            Availability Reserve): An amount equal to fifty percent of the
            Borrowers' and the Canadian Operating Subsidiary's Gift Certificate
            and Merchandise Credit Liability outstanding from time to time.


                                       22
<PAGE>
                  (iv)  Canadian Provincial and Governmental Sales Taxes (an
            Availability Reserve): An amount equal to 100% of the outstanding
            amount accrued and unpaid for such taxes.

                  (v)   PETsMART Direct Shrink Reserve (an Inventory Reserve):
            An amount equal to $200,000.

                  (vi)  PETsMART Direct General Ledger Reserve (an Inventory
            Reserve): An amount equal to 100% of the inventory reserve from time
            to time on the general ledger of the Borrowers for inventory of
            PETsMART Direct, Inc.

      (b)   The Administrative Agent may hereafter establish additional Reserves
or change any of the foregoing Reserves, in the exercise of the reasonable
judgment of the Administrative Agent.

      SECTION 2.3 Making of Loans.

      (a)   Except as set forth in Sections 2.16 and 2.24, Loans (other than
Swingline Loans) by the Lenders shall be either Base Rate Loans or Eurodollar
Loans as the Lead Borrower on behalf of the Borrowers may request subject to and
in accordance with this Section 2.03, provided that all Swingline Loans shall be
only Base Rate Loans. All Loans made pursuant to the same Borrowing shall,
unless otherwise specifically provided herein, be Loans of the same Type. Each
Lender may fulfill its Commitment with respect to any Loan by causing any
lending office of such Lender to make such Loan; but any such use of a lending
office shall not affect the obligation of the Borrowers to repay such Loan in
accordance with the terms of the applicable Note. Each Lender shall, subject to
its overall policy considerations, use reasonable efforts (but shall not be
obligated) to select a lending office which will not result in the payment of
increased costs by the Borrowers pursuant to Section 2.23. Subject to the other
provisions of this Section 2.03 and the provisions of Section 2.24, Borrowings
of Loans of more than one Type may be incurred at the same time, but no more
than five (5) Borrowings of Eurodollar Loans may be outstanding at any time.

      (b)   The Lead Borrower shall give the Administrative Agent three Business
Days' prior telephonic notice (thereafter confirmed in writing) of each
Borrowing of Eurodollar Loans and one Business Day's prior notice of each
Borrowing of Base Rate Loans. Any such notice, to be effective, must be received
by the Administrative Agent not later than 2:00 p.m., Boston time, on the third
Business Day in the case of Eurodollar Loans prior to, and on the first Business
Day in the case of Base Rate Loans prior to, the date on which such Borrowing is
to be made. Such notice shall be irrevocable and shall specify the amount of the
proposed Borrowing (which shall be in an integral multiple of $500,000, but not
less than $3,000,000 in the case of Eurodollar Loans) and the date thereof
(which shall be a Business Day) and shall contain disbursement instructions.
Such notice shall specify whether the Borrowing then being requested is to be a
Borrowing of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the
Interest Period with respect thereto. If no election of Interest Period is
specified in any such notice for a Borrowing of Eurodollar Loans, such notice
shall be deemed a request for an Interest Period of


                                       23
<PAGE>
one month. If no election is made as to the Type of Loan, such notice shall be
deemed a request for Borrowing of Base Rate Loans. The Administrative Agent
shall promptly notify each Lender of its proportionate share of such Borrowing,
the date of such Borrowing, the Type of Borrowing being requested and the
Interest Period or Interest Periods applicable thereto, as appropriate. On the
borrowing date specified in such notice, each Lender shall make its share of the
Borrowing available at the office of the Administrative Agent at 40 Broad
Street, Boston, Massachusetts 02109, no later than 1:00 p.m., Boston time, in
immediately available funds. Unless the Administrative Agent shall have received
notice from a Lender prior to the proposed date of any Borrowing that such
Lender will not make available to the Administrative Agent such Lender's share
of such Borrowing, the Administrative Agent may assume that such Lender has made
such share available on such date in accordance with this Section and may, in
reliance upon such assumption, make available to the Borrowers a corresponding
amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable
Lender and the Borrowers severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrowers
to but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrowers, the interest
rate applicable to Base Rate Loans. If such Lender pays such amount to the
Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing. Upon receipt of the funds made available by the
Lenders to fund any Borrowing, the Administrative Agent shall disburse such
funds in the manner specified in the notice of borrowing delivered by the Lead
Borrower and shall use reasonable efforts to make the funds so received from the
Lenders available to the Borrowers no later than 4:00 p.m., Boston time.

      SECTION 2.4 Overadvances. The Agents and the Lenders have no obligation to
make any Loan or to provide any Letter of Credit if an Overadvance would result.
The Administrative Agent may, in its discretion, make Permitted Overadvances
without the consent of the Lenders and each Lender shall be bound thereby. Any
Permitted Overadvances may constitute Swingline Loans. The making of any
Permitted Overadvance is for the benefit of the Borrowers; such Permitted
Overadvances constitute Loans and Obligations. The making of any such Permitted
Overadvances on any one occasion shall not obligate the Administrative Agent or
any Lender to make or permit any Permitted Overadvances on any other occasion or
to permit such Permitted Overadvances to remain outstanding.

      SECTION 2.5 Swingline Loans

      (a)   The Swingline Lender is authorized by the Lenders, but is not
obligated, to make Swingline Loans up to $12,500,000.00 plus the Permitted
Overadvance in the aggregate outstanding at any time, consisting only of Base
Rate Loans, upon a notice of Borrowing received by the Administrative Agent and
the Swingline Lender (which notice, at the Swingline Lender's discretion, may be
submitted prior to 2:00 p.m., Boston time, on the Business Day on which such
Swingline Loan is requested). Swingline Loans shall be subject to periodic
settlement with the Lenders under Section 2.07 below.


                                       24
<PAGE>
      (b)   Swingline Loans may be made only in the following circumstances: (A)
for administrative convenience, the Swingline Lender may, but is not obligated
to, make Swingline Loans in reliance upon the Borrowers' actual or deemed
representations under Section 4.02, that the applicable conditions for borrowing
are satisfied or (B) for Permitted Overadvances, or (C) if the conditions for
borrowing under Section 4.02 cannot be fulfilled, the Lead Borrower shall give
immediate notice thereof to the Administrative Agent and the Swingline Lender (a
"Noncompliance Notice"), and the Administrative Agent shall promptly provide
each Lender with a copy of the Noncompliance Notice. If the conditions for
borrowing under Section 4.02 cannot be fulfilled, the Required Lenders may
direct the Swingline Lender to, and the Swingline Lender thereupon shall, cease
making Swingline Loans (other than Permitted Overadvances) until such conditions
can be satisfied or are waived in accordance with Section 9.02 hereof. Unless
the Required Lenders so direct the Swingline Lender, the Swingline Lender may,
but is not obligated to, continue to make Swingline Loans beginning one Business
Day after the Non-Compliance Notice is furnished to the Lenders. Notwithstanding
the foregoing, no Swingline Loans shall be made pursuant to this subsection (b)
(other than Permitted Overadvances) if the aggregate outstanding amount of the
Loans and Letter of Credit Outstandings would exceed the lower of (i)
$250,000,000.00 or any lesser amount to which the Commitments have then been
reduced by the Borrowers pursuant to Section 2.15, and (ii) the then amount of
the Borrowing Base.

      SECTION 2.6 Letters of Credit.

      (a)   Upon the terms and subject to the conditions herein set forth, the
Lead Borrower on behalf of the Borrowers may request the Issuing Bank, at any
time and from time to time after the date hereof and prior to the Termination
Date, to issue, and subject to the terms and conditions contained herein, the
Issuing Bank shall issue, for the account of the Borrowers one or more Letters
of Credit; provided that no Letter of Credit shall be issued if after giving
effect to such issuance (i) the aggregate Letter of Credit Outstandings shall
exceed $150,000,000, or (ii) the aggregate Loans and Letter of Credit
Outstandings would exceed the limitation set forth in Section 2.01(a)(i); and
provided, further, that no Letter of Credit shall be issued if the Issuing Bank
shall have received notice from the Administrative Agent or the Required Lenders
that the conditions to such issuance have not been met.

      (b)   Each Standby Letter of Credit shall expire at or prior to the close
of business on the earlier of (i) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, one year after such renewal or extension) and (ii) the date that is
five Business Days prior to the Maturity Date, provided that each Standby Letter
of Credit may, upon the request of the Lead Borrower, include a provision
whereby such Letter of Credit shall be renewed automatically for additional
consecutive periods of 12 months or less (but not beyond the date that is five
Business Days prior to the Maturity Date) unless the Issuing Bank notifies the
beneficiary thereof at least 30 days prior to the then-applicable expiration
date that such Letter of Credit will not be renewed.


                                       25
<PAGE>
      (c)   Each Commercial Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date 120 days after the date of the
issuance of such Commercial Letter of Credit and (ii) the date that is five
Business Days prior to the Maturity Date.

      (d)   Drafts drawn under each Letter of Credit shall be reimbursed by the
Borrowers in dollars on the same Business Day of any such drawing by paying to
the Administrative Agent an amount equal to such drawing not later than 2:00
p.m., Boston time, on (i) the date that the Borrowers shall have received notice
of such payment, if such notice is received prior to 10:00 a.m., Boston time, on
such date, or (ii) the Business Day immediately following the day that the
Borrowers receive such notice, if such notice is received after 10:00 a.m.,
Boston time on the day of receipt, provided that the Lead Borrower may, subject
to the conditions to borrowing set forth herein, request in accordance with
Section 2.03 that such payment be financed with an Base Rate Loan or Swingline
Loan in an equivalent amount and, to the extent so financed, the Borrowers'
obligation to make such payment shall be discharged and replaced by the
resulting Base Rate Loan or Swingline Loan. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrowers by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make payment thereunder, provided that any failure to give or delay in
giving such notice shall not relieve the Borrowers of their obligation to
reimburse the Issuing Bank and the Lenders with respect to any such payment.

      (e)   If the Issuing Bank shall make any L/C Disbursement, then, unless
the Borrowers shall reimburse the Issuing Bank in full on the date such payment
is made, the unpaid amount thereof shall bear interest, for each day from and
including the date such payment is made to but excluding the date that the
Borrowers reimburse the Issuing Bank therefor, at the rate per annum then
applicable to Base Rate Loans, provided that, if the Borrowers fail to reimburse
such Issuing Bank when due pursuant to paragraph (d) of this Section, then
Section 2.10 shall apply. Interest accrued pursuant to this paragraph shall be
for the account of the Issuing Bank, except that interest accrued on and after
the date of payment by any Lender pursuant to paragraph (g) of this Section to
reimburse the Issuing Bank shall be for the account of such Lender to the extent
of such payment.

      (f)   Immediately upon the issuance of any Letter of Credit by the Issuing
Bank (or the amendment of a Letter of Credit increasing the amount thereof), and
without any further action on the part of the Issuing Bank, the Issuing Bank
shall be deemed to have sold to each Lender, and each such Lender shall be
deemed unconditionally and irrevocably to have purchased from the Issuing Bank,
without recourse or warranty, an undivided interest and participation, to the
extent of such Lender's Commitment Percentage, in such Letter of Credit, each
drawing thereunder and the obligations of the Borrowers under this Agreement and
the other Loan Documents with respect thereto. Upon any change in the
Commitments pursuant to Section 9.05, it is hereby agreed that with respect to
all Letter of Credit Outstandings, there shall be an automatic adjustment to the
participations hereby created to reflect the new Commitment Percentages of the
assigning and assignee Lenders. Any action taken or omitted by the Issuing Bank
under or in connection with a Letter of Credit, if taken or omitted in the
absence of gross


                                       26
<PAGE>
negligence or willful misconduct, shall not create for the Issuing Bank any
resulting liability to any Lender.

      (g)   In the event that the Issuing Bank makes any L/C Disbursement and
the Borrowers shall not have reimbursed such amount in full to the Issuing Bank
pursuant to this Section 2.06, the Issuing Bank shall promptly notify the
Administrative Agent, which shall promptly notify each Lender of such failure,
and each Lender shall promptly and unconditionally pay to the Administrative
Agent for the account of the Issuing Bank the amount of such Lender's Commitment
Percentage of such unreimbursed payment in dollars and in same day funds. If the
Issuing Bank so notifies the Administrative Agent, and the Administrative Agent
so notifies the Lenders prior to 11:00 a.m., Boston time, on any Business Day,
each such Lender shall make available to the Issuing Bank such Lender's
Commitment Percentage of the amount of such payment on such Business Day in same
day funds. If and to the extent such Lender shall not have so made its
Commitment Percentage of the amount of such payment available to the Issuing
Bank, such Lender agrees to pay to the Issuing Bank, forthwith on demand such
amount, together with interest thereon, for each day from such date until the
date such amount is paid to the Administrative Agent for the account of the
Issuing Bank at the Federal Funds Effective Rate. Each Lender agrees to fund its
Commitment Percentage of such unreimbursed payment notwithstanding a failure to
satisfy any applicable lending conditions or the provisions of Sections 2.01 or
2.06, or the occurrence of the Termination Date. The failure of any Lender to
make available to the Issuing Bank its Commitment Percentage of any payment
under any Letter of Credit shall neither relieve any Lender of its obligation
hereunder to make available to the Issuing Bank its Commitment Percentage of any
payment under any Letter of Credit on the date required, as specified above, nor
increase the obligation of such other Lender. Whenever any Lender has made
payments to the Issuing Bank in respect of any reimbursement obligation for any
Letter of Credit, such Lender shall be entitled to share ratably, based on its
Commitment Percentage, in all payments and collections thereafter received on
account of such reimbursement obligation.

      (h)   Whenever the Borrowers desire that the Issuing Bank issue a Letter
of Credit (or the amendment, renewal or extension of an outstanding Letter of
Credit), the Lead Borrower shall give to the Issuing Bank and the Administrative
Agent at least two Business Days' prior written (including telegraphic, telex,
facsimile or cable communication) notice (or such shorter period as may be
agreed upon in writing by the Issuing Bank and the Lead Borrower) specifying the
date on which the proposed Letter of Credit is to be issued, amended, renewed or
extended (which shall be a Business Day), the stated amount of the Letter of
Credit so requested, the expiration date of such Letter of Credit, the name and
address of the beneficiary thereof, and the provisions thereof. If requested by
the Issuing Bank, the Borrowers shall also submit a letter of credit application
on the Issuing Bank's standard form in connection with any request for the
issuance, amendment, renewal or extension of a Letter of Credit.

      (i)   The obligations of the Borrowers to reimburse the Issuing Bank for
any L/C Disbursement shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement under all circumstances,
including, without limitation (it being understood that any such payment by the
Borrowers shall be without prejudice to, and shall not


                                       27
<PAGE>
constitute a waiver of, any rights the Borrowers might have or might acquire as
a result of the payment by the Issuing Bank of any draft or the reimbursement by
the Borrowers thereof): (i) any lack of validity or enforceability of any Letter
of Credit; (ii) the existence of any claim, setoff, defense or other right which
the Borrowers may have at any time against a beneficiary of any Letter of Credit
or against any of the Lenders, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction; (iii) any draft,
demand, certificate 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; (iv) payment by the
Issuing Bank of any Letter of Credit against presentation of a demand, draft or
certificate or other document which does not comply with the terms of such
Letter of Credit; (v) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, that might, but for the provisions of this
Section, constitute a legal or equitable discharge of, or provide a right of
setoff against, the Borrowers' obligations hereunder; or (vi) the fact that any
Event of Default shall have occurred and be continuing. None of the
Administrative Agent, the Lenders, the Issuing Bank or any of their Affiliates
shall have any liability or responsibility by reason of or in connection with
the issuance or transfer of any Letter of Credit or any payment or failure to
make any payment thereunder (irrespective of any of the circumstances referred
to in the preceding sentence), or any error, omission, interruption, loss or
delay in transmission or delivery of any draft, notice or other communication
under or relating to any Letter of Credit (including any document required to
make a drawing thereunder), any error in interpretation of technical terms or
any consequence arising from causes beyond the control of the Issuing Bank,
provided that the foregoing shall not be construed to excuse the Issuing Bank
from liability to the Borrowers to the extent of any direct damages (as opposed
to consequential damages, claims in respect of which are hereby waived by the
Borrowers to the extent permitted by applicable law) suffered by the Borrowers
that are caused by the Issuing Bank's failure to exercise care when determining
whether drafts and other documents presented under a Letter of Credit comply
with the terms thereof. The parties hereto expressly agree that, in the absence
of gross negligence or willful misconduct on the part of the Issuing Bank, the
Issuing Bank shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented that appear on their
face to be in compliance with the terms of a Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

      (j)   If any Event of Default shall occur and be continuing, on the
Business Day that the Borrowers receive notice from the Administrative Agent or
the Required Lenders demanding the deposit of cash collateral pursuant to this
paragraph, the Borrowers shall deposit in the Cash Collateral Account an amount
in cash equal to 103% of the Letter of Credit Outstandings as of such date plus
any accrued and unpaid interest thereon. Each such deposit shall be held by the
Collateral Agent as collateral for the payment and performance of the
Obligations of the Borrowers under this Agreement. The Collateral Agent shall
have exclusive dominion and control, including the exclusive right of
withdrawal, over such Cash Collateral Account. Other than any interest earned on
the investment of such deposits, which investments shall be made at


                                       28
<PAGE>
the option and sole discretion of the Collateral Agent at the request of the
Borrowers and at the Borrowers' risk and expense, such deposits shall not bear
interest. Interest or profits, if any, on such investments shall accumulate in
such account. Moneys in such Cash Collateral Account shall be applied by the
Collateral Agent to reimburse the Issuing Bank for payments on account of
drawings under Letters of Credit for which it has not been reimbursed and, to
the extent not so applied, shall be held for the satisfaction of the
reimbursement obligations of the Borrowers for the Letter of Credit Outstandings
at such time or, if the Loans have matured or the maturity of the Loans has been
accelerated, be applied to satisfy other Obligations of the Borrowers under this
Agreement.

      SECTION 2.7 Settlements Amongst Lenders

      (a)   The Swingline Lender may (but shall not be obligated to), at any
time, on behalf of the Borrowers (which hereby authorize the Swingline Lender to
act in their behalf in that regard) request the Administrative Agent to cause
the Lenders to make a Loan (which shall be an Base Rate Loan) in an amount equal
to such Lender's Commitment Percentage of the outstanding amount of Swingline
Loans made in accordance with Section 2.05, which request may be made regardless
of whether the conditions set forth in Article IV have been satisfied. Upon such
request, each Lender shall make available to the Administrative Agent the
proceeds of such Loan which proceeds shall be paid to the Swingline Lender to be
applied in reduction of the Swingline Loans. If the Swingline Lender requires a
Loan to be made by the Lenders and the request therefor is received prior to
12:00 Noon, Boston time, on a Business Day, such transfers shall be made in
immediately available funds no later than 3:00 p.m., Boston time, that day; and,
if the request therefor is received after 12:00 Noon, Boston time, then no later
than 3:00 p.m., Boston time, on the next Business Day. The obligation of each
Lender to transfer such funds is irrevocable, unconditional and without recourse
to or warranty by the Administrative Agent or the Swingline Lender. If and to
the extent any Lender shall not have so made its transfer to the Administrative
Agent, such Lender agrees to pay to the Administrative Agent, forthwith on
demand such amount, together with interest thereon, for each day from such date
until the date such amount is paid to the Administrative Agent at the Federal
Funds Effective Rate.

      (b)   The amount of each Lender's Commitment Percentage of outstanding
Loans (excluding Swingline Loans) shall be computed weekly (or more frequently
in the Administrative Agent's discretion) and shall be adjusted upward or
downward based on all Loans (excluding Swingline Loans) and repayments of Loans
(excluding Swingline Loans) received by the Administrative Agent as of 3:00
p.m., Boston time, on the first Business Day following the end of the period
specified by the Administrative Agent (such date, the "Settlement Date").

      (c)   The Administrative Agent shall deliver to each of the Lenders
promptly after the Settlement Date a summary statement of the amount of
outstanding Loans (excluding Swingline Loans) for the period and the amount of
repayments received for the period. As reflected on the summary statement: (x)
the Administrative Agent shall transfer to each Lender its applicable Commitment
Percentage of repayments, and (y) each Lender shall transfer to the
Administrative Agent (as provided below), or the Administrative Agent shall
transfer to each Lender, such


                                       29
<PAGE>
amounts as are necessary to insure that, after giving effect to all such
transfers, the amount of Loans made by each Lender with respect to Loans
(excluding Swingline Loans) shall be equal to such Lender's applicable
Commitment Percentage of Loans (excluding Swingline Loans) outstanding as of
such Settlement Date. If the summary statement requires transfers to be made to
the Administrative Agent by the Lenders and is received prior to 12:00 Noon,
Boston time, on a Business Day, such transfers shall be made in immediately
available funds no later than 4:00 p.m., Boston time, that day; and, if received
after 12:00 Noon, Boston time, then no later than 4:00 p.m., Boston time, on the
next Business Day. The obligation of each Lender to transfer such funds is
irrevocable, unconditional and without recourse to or warranty by the
Administrative Agent. If and to the extent any Lender shall not have so made its
transfer to the Administrative Agent, such Lender agrees to pay to the
Administrative Agent, forthwith on demand such amount, together with interest
thereon, for each day from such date until the date such amount is paid to the
Administrative Agent at the Federal Funds Effective Rate.

      SECTION 2.8 Notes; Repayment of Loans.

      (a)   The Loans outstanding to each Lender (and to the Swingline Lender,
with respect to Swingline Loans) shall be evidenced by a Note duly executed on
behalf of the Borrowers, dated the Closing Date, in substantially the form
attached hereto as Exhibit B-1 or B-2, as applicable, payable to the order of
each such Lender (or the Swingline Lender, as applicable) in an aggregate
principal amount equal to such Lender's Commitment (or, in the case of the Note
evidencing the Swingline Loans, $12,500,000.00).

      (b)   The outstanding principal balance of all Swingline Loans shall be
repaid on the earlier of the Termination Date or, on the date otherwise
requested by the Swingline Lender in accordance with the provisions of Section
2.07(a). The outstanding principal balance of all other Obligations shall be
payable on the Termination Date (subject to earlier repayment as provided
below). Each Note shall bear interest from the date thereof on the outstanding
principal balance thereof as set forth in this Article II. Each Lender is hereby
authorized by the Borrowers to endorse on a schedule attached to each Note
delivered to such Lender (or on a continuation of such schedule attached to such
Note and made a part thereof), or otherwise to record in such Lender's internal
records, an appropriate notation evidencing the date and amount of each Loan
from such Lender, each payment and prepayment of principal of any such Loan,
each payment of interest on any such Loan and the other information provided for
on such schedule; provided, however, that the failure of any Lender to make such
a notation or any error therein shall not affect the obligation of the Borrowers
to repay the Loans made by such Lender in accordance with the terms of this
Agreement and the applicable Notes.

      SECTION 2.9 Interest on Loans.

      (a)   Subject to Section 2.10, each Base Rate Loan shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 365
or 366 days, as applicable) at a rate per annum that shall be equal to the then
Alternate Base Rate, plus the Applicable Margin for Base Rate Loans.


                                       30
<PAGE>
      (b)   Subject to Section 2.10, each Eurodollar Loan shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 360
days) at a rate per annum equal, during each Interest Period applicable thereto,
to the Adjusted LIBO Rate for such Interest Period, plus the Applicable Margin
for Eurodollar Loans.

      (c)   Accrued interest on all Loans shall be payable in arrears on each
Interest Payment Date applicable thereto, at maturity (whether by acceleration
or otherwise), after such maturity on demand and (with respect to Eurodollar
Loans) upon any repayment or prepayment thereof (on the amount prepaid).

      SECTION 2.10 Default Interest.

      Effective upon the occurrence of any Event of Default and at all times
thereafter while such Event of Default is continuing, at the option of the
Administrative Agent or upon the direction of the Required Lenders, interest
shall accrue on all outstanding Loans (including Swingline Loans) (after as well
as before judgment, as and to the extent permitted by law) at a rate per annum
equal to the rate (including the Applicable Margin for Loans) in effect from
time to time plus 2.00% per annum, and such interest shall be payable on demand.

      SECTION 2.11 Certain Fees.

      The Borrowers shall pay to the Administrative Agent, for the account of
the Administrative Agent, the fees set forth in the Fee Letter as and when
payment of such fees is due as therein set forth.

      SECTION 2.12 Unused Commitment Fee.

      Each Lender shall be paid the Line Fee at the times and in the manner set
forth below. The Borrowers shall pay to the Administrative Agent for the account
of the Lenders, a commitment fee (the "Commitment Fee") equal to 0.375% per
annum (on the basis of actual days elapsed in a year of 365 or 366 days, as
applicable) of the average daily balance of the Unused Commitment for each day
commencing on and including the Closing Date and ending on but excluding the
Termination Date. The Commitment Fee so accrued in any calendar quarter shall be
payable on the first Business Day of the immediately succeeding calendar
quarter, except that all Commitment Fees so accrued as of the Termination Date
shall be payable on the Termination Date. If the Commitment Fee actually paid by
the Borrowers is insufficient to pay the Line Fee due the Lenders, the
deficiency shall be paid to the Lenders by the Swingline Lender from its own
funds (and the Borrowers shall have no liability with respect thereto). The
Administrative Agent shall pay the Commitment Fee (and any amounts payable by
the Swingline Lender hereunder) to the Lenders based upon their pro rata share
of the aggregate Line Fee due to all Lenders; provided that for purposes of
calculating the pro rata share of any Person which is both the Swingline Lender
and a Lender, such Person's share shall be equal to the difference between (i)
the sum of such Person's Commitment, and (ii) the sum of (A) such Person's
Commitment Percentage of the principal amount of Loans then outstanding
(including the principal amount of Swingline Loans then outstanding), and (B)
such Person's Commitment Percentage of the then Letter of Credit Outstandings.

      SECTION 2.13 Letter of Credit Fees.


                                       31
<PAGE>
      (a)   The Borrowers shall pay the Administrative Agent, for the account of
the Lenders, on the last day of each calendar quarter, in arrears, a fee (each,
a "Letter of Credit Fee") equal to the following per annum percentages of the
average face amount of the following categories of Letters of Credit outstanding
during the subject quarter:

                  (i)   Standby Letters of Credit: The Applicable Margin for
            Eurodollar Loans.

                  (ii)  Commercial Letters of Credit: The Applicable Margin for
            Eurodollar Loans minus 0.50%.

                  (iii) After the occurrence and during the continuance of an
            Event of Default, at the option of the Administrative Agent or upon
            the direction of the Required Lenders, the Letter of Credit Fee
            shall be increased by an amount equal to two percent (2%) per annum.

      (b)   The Borrowers shall pay to the Administrative Agent, for the account
of the Issuing Bank, and in addition to all Letter of Credit Fees otherwise
provided for hereunder, such fronting fees and other fees and charges in
connection with the issuance, negotiation, settlement, amendment and processing
of each Letter of Credit issued by the Issuing Bank as are customarily imposed
by the Issuing Bank to account parties of comparable credit quality from time to
time in connection with letter of credit transactions.

      SECTION 2.14 Nature of Fees.

      All fees shall be paid on the dates due, in immediately available funds,
to the Administrative Agent, for the respective accounts of the Administrative
Agent, the Issuing Bank, and the Lenders, as provided herein. Once paid, all
fees shall be fully earned (absent manifest error) and shall not be refundable
under any circumstances.

      SECTION 2.15 Termination or Reduction of Commitments.

      (a)   Subject to the provisions of Section 2.15(b), upon at least two
Business Days' prior written notice to the Administrative Agent, the Borrowers
may at any time in whole permanently terminate, or from time to time in part
permanently reduce, the Commitments. Each such reduction shall be in the amount
of $5,000,000 or any integral multiple thereof. Each such reduction or
termination shall (i) be applied ratably to the Commitments of each Lender and
(ii) be irrevocable when given. At the effective time of each such reduction or
termination, the Borrowers shall pay to the Administrative Agent for application
as provided herein (i) all Commitment Fees accrued on the amount of the
Commitments so terminated or reduced through the date thereof, (ii) any amount
by which the Credit Extensions outstanding on such date exceed the amount to
which the Commitments are to be reduced effective on such date, in each case pro
rata based on the amount prepaid, and (iii) the Early Termination Fee on the
amount of the Commitments so terminated or reduced.


                                       32
<PAGE>
      (b)   In the event that, prior to April 30, 2003, either (i) the Borrowers
terminate or reduce the Commitments pursuant to Section 2.15(a) hereof, or (ii)
the Termination Date occurs for any reason, the Borrowers shall pay the
Administrative Agent, for the benefit of the Lenders, a fee (the "Early
Termination Fee") in an amount equal to (x) if any of the events described in
clauses (i) or (ii) hereof occurs on or before April 30, 2002, one-half of one
percent (0.50%) of the Commitments so reduced or terminated, or (y) if any of
the events described in clauses (i) or (ii) hereof occurs after April 30, 2002
and on or before April 30, 2003, one-quarter of one percent (0.25%) of the
Commitments so reduced or terminated.

      SECTION 2.16 Alternate Rate of Interest.

      If prior to the commencement of any Interest Period for a Eurodollar
Borrowing:

      (a)   the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or

      (b)   the Administrative Agent is advised by the Required Lenders that the
Adjusted LIBO Rate for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (or Lender) of making or maintaining their
Loans (or its Loan) included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrowers and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrowers and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Borrowing
Request that requests the conversion of any Borrowing to, or continuation of any
Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any
Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made
as a Borrowing of Base Rate Loans.

      SECTION 2.17 Conversion and Continuation of Loans.

      The Lead Borrower on behalf of the Borrowers shall have the right at any
time, on three Business Days' prior irrevocable notice to the Administrative
Agent (which notice, to be effective, must be received by the Administrative
Agent not later than 2:00 p.m., Boston time, on the third Business Day preceding
the date of any conversion), (x) to convert any outstanding Borrowings of Loans
(but in no event Swingline Loans) of one Type (or a portion thereof) to a
Borrowing of Loans of the other Type or (y) to continue an outstanding Borrowing
of Eurodollar Loans for an additional Interest Period, subject to the following:

      (a)   no Borrowing of Loans may be converted into, or continued as,
Eurodollar Loans at any time when an Event of Default has occurred and is
continuing (nothing contained herein being deemed to obligate the Borrowers to
incur Breakage Costs upon the occurrence of an Event of Default unless the
Obligations are accelerated);


                                       33
<PAGE>
      (b)   if less than a full Borrowing of Loans is converted, such conversion
shall be made pro rata among the Lenders, as applicable, in accordance with the
respective principal amounts of the Loans comprising such Borrowing held by such
Lenders immediately prior to such refinancing;

      (c)   the aggregate principal amount of Loans being converted into or
continued as Eurodollar Loans shall be in an integral of $500,000 and at least
$3,000,000;

      (d)   each Lender shall effect each conversion by applying the proceeds of
its new Eurodollar Loan or Base Rate Loan, as the case may be, to its Loan being
so converted;

      (e)   the Interest Period with respect to a Borrowing of Eurodollar Loans
effected by a conversion or in respect to the Borrowing of Eurodollar Loans
being continued as Eurodollar Loans shall commence on the date of conversion or
the expiration of the current Interest Period applicable to such continuing
Borrowing, as the case may be;

      (f)   a Borrowing of Eurodollar Loans may be converted only on the last
day of an Interest Period applicable thereto;

      (g)   each request for a conversion or continuation of a Borrowing of
Eurodollar Loans which fails to state an applicable Interest Period shall be
deemed to be a request for an Interest Period of one month; and

      (h)   no more than five (5) Borrowings of Eurodollar Loans may be
outstanding at any time.

If the Lead Borrower does not give notice to convert any Borrowing of Eurodollar
Loans, or does not give notice to continue, or does not have the right to
continue, any Borrowing as Eurodollar Loans, in each case as provided above,
such Borrowing shall automatically be converted to a Borrowing of Base Rate
Loans at the expiration of the then-current Interest Period. The Administrative
Agent shall, after it receives notice from the Lead Borrower, promptly give each
Lender notice of any conversion, in whole or part, of any Loan made by such
Lender.

      SECTION 2.18 Mandatory Prepayment; Commitment Termination; Cash
Collateral.

      The outstanding Obligations shall be subject to mandatory prepayment as
follows:

      (a)   If at any time the amount of the Credit Extensions exceeds the lower
of (i) the then amount of the Commitments and (ii) the then amount of the
Borrowing Base, the Borrowers will immediately upon notice from the
Administrative Agent (A) prepay the Loans in an amount necessary to eliminate
such excess, and (B) if, after giving effect to the prepayment in full of all
outstanding Loans such excess has not been eliminated, deposit cash into the
Cash Collateral Account in an amount equal to 103% of the Letters of Credit
Outstanding.


                                       34
<PAGE>
      (b)   The Loans shall be repaid daily in accordance with the provisions of
Sections 2.21(h) and 2.22 hereof.

      (c)   Subject to the foregoing, outstanding Base Rate Loans shall be
prepaid before outstanding Eurodollar Loans are prepaid. Each partial prepayment
of Eurodollar Loans shall be in an integral multiple of $500,000. No prepayment
of Eurodollar Loans shall be permitted pursuant to this Section 2.18 other than
on the last day of an Interest Period applicable thereto, unless the Borrowers
simultaneously reimburse the Lenders for all "Breakage Costs" (as defined below)
associated therewith. In order to avoid such Breakage Costs, as long as no Event
of Default has occurred and is continuing, at the request of the Lead Borrower,
the Administrative Agent shall hold all amounts required to be applied to
Eurodollar Loans in the Cash Collateral Account and will apply such funds to the
applicable Eurodollar Loans at the end of the then pending Interest Period
therefor (provided that the foregoing shall in no way limit or restrict the
Agents' rights upon the subsequent occurrence of an Event of Default). No
partial prepayment of a Borrowing of Eurodollar Loans shall result in the
aggregate principal amount of the Eurodollar Loans remaining outstanding
pursuant to such Borrowing being less than $3,000,000. Any prepayment of the
Loans shall not permanently reduce the Commitments.

      (d)   All amounts required to be applied to all Loans hereunder (other
than Swingline Loans) shall be applied ratably in accordance with each Lender's
Commitment Percentage.

      (e)   Upon the Termination Date, the credit facility provided hereunder
shall be terminated in full and the Borrowers shall pay, in full and in cash,
all outstanding Loans and all other outstanding Obligations.

      SECTION 2.19 Optional Prepayment of Loans; Reimbursement of Lenders.

      (a)   The Borrowers shall have the right at any time and from time to time
to prepay outstanding Loans in whole or in part, (x) with respect to Eurodollar
Loans, upon at least two Business Days' prior written, telex or facsimile notice
to the Administrative Agent prior to 2:00 p.m., Boston time, and (y) with
respect to Base Rate Loans, on the same Business Day if written, telex or
facsimile notice is received by the Administrative Agent prior to 2:00 p.m.,
Boston time, subject to the following limitations:

                  (i)   Subject to Section 2.18, all prepayments shall be paid
            to the Administrative Agent for application, first, to the
            prepayment of outstanding Swingline Loans, second, to the prepayment
            of other outstanding Loans ratably in accordance with each Lender's
            Commitment Percentage, and third, to the funding of a cash
            collateral deposit in the Cash Collateral Account in an amount equal
            to 103% of all Letter of Credit Outstandings.

                  (ii)  Subject to the foregoing, outstanding Base Rate Loans
            shall be prepaid before outstanding Eurodollar Loans are prepaid.
            Each partial prepayment of Eurodollar Loans shall be in an integral
            multiple of $500,000. No prepayment of Eurodollar Loans shall be
            permitted pursuant to this Section 2.19 other than on the last day
            of an Interest Period applicable thereto, unless the Borrowers


                                       35
<PAGE>
            simultaneously reimburse the Lenders for all "Breakage Costs" (as
            defined below) associated therewith. No partial prepayment of a
            Borrowing of Eurodollar Loans shall result in the aggregate
            principal amount of the Eurodollar Loans remaining outstanding
            pursuant to such Borrowing being less than $3,000,000.

                  (iii) Each notice of prepayment shall specify the prepayment
            date, the principal amount and Type of the Loans to be prepaid and,
            in the case of Eurodollar Loans, the Borrowing or Borrowings
            pursuant to which such Loans were made. Each notice of prepayment
            shall be irrevocable and shall commit the Borrowers to prepay such
            Loan by the amount and on the date stated therein. The
            Administrative Agent shall, promptly after receiving notice from the
            Borrowers hereunder, notify each Lender of the principal amount and
            Type of the Loans held by such Lender which are to be prepaid, the
            prepayment date and the manner of application of the prepayment.

      (b)   The Borrowers shall reimburse each Lender on demand for any loss
incurred by it in the reemployment of the funds released (i) resulting from any
prepayment (for any reason whatsoever, including, without limitation, conversion
to Base Rate Loans or acceleration by virtue of, and after, the occurrence of an
Event of Default) of any Eurodollar Loan required or permitted under this
Agreement, if such Loan is prepaid other than on the last day of the Interest
Period for such Loan or (ii) in the event that after the Lead Borrower delivers
a notice of borrowing under Section 2.03 in respect of Eurodollar Loans, such
Loans are not made on the first day of the Interest Period specified in such
notice of borrowing for any reason other than a breach by such Lender of its
obligations hereunder or the delivery of any notice pursuant to Section 2.16.
Such loss of any Lender shall be reimbursed by the Borrowers in the amount as
reasonably determined by such Lender equal to the excess, if any, of (A) the
amount of interest which would have accrued to such Lender on the amount so paid
or not borrowed at a rate of interest equal to the Adjusted LIBO Rate for such
Loan, for the period from the date of such payment or failure to borrow to the
last day (x) in the case of a payment or refinancing with Base Rate Loans other
than on the last day of the Interest Period for such Loan, of the then current
Interest Period for such Loan or (y) in the case of such failure to borrow, of
the Interest Period for such Loan which would have commenced on the date of such
failure to borrow, over (B) the amount of interest which would have accrued to
such Lender on such amount by placing such amount on deposit for a comparable
period with leading banks in the London interbank market (collectively,
"Breakage Costs"). Any Lender demanding reimbursement for such loss shall
deliver to the Borrowers from time to time one or more certificates setting
forth the amount of such loss as determined by such Lender and setting forth in
reasonable detail the manner in which such amount was determined.

      (c)   In the event the Borrowers fail to prepay any Loan on the date
specified in any prepayment notice delivered pursuant to Section 2.19(a), the
Borrowers on demand by any Lender shall pay to the Administrative Agent for the
account of such Lender any amounts required to compensate such Lender for any
loss incurred by such Lender as a result of such failure to prepay, including,
without limitation, any loss, cost or expenses incurred by reason of the
acquisition of deposits or other funds by such Lender to fulfill deposit
obligations incurred in


                                       36
<PAGE>
anticipation of such prepayment. Any Lender demanding such payment shall deliver
to the Borrowers from time to time one or more certificates setting forth the
amount of such loss as determined by such Lender and setting forth in reasonable
detail the manner in which such amount was determined.

      (d)   Whenever any partial prepayment of Loans are to be applied to
Eurodollar Loans, such Eurodollar Loans shall be prepaid in the chronological
order of their Interest Payment Dates.

      SECTION 2.20 Maintenance of Loan Account; Statements of Account.

      (a)   The Administrative Agent shall maintain an account on its books in
the name of the Borrowers (the "Loan Account") which will reflect (i) all
Swingline Loans and all loans and advances made by the Lenders to the Borrowers
or for the Borrowers' account, including the Loans, (ii) all L/C Disbursements,
fees and interest that have become payable as herein set forth, and (iii) any
and all other Obligations that have become payable.

      (b)   The Loan Account will be credited with all amounts received by the
Administrative Agent from the Borrowers or from others for the Borrowers'
account, including all amounts received in the FRF Concentration Account from
the Blocked Account Banks, and the amounts so credited shall be applied as set
forth in Sections 2.22(a) and (b). After the end of each month, the
Administrative Agent shall send to the Borrowers a statement accounting for the
charges, loans, advances, prepayments, and other transactions occurring among
and between the Administrative Agent, the Lenders and the Borrowers during that
month. The monthly statements shall, absent manifest error, be an account
stated, which is final, conclusive and binding on the Borrowers.

      SECTION 2.21 Cash Receipts.

      (a)   Annexed hereto as Schedule 2.21(a) is a list of all present DDAs,
which Schedule includes, with respect to each depository (i) the name and
address of that depository; (ii) the account number(s) maintained with such
depository; and (iii) to the extent known, a contact person at such depository.

      (b)   Annexed hereto as Schedule 2.21(b) is a list describing all
arrangements to which any Borrower is a party with respect to the payment to any
Borrower of the proceeds of all credit card charges for sales by any Borrower.

      (c)   On or prior to the Closing Date, the Borrowers shall (i) deliver to
the Administrative Agent notifications executed on behalf of the Borrowers to
each depository institution with which any DDA is maintained in form
satisfactory to the Administrative Agent, of the Administrative Agent's interest
in such DDA (each, a "DDA Notification"), and (ii) deliver to the Administrative
Agent notifications executed on behalf of the Borrowers to each of the
Borrower's credit card clearinghouses and processors of notice in form
satisfactory to the Administrative Agent, (each, a "Credit Card Notification"),
and (iii) entered into agency agreements with the banks maintaining the deposit
accounts identified on Schedule 2.21(c)


                                       37
<PAGE>
(collectively, the "Blocked Accounts"), which agreements (the "Blocked Account
Agreements") shall be in form and substance satisfactory to the Administrative
Agent. The DDA Notifications, Credit Card Notifications and Blocked Account
Agreements shall require, after the occurrence and during the continuance of a
Default or Cash Control Event, the sweep on each Business Day of all available
cash receipts from the sale of Inventory and other assets, all collections of
Accounts, and all other cash payments received by the Borrowers from any Person
or from any source or on account of any sale or other transaction or event,
including, without limitation, any Prepayment Event (all such cash receipts and
collections, "Cash Receipts"), to a concentration account maintained by the
Collateral Agent at Fleet (the "FRF Concentration Account"). In that regard,
after the occurrence, and during the continuance, of a Default or Cash Control
Event, the Borrowers shall cause the ACH or wire transfer to a Blocked Account
or to the FRF Concentration Account, no less frequently than daily (and whether
or not there is then an outstanding balance in the Loan Account) of (A) the then
contents of each DDA, each such transfer to be net of any minimum balance, not
to exceed $10,000.00, as may be required to be maintained in the subject DDA by
the bank at which such DDA is maintained; and (B) the proceeds of all credit
card charges not otherwise provided for pursuant hereto, and (C) all other Cash
Receipts. Further, whether or not any Obligations are then outstanding, after
the occurrence and during the continuance of a Default or Cash Control Event,
the Borrowers shall cause the ACH or wire transfer to the FRF Concentration
Account, no less frequently than daily, of the then entire ledger balance of
each Blocked Account, net of such minimum balance, not to exceed $10,000.00, as
may be required to be maintained in the subject Blocked Account by the bank at
which such Blocked Account is maintained. In the event that, notwithstanding the
provisions of this Section 2.21, after the occurrence and during the continuance
of a Default or Cash Control Event, the Borrowers receive or otherwise have
dominion and control of any such proceeds or collections, such proceeds and
collections shall be held in trust by the Borrowers for the Administrative Agent
and shall not be commingled with any of the Borrowers' other funds or deposited
in any account of any Borrower other than as instructed by the Administrative
Agent.

      (d)   The Borrowers shall, after the occurrence and during the continuance
of a Default or Cash Control Event, accurately report to the Administrative
Agent all amounts deposited in the Blocked Accounts to ensure the proper
transfer of funds as set forth above. If at any time other than the times set
forth above any cash or cash equivalents owned by the Borrowers are deposited to
any account, or held or invested in any manner, otherwise than in a Blocked
Account that is subject to a Blocked Account Agreement, the Administrative Agent
shall require the Borrowers to close such account and have all funds therein
transferred to an account maintained by the Administrative Agent at Fleet and
all future deposits made to a Blocked Account which is subject to a Blocked
Account Agreement.

      (e)   The Borrowers may (i) close DDAs or Blocked Accounts and/or open new
DDAs or Blocked Accounts, subject to the execution and delivery to the
Administrative Agent of appropriate DDA Notifications or Blocked Account
Agreements (unless expressly waived by the Administrative Agent) consistent with
the provisions of this Section 2.21 and otherwise satisfactory to the
Administrative Agent, and (ii) enter into any agreements with credit card
processors subject to the execution and delivery to the Administrative Agent of
appropriate Credit Card Notifications (unless expressly waived by the
Administrative Agent) consistent with


                                       38
<PAGE>
the provisions of this Section 2.21 and otherwise satisfactory to the
Administrative Agent. Unless the Lead Borrower shall have notified the
Administrative Agent and complied with the provisions of the immediately
preceding sentence, the Borrowers may not maintain any bank accounts or enter
into any agreements with credit card processors other than the ones expressly
contemplated herein.

      (f)   The Borrowers may also maintain with the Administrative Agent at
Fleet one or more disbursement accounts (the "Fleet Disbursement Accounts") to
be used by the Borrowers for disbursements and payments (including payroll) in
the ordinary course of business or as otherwise permitted hereunder.

      (g)   The FRF Concentration Account is, and shall remain, under the sole
dominion and control of the Collateral Agent. Each Borrower acknowledges and
agrees that (i) such Borrower has no right of withdrawal from the FRF
Concentration Account, (ii) the funds on deposit in the FRF Concentration
Account shall continue to be collateral security for all of the Obligations and
(iii) the funds on deposit in the FRF Concentration Account shall be applied as
provided in Section 2.22(a).

      (h)   So long as (i) no Default has occurred and is continuing, and (ii)
no Cash Control Event has occurred and is continuing, daily, the Borrowers may
direct, and shall have sole control over, the manner of disposition of its funds
in the DDA Accounts and Blocked Accounts. Effective upon notice to the Lead
Borrower from the Collateral Agent (x) after the occurrence and during the
continuance of a Default or (y) in the event of a Cash Control Event and during
the continuance thereof (which notice may be given by telephone if promptly
confirmed in writing), the FRF Concentration Account will, without any further
action on the part of any Borrower or the Collateral Agent convert into a closed
account under the exclusive dominion and control of the Collateral Agent in
which funds are held subject to the rights of the Collateral Agent hereunder. In
such event, all amounts in the FRF Concentration Account and all other Cash
Receipts from time to time may be applied to the Obligations in such order and
manner as provided in Section 2.22 hereof, and the Administrative Agent may, in
its discretion, but shall not be obligated to, transfer any amounts in the FRF
Concentration Account to the Fleet Disbursement Accounts.

      SECTION 2.22 Application of Payments.

      (a)   Subject to the provisions of Section 2.21, all amounts received in
the FRF Concentration Account from any source, including the Blocked Account
Banks, shall be applied, on the day immediately following receipt, in the
following order: first, to pay interest due and payable on Credit Extensions and
to pay fees and expense reimbursements and indemnification then due and payable
to the Administrative Agent, FSI, the Issuing Bank, the Collateral Agent, and
the Lenders; second to repay outstanding Swingline Loans; third, to repay other
outstanding Loans that are Base Rate Loans and all outstanding reimbursement
obligations under Letters of Credit; fourth, to repay outstanding Loans that are
Eurodollar Loans and all Breakage Costs due in respect of such repayment
pursuant to Section 2.19(b) or, at the Borrowers' option (if no Event of Default
has occurred and is then continuing), to fund a cash collateral deposit to the


                                       39
<PAGE>
Cash Collateral Account sufficient to pay, and with direction to pay, all such
outstanding Eurodollar Loans on the last day of the then-pending Interest Period
therefor; fifth if any Event of Default has occurred and is continuing, to fund
a cash collateral deposit in the Cash Collateral Account in an amount equal to
103% of all Letter of Credit Outstandings; sixth, to pay all other Obligations
that are then outstanding and payable. If all Obligations are paid, any excess
amounts shall be deposited in a separate cash collateral account, and as long as
no Event of Default then exists, shall be promptly released to the Borrowers and
shall be utilized by the Borrowers prior to any further Loans being made. Any
other amounts received by the Administrative Agent, the Issuing Bank, the
Collateral Agent, or any Lender as contemplated by Section 2.21 shall also be
applied in the order set forth above in this Section 2.22.

      (b)   All credits against the Obligations shall be conditioned upon final
payment to the Administrative Agent of the items giving rise to such credits and
shall be subject to one (1) Business Day's clearance and collection. If any item
deposited to the FRF Concentration Account and credited to the Loan Account is
dishonored or returned unpaid for any reason, whether or not such return is
rightful or timely, the Administrative Agent shall have the right to reverse
such credit and charge the amount of such item to the Loan Account and the
Borrowers shall indemnify the Administrative Agent, the Collateral Agent, the
Issuing Bank and the Lenders against all claims and losses resulting from such
dishonor or return.

      SECTION 2.23 Increased Costs.

            (a)   If any Change in Law shall:

                  (i)   impose, modify or deem applicable any reserve, special
      deposit or similar requirement against assets of, deposits with or for the
      account of, or credit extended by, any Lender or any holding company of
      any Lender (except any such reserve requirement reflected in the Adjusted
      LIBO Rate) or the Issuing Bank; or

                  (ii)  impose on any Lender or the Issuing Bank or the London
      interbank market any other condition affecting this Agreement or
      Eurodollar Loans made by such Lender or any Letter of Credit or
      participation therein;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrowers will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.

            (b)   If any Lender or the Issuing Bank determines that any Change
in Law regarding capital requirements has or would have the effect of reducing
the rate of return on such Lender's or the Issuing Bank's capital or on the
capital of such Lender's or the Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made by, or participations in Letters
of Credit held by, such Lender, or the Letters of Credit issued by the


                                       40
<PAGE>
Issuing Bank, to a level below that which such Lender or the Issuing Bank or
such Lender's or the Issuing Bank's holding company could have achieved but for
such Change in Law (taking into consideration such Lender's or the Issuing
Bank's policies and the policies of such Lender's or the Issuing Bank's holding
company with respect to capital adequacy), then from time to time the Borrowers
will pay to such Lender or the Issuing Bank, as the case may be, such additional
amount or amounts as will compensate such Lender or the Issuing Bank or such
Lender's or the Issuing Bank's holding company for any such reduction suffered.

            (c)   A certificate of a Lender or the Issuing Bank setting forth
the amount or amounts necessary to compensate such Lender or the Issuing Bank or
its holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section and setting forth in reasonable detail the manner in which such
amount or amounts were determined shall be delivered to the Borrowers and shall
be conclusive absent manifest error. The Borrowers shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within ten (10) Business Days after receipt thereof.

            (d)   Failure or delay on the part of any Lender or the Issuing Bank
to demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation, provided
that no Lender or Issuing Bank shall be entitled to such compensation in
connection with matters that arose more than 90 days prior to the date such
Lender or Issuing Bank notifies the Lead Borrower of such matters.

      SECTION 2.24 Change in Legality.

            (a)   Notwithstanding anything to the contrary contained elsewhere
in this Agreement, if (x) any Change in Law shall make it unlawful for a Lender
to make or maintain a Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to a Eurodollar Loan or (y) at any time any
Lender determines that the making or continuance of any of its Eurodollar Loans
has become impracticable as a result of a contingency occurring after the date
hereof which adversely affects the London interbank market or the position of
such Lender in the London interbank market, then, by written notice to the
Borrowers, such Lender may (i) declare that Eurodollar Loans will not thereafter
be made by such Lender hereunder, whereupon any request by the Borrowers for a
Eurodollar Borrowing shall, as to such Lender only, be deemed a request for an
Base Rate Loan unless such declaration shall be subsequently withdrawn; and (ii)
require that all outstanding Eurodollar Loans made by it be converted to Base
Rate Loans, in which event all such Eurodollar Loans shall be automatically
converted to Base Rate Loans as of the effective date of such notice as provided
in paragraph (b) below. In the event any Lender shall exercise its rights under
clause (i) or (ii) of this paragraph (a), all payments and prepayments of
principal which would otherwise have been applied to repay the Eurodollar Loans
that would have been made by such Lender or the converted Eurodollar Loans of
such Lender shall instead be applied to repay the Base Rate Loans made by such
Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans.

            (b)   For purposes of this Section 2.24, a notice to the Borrowers
by any Lender pursuant to paragraph (a) above shall be effective, if lawful, and
if any Eurodollar Loans shall then be outstanding, on the last day of the
then-current Interest Period; and otherwise such notice shall be effective on
the date of receipt by the Borrowers.

      SECTION 2.25 Payments; Sharing of Setoff.


                                       41
<PAGE>
            (a)   The Borrowers shall make each payment required to be made by
it hereunder or under any other Loan Document (whether of principal, interest,
fees or reimbursement of drawings under Letters of Credit, or of amounts payable
under Sections 2.19(b), 2.23 or 2.26, or otherwise) prior to 2:00 p.m., Boston
time, on the date when due, in immediately available funds, without setoff or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its offices at 40
Broad Street, Boston, Massachusetts, except payments to be made directly to the
Issuing Bank or Swingline Lender as expressly provided herein and except that
payments pursuant to Sections 2.19(b), 2.23, 2.26 and 9.03 shall be made
directly to the Persons entitled thereto and payments pursuant to other Loan
Documents shall be made to the Persons specified therein. The Administrative
Agent shall distribute any such payments received by it for the account of any
other Person to the appropriate recipient promptly following receipt thereof. If
any payment under any Loan Document shall be due on a day that is not a Business
Day, except with respect to Eurodollar Borrowings, the date for payment shall be
extended to the next succeeding Business Day, and, in the case of any payment
accruing interest, interest thereon shall be payable for the period of such
extension. All payments under each Loan Document shall be made in dollars.

            (b)   If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
unreimbursed drawings under Letters of Credit, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of interest
and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(ii) second, towards payment of principal and unreimbursed drawings under
Letters of Credit then due hereunder, ratably among the parties entitled thereto
in accordance with the amounts of principal and unreimbursed drawings under
Letters of Credit then due to such parties.

            (c)   If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans or participations in drawings under Letters of
Credit or Swingline Loans resulting in such Lender's receiving payment of a
greater proportion of the aggregate amount of its Loans and participations in
drawings under Letters of Credit and Swingline Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans and participations in drawings under Letters of
Credit and Swingline Loans of other Lenders to the extent necessary so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans and participations in drawings under Letters of Credit
and Swingline Loans, provided that (i) if any such participations are purchased
and all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made by the Borrowers pursuant to
and in accordance with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans or participations in drawings under Letters of
Credit to any assignee or participant, other than to the Borrowers or any
Affiliate thereof (as to which the provisions of this paragraph shall apply).
The Borrowers consent to the foregoing and agree, to the extent they may
effectively do so under applicable law, that any


                                       42
<PAGE>
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrowers rights of setoff and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrowers in the amount of such participation.

            (d)   Unless the Administrative Agent shall have received notice
from the Borrowers prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrowers will not make such payment, the Administrative
Agent may assume that the Borrowers have made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders or the Issuing Bank, as the case may be, the amount due. In such event,
if the Borrowers have not in fact made such payment, then each of the Lenders or
the Issuing Bank, as the case may be, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.

            (e)   If any Lender shall fail to make any payment required to be
made by it pursuant to this Agreement, then the Administrative Agent may, in its
discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Lender
to satisfy such Lender's obligations under such Sections until all such
unsatisfied obligations are fully paid.

      SECTION 2.26 Taxes.

            (a)   Any and all payments by or on account of any obligation of the
Borrowers hereunder or under any other Loan Document shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes,
provided that if the Borrowers shall be required to deduct any Indemnified Taxes
or Other Taxes from such payments, then (i) the sum payable shall be increased
as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrowers shall make such deductions and (iii) the Borrowers shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.

            (b)   In addition, the Borrowers shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.

            (c)   The Borrowers shall indemnify the Administrative Agent, each
Lender and the Issuing Bank, within 10 Business Days after written demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Administrative Agent, such Lender or the Issuing Bank, as the case may be,
on or with respect to any payment by or on account of any obligation of the
Borrowers hereunder or under any other Loan Document (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of


                                       43
<PAGE>
such payment or liability delivered to the Borrowers by a Lender or the Issuing
Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender
or the Issuing Bank setting forth in reasonable detail the manner in which such
amount was determined, shall be conclusive absent manifest error.

            (d)   As soon as practicable after any payment of Indemnified Taxes
or Other Taxes by the Borrowers to a Governmental Authority, the Borrowers shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.

            (e)   Any Foreign Lender that is entitled to an exemption from or
reduction in withholding tax shall deliver to the Borrowers and the
Administrative Agent two copies of either United States Internal Revenue Service
Form W8-BEN, or, in the case of a Foreign Lender's claiming exemption from or
reduction in U.S. Federal withholding tax under Section 871(h) or 881(c) of the
Code with respect to payments of "portfolio interest", a Form W-8ECI, or any
subsequent versions thereof or successors thereto (and, if such Foreign Lender
delivers a Form W-8ECI, a certificate representing that such Foreign Lender is
not a bank for purposes of Section 881(c) of the Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrowers and is not a controlled foreign corporation related to the Borrowers
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Foreign Lender claiming complete exemption from or reduced
rate of, U.S. Federal withholding tax on payments by the Borrowers under this
Agreement and the other Loan Documents. Such forms shall be delivered by each
Foreign Lender on or before the date it becomes a party to this Agreement (or,
in the case of a transferee that is a participation holder, on or before the
date such participation holder becomes a transferee hereunder) and on or before
the date, if any, such Foreign Lender changes its applicable lending office by
designating a different lending office (a "New Lending Office"). In addition,
each Foreign Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Foreign Lender.
Notwithstanding any other provision of this Section 2.26(e), a Foreign Lender
shall not be required to deliver any form pursuant to this 2.26(e) that such
Foreign Lender is not legally able to deliver.

            (f)   The Borrowers shall not be required to indemnify any Foreign
Lender or to pay any additional amounts to any Foreign Lender in respect of U.S.
Federal withholding tax pursuant to paragraph (a) or (c) above to the extent
that the obligation to pay such additional amounts would not have arisen but for
a failure by such Foreign Lender to comply with the provisions of paragraph (e)
above. Should a Lender become subject to Taxes because of its failure to deliver
a form required hereunder, the Borrowers shall, at such Lender's expense, take
such steps as such Lender shall reasonably request to assist such Lender to
recover such Taxes.

      SECTION 2.27 Security Interests in Collateral.

      To secure their Obligations under this Agreement and the other Loan
Documents, the Borrowers shall grant to the Collateral Agent, for its benefit
and the ratable benefit of the other Secured Parties, a first-priority security
interest in all of the Collateral pursuant hereto and to the Security Documents
(subject to Permitted Encumbrances having priority over the Lien of the
Collateral Agent by operation of law).


                                       44
<PAGE>
      SECTION 2.28 Mitigation Obligations; Replacement of Lenders.

            (a)   If any Lender requests compensation under Section 2.23, or if
the Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.26,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 2.23 or 2.26, as the case may be,
in the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrowers
hereby agree to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment; provided, however, that the
Borrowers shall not be liable for such costs and expenses of a Lender requesting
compensation if (i) such Lender becomes a party to this Agreement on a date
after the Closing Date and (ii) the relevant Change in Law occurs on a date
prior to the date such Lender becomes a party hereto.

            (b)   If any Lender requests compensation under Section 2.23, or if
the Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.26,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrowers may, at their sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.05), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment), provided that (i) the Borrowers
shall have received the prior written consent of the Administrative Agent, the
Issuing Bank and Swingline Lender, which consent shall not unreasonably be
withheld, (ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in unreimbursed drawings
under Letters of Credit and Swingline Loans, accrued interest thereon, accrued
fees and all other amounts payable to it hereunder, from the assignee (to the
extent of such outstanding principal and accrued interest and fees) or the
Borrowers (in the case of all other amounts) and (iii) in the case of any such
assignment resulting from a claim for compensation under Section 2.23 or
payments required to be made pursuant to Section 2.26, such assignment will
result in a reduction in such compensation or payments. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrowers to require such assignment and delegation cease to apply.

                                   ARTICLE III

                         Representations and Warranties

      Each Loan Party represents and warrants to the Agents and the Lenders
that:

      SECTION 3.1 Organization; Powers. Each Loan Party is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a


                                       45
<PAGE>
Material Adverse Effect, is qualified to do business in, and is in good standing
in, every jurisdiction where such qualification is required.

      SECTION 3.2 Authorization; Enforceability. The transactions contemplated
hereby and by the other Loan Documents to be entered into by each Loan Party are
within such Loan Party's corporate powers and have been duly authorized by all
necessary corporate and, if required, stockholder action. This Agreement has
been duly executed and delivered by each Loan Party that is a party hereto and
constitutes, and each other Loan Document to which any Loan Party is a party,
when executed and delivered by such Loan Party will constitute, a legal, valid
and binding obligation of such Loan Party (as the case may be), enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.

      SECTION 3.3 Governmental Approvals; No Conflicts. The transactions to be
entered into contemplated by the Loan Documents (a) do not require any consent
or approval of, registration or filing with, or any other action by, any
Governmental Authority, except for such as have been obtained or made and are in
full force and effect and except filings and recordings necessary to perfect
Liens created under the Loan Documents, (b) will not violate any applicable law
or regulation or the charter, by-laws or other organizational documents of any
Loan Party or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, agreement or other instrument binding
upon any Loan Party or its assets, or give rise to a right thereunder to require
any payment to be made by any Loan Party, and (d) will not result in the
creation or imposition of any Lien on any asset of any Loan Party, except Liens
created under the Loan Documents.

      SECTION 3.4 Financial Condition. The Lead Borrower has heretofore
furnished to the Lenders the financial statements for the Lead Borrower and its
Subsidiaries pursuant to the requirements of Section 5.01(a) and 5.01(c),
certified by a Financial Officer of the Borrowers. Such financial statements
present fairly, in all material respects, the financial position, results of
operations and cash flows of the Lead Borrower and its Subsidiaries as of such
dates and for such periods in accordance with GAAP, subject to year end audit
adjustments and the absence of footnotes. Since the date of such financial
statements, there have been no changes in the assets, liabilities, financial
condition, or business of the Borrowers other than changes in the ordinary
course of business, the effect of which could not reasonably be expected to have
a Material Adverse Effect.

      SECTION 3.5 Properties. (a) Except as disclosed in Schedules 3.05(c)(i)
and 3.05(c)(ii), each Loan Party has good title to, or valid leasehold interests
in, all its real and personal property material to its business, except for
defects which could not reasonably be expected to have a Material Adverse
Effect.

            (b)   Each Loan Party owns, or is licensed to use, all trademarks,
trade names, copyrights, patents and other intellectual property material to its
business, and the use thereof by the Loan Parties does not infringe upon the
rights of any other Person, except for any such


                                       46
<PAGE>
infringements that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

            (c)   Schedule 3.05(c)(i) sets forth the address (including county)
of all Real Estate that is owned by the Loan Parties as of the Closing Date,
together with a list of the holders of any mortgage or other Lien thereon.
Schedule 3.05(c)(ii) sets forth the address (including county) of all Real
Estate that is leased by the Loan Parties as of the Closing Date, together with
a list of the holders of any mortgage or other Lien thereon. The information on
such Schedule shall be updated and supplemented from time to time as required
pursuant to the provisions of Section 5.03 hereof.

      SECTION 3.6 Litigation and Environmental Matters. (a) There are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of any Borrower, threatened
against or affecting any Loan Party (i) which could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect (other
than those set forth on Schedule 3.06) or (ii) that involve any of the Loan
Documents. The information on such Schedule 3.06 shall be updated and
supplemented from time to time as required pursuant to the provisions of Section
5.02 hereof.

            (b)   Except for the matters set forth on Schedule 3.06 and except
with respect to any other matters that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect, no Loan Party
(i) has failed to comply with any Environmental Law or to obtain, maintain or
comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability, (iii)
has received notice of any claim with respect to any Environmental Liability or
(iv) knows of any basis for any Environmental Liability.

            (c)   Since the date of this Agreement, there has been no change in
the status of the matters set forth on Schedule 3.06 that, individually or in
the aggregate, has resulted in, or could reasonably be expected to result in, a
Material Adverse Effect.

      SECTION 3.7 Compliance with Laws and Agreements. Each Loan Party is in
compliance with all laws, regulations and orders of any Governmental Authority
applicable to it or its property and all indentures, material agreements and
other instruments binding upon it or its property, and except where the failure
to do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect. No Default has occurred and is continuing.

      SECTION 3.8 Investment and Holding Company Status. No Loan Party is (a) an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.

      SECTION 3.9 Taxes. Each Loan Party has timely filed or caused to be filed
all tax returns and reports required to have been filed and has paid or caused
to be paid all taxes required to have been paid by it, except (a) taxes that are
being contested in good faith by appropriate proceedings, for which such Loan
Party has set aside on its books adequate reserves,


                                       47
<PAGE>
and as to which no Lien has arisen, or (b) to the extent that the failure to do
so could not reasonably be expected to result in a Material Adverse Effect.

      SECTION 3.10 ERISA. No ERISA Event has occurred or is reasonably expected
to occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $500,000 the fair market value of the assets of such Plan, and the present
value of all accumulated benefit obligations of all underfunded Plans (based on
the assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $1,000,000 the fair market value of
the assets of all such underfunded Plans.

      SECTION 3.11 Disclosure. The Borrowers have disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which any Loan
Party is subject, and all other matters known to any of them, that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect. None of any of the reports, financial statements, certificates
or other information furnished by or on behalf of any Loan Party to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or any other Loan Document or delivered hereunder or thereunder (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

      SECTION 3.12 Subsidiaries. Schedule 3.12 sets forth the name of, and the
ownership interest of each Loan Party in each Subsidiary as of the Closing Date.
The Loan Parties are not party to any joint venture, general or limited partners
of a general or limited partnership, or members of a limited liability company
(except that PETsMART.com, Inc. is the sole member of Pet Catalog, LLC), or any
other similar business ventures or entities. The information on such Schedule
shall be updated and supplemented from time to time as required pursuant to the
provisions of Section 5.12 hereof.

      SECTION 3.13 Insurance. Schedule 3.13 sets forth a description of all
insurance maintained by or on behalf of the Borrowers and their Subsidiaries as
of the Closing Date. As of the Closing Date, all premiums in respect of such
insurance that are due and payable have been paid. The information on such
Schedule shall be updated and supplemented from time to time as required
pursuant to the provisions of Section 5.07 hereof.

      SECTION 3.14 Labor Matters. As of the Closing Date, there are no strikes,
lockouts or slowdowns against any Loan Party pending or, to the knowledge of the
Borrowers, threatened. The hours worked by and payments made to employees of the
Loan Parties have not been in violation of the Fair Labor Standards Act or any
other applicable federal, state, local or foreign law dealing with such matters
to the extent that any such violation could reasonably be expected


                                       48
<PAGE>
to have a Material Adverse Effect. All payments due from any Loan Party, or for
which any claim may be made against any Loan Party, on account of wages and
employee health and welfare insurance and other benefits, have been paid or
accrued as a liability on the books of such member. The consummation of the
transactions contemplated by the Loan Documents will not give rise to any right
of termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which any Loan Party is bound. The
representations set forth herein shall be updated and supplemented from time to
time as required pursuant to the provisions of Section 5.02 hereof.

      SECTION 3.15 Security Documents. The Security Documents create in favor of
the Collateral Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral, as applicable, and
the Security Documents constitute the creation of a fully perfected first
priority Lien on, and security interest, in, all right, title and interest of
the Loan Parties thereunder in such Collateral, in each case prior and superior
in right to any other Person (except for Permitted Encumbrances having priority
over the Lien of the Collateral Agent pursuant to operation of law).

      SECTION 3.16 Federal Reserve Regulations. (a) No Loan Party is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of buying or carrying Margin Stock.

            (b)   No part of the proceeds of any Loan or any Letter of Credit
will be used, whether directly or indirectly, and whether immediately,
incidentally or ultimately, (i) to buy or carry Margin Stock or to extend credit
to others for the purpose of buying or carrying Margin Stock or to refund
indebtedness originally incurred for such purpose or (ii) for any purpose that
entails a violation of, or that is inconsistent with, the provisions of the
Regulations of the Board, including Regulation U or X.

            (c)   Less than 25% of the assets of the Borrowers on a consolidated
basis consist of Margin Stock.

      SECTION 3.17 Solvency. Each of the Loan Parties is Solvent. No transfer of
property is being made by any Loan Party and no obligation is being incurred by
any Loan Party in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of any Loan Party.

                                   ARTICLE IV

                                   Conditions

      SECTION 4.1 Closing Date. The obligation of the Lenders to make the
initial Loan and of the Issuing Bank to issue the initial Letter of Credit is
subject to the following conditions precedent:

      (a)   The Agents (or their counsel) shall have received from each party
hereto other than the Lenders either (i) a counterpart of this Agreement and all
other Loan Documents signed on behalf of such party or (ii) written evidence
satisfactory to the Agents (which may include


                                       49
<PAGE>
telecopy transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of this Agreement and all other Loan Documents.

      (b)   The Agents shall have received a favorable written opinion
(addressed to each Agent and the Lenders and dated the Closing Date) of Cooley
Godward LLP, counsel for the Loan Parties substantially in the form of Exhibit C
(and of counsel for the Canadian Operating Subsidiary), and covering such other
matters relating to the Loan Parties, the Loan Documents or the transactions
contemplated thereby as the Required Lenders shall reasonably request. The
Borrowers hereby request such counsel to deliver such opinion.

      (c)   The Agents shall have received such documents and certificates as
the Agents or their counsel may reasonably request relating to the organization,
existence and good standing of each Loan Party, the authorization of the
transactions contemplated by the Loan Documents and any other legal matters
relating to the Borrowers, the Facility Guarantors, the Loan Documents or the
transactions contemplated thereby, all in form and substance satisfactory to the
Agents and their counsel.

      (d)   After giving effect to the first funding under the Loans and all
Letters of Credit to be issued at, or immediately subsequent to, such
establishment, Excess Availability shall be not less than $35,000,000. The
Agents shall have received a Borrowing Base Certificate dated the Closing Date,
relating to the calendar week ended on April 27, 2001, and executed by a
Financial Officer of the Lead Borrower.

      (e)   The Agents shall have received a certificate, reasonably
satisfactory in form and substance to the Agents, with respect to the solvency
of the Lead Borrower and its Subsidiaries on a consolidated basis as of the
Closing Date.

      (f)   The consummation of the transactions contemplated hereby shall not
(a) violate any applicable law, statute, rule or regulation or (b) conflict
with, or result in a default or event of default under, any material agreement
of any Loan Party.

      (g)   All necessary consents and approvals to the transactions
contemplated hereby shall have been obtained and shall be satisfactory to the
Agents.

      (h)   The Collateral Agent shall have received appraisals of the
Borrowers' and the Canadian Operating Subsidiary's Inventory by a third party
appraiser acceptable to the Collateral Agent.

      (i)   The Agents shall be reasonably satisfied that any financial
statements delivered to them fairly present the business and financial condition
of the Borrowers and their Subsidiaries, and that there has been no material
adverse change in the assets, business, financial condition, or income of the
Borrowers and their Subsidiaries since the date of the most recent financial
information delivered to the Agents.


                                       50
<PAGE>
      (j)   The Administrative Agent shall have received and be satisfied with
monthly detailed one-year financial projections and business assumptions for the
Borrowers and their Subsidiaries.

      (k)   There shall not be pending any litigation or other proceeding, the
result of which could reasonably be expected to have a Material Adverse Effect.

      (l)   There shall not have occurred any default of any material contract
or agreement of any Loan Party.

      (m)   The Collateral Agent shall have received results of searches or
other evidence reasonably satisfactory to the Collateral Agent (in each case
dated as of a date reasonably satisfactory to the Collateral Agent) indicating
the absence of liens on the assets of the Loan Parties, except for which
termination statements and releases reasonably satisfactory to the Collateral
Agent are being tendered concurrently with such extension of credit.

      (n)   The Collateral Agent shall have received all documents and
instruments, including Uniform Commercial Code financing statements, required by
law or reasonably requested by the Collateral Agent to be filed, registered or
recorded to create or perfect the first priority Liens intended to be created
under the Loan Documents (subject to Permitted Encumbrances having priority over
the Lien of the Collateral Agent pursuant to operation of law) and all such
documents and instruments shall have been so filed (or provision made therefor),
registered or recorded to the satisfaction of the Collateral Agent.

      (o)   All fees due at or immediately after the Closing Date and all costs
and expenses incurred by the Agents in connection with the establishment of the
credit facility contemplated hereby (including the fees and expenses of counsel
to the Agents) shall have been paid in full.

      (p)   The consummation of the transactions contemplated hereby shall not
(a) violate any applicable law or (b) conflict with, or result in a default or
event of default under, any material agreement of any Loan Party. No event shall
exist which is, or solely with the passage of time, the giving of notice or
both, would be a default under any material agreement of any Loan Party.

      (q)   No material changes in governmental regulations or policies
affecting the Loan Parties, the Agents, the Arranger or any Lender involved in
this transaction shall have occurred prior to the Closing Date.

      (r)   There shall not have occurred any disruption or material adverse
change in the financial or capital markets in general that would, in the
reasonable opinion of the Agents, have a material adverse effect on the market
for loan syndications or adversely affecting the syndication of the Loans.

      (s)   There shall be no events of default on the Closing Date (after
giving effect to the closing of the transactions hereunder) on any long term
debt held by any of the Loan Parties, including under the Bonds and the Existing
Synthetic Leases.


                                       51
<PAGE>
      (t)   The refinancing of the Existing Synthetic Leases with FRF shall have
been consummated in accordance with the terms of the March 7, 2001 commitment
letter and accompanying lease facility term sheet issued by FRF.

      (u)   There shall have been delivered to the Administrative Agent such
additional instruments and documents as the Agents or counsel to the Agents
reasonably may require or request.

The Administrative Agent shall notify the Borrowers and the Lenders of the
Closing Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at
or prior to 12:00 noon, Boston time, on April 30, 2001, (and, in the event such
conditions are not so satisfied or waived, this Agreement shall terminate at
such time).

      SECTION 4.2 Conditions Precedent to Each Loan and Each Letter of Credit.

      The obligation of the Lenders to make each Loan and of the Issuing Bank to
issue each Letter of Credit, is subject to the following conditions precedent:

      (a)   Notice. The Administrative Agent shall have received a notice with
respect to such Borrowing or issuance, as the case may be, as required by
Article II.

      (b)   Representations and Warranties. All representations and warranties
contained in this Agreement and the other Loan Documents or otherwise made in
writing in connection herewith or therewith shall be true and correct in all
material respects on and as of the date of each Borrowing or the issuance of
each Letter of Credit hereunder with the same effect as if made on and as of
such date, other than representations and warranties that relate solely to an
earlier date.

      (c)   No Default. On the date of each Borrowing hereunder and the issuance
of each Letter of Credit, the Loan Parties shall be in compliance with all of
the terms and provisions set forth herein and in the other Loan Documents to be
observed or performed and no Default or Event of Default shall have occurred and
be continuing.

      (d)   Borrowing Base Certificate. The Administrative Agent shall have
received the timely delivery of the most recently required Borrowing Base
Certificate, with each such Borrowing Base Certificate including schedules as
required by the Administrative Agent.

The request by the Borrowers for, and the acceptance by the Borrowers of, each
extension of credit hereunder shall be deemed to be a representation and
warranty by the Borrowers that the conditions specified in this Section 4.02
have been satisfied at that time and that after giving effect to such extension
of credit the Borrowers shall continue to be in compliance with the Borrowing
Base. The conditions set forth in this Section 4.02 are for the sole benefit of
the Administrative Agent and each Lender and may be waived by the Administrative
Agent in whole or in part without prejudice to the Administrative Agent or any
Lender.


                                       52
<PAGE>
                                    ARTICLE V

                              Affirmative Covenants

      Until the Commitments have expired or been terminated and the principal of
and interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit shall have expired or terminated and all L/C
Disbursements shall have been reimbursed, each Loan Party covenants and agrees
with the Agents and the Lenders that:

      SECTION 5.1 Financial Statements and Other Information. The Borrowers will
furnish to the Agents:

      (a) within 90 days after the end of each fiscal year of the Lead Borrower,
its consolidated and consolidating balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all audited (in the case only of such consolidated
statements) and reported on by independent public accountants of recognized
national standing (without a "going concern" or like qualification or exception
and without a qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the Lead
Borrower and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;

      (b) within 45 days after the end of each of the first three fiscal
quarters of the Lead Borrower, (i) its consolidated balance sheet and related
statements of operations, stockholders' equity and cash flows, and a summary of
all Capital Expenditures, as of the end of and for such fiscal quarter and the
elapsed portion of the fiscal year, all certified by one of its Financial
Officers as presenting in all material respects the financial condition and
results of operations of the Lead Borrower and its consolidated Subsidiaries on
a consolidated basis in accordance with GAAP consistently applied, subject to
normal year end audit adjustments and the absence of footnotes, and (ii) the
separate balance sheet and related statements of operations, stockholders'
equity and cash flows, and a summary of all Capital Expenditures, as of the end
of and for such fiscal quarter and the elapsed portion of the fiscal year, for
each of Pet Catalog, LLC, PETsMART.com, Inc., and the Lead Borrower, all
certified by one of its Financial Officers as presenting in all material
respects the financial condition and results of operations of such Persons in
accordance with GAAP consistently applied, subject to normal year end audit
adjustments and the absence of footnotes;

      (c) within 30 days after the end of each fiscal month of the Lead
Borrower, (i) the financial report customarily delivered by the Lead Borrower to
its board of directors entitled "Monthly Board Report", substantially in the
form annexed hereto as Schedule 5.01(c) and containing, at a minimum, a
consolidated balance sheet and related statements of operations, as of the end
of and for such fiscal month and the elapsed portion of the fiscal year, and
(ii) a statement of cash flows for (A) the Lead Borrower and its consolidated
Subsidiaries, and (B)


                                       53
<PAGE>
each of Pet Catalog, LLC, PETsMART.com, Inc., and the Lead Borrower for such
month and the elapsed portion of the fiscal year;

      (d) concurrently with any delivery of financial statements under clause
(a), (b), or (c) above, a certificate of a Financial Officer of the Lead
Borrower (i) certifying as to whether a Default has occurred and, if a Default
has occurred, specifying the details thereof and any action taken or proposed to
be taken with respect thereto, and (ii) setting forth reasonably detailed
calculations (A) with respect to the financial statements delivered pursuant to
Section 5.01(c), above, a calculation of the average Excess Availability for
purposes of determining the "Applicable Margin", and (B) demonstrating
compliance with Section 6.11, and (iii) stating whether any change in GAAP or in
the application thereof has occurred since the date of the Lead Borrower's
audited financial statements referred to in Section 3.04 and, if any such change
has occurred, specifying the effect of such change on the financial statements
accompanying such certificate;

      (e) within thirty (30) days prior to the commencement of each fiscal year
of the Lead Borrower, a detailed consolidated budget by month for such fiscal
year (including a projected consolidated balance sheet and related statements of
projected operations and cash flow as of the end of and for such fiscal year)
and, promptly when available, any significant revisions of such budget;

      (f) on Wednesday of each week, a certificate in the form of Exhibit D (a
"Borrowing Base Certificate") showing the Borrowing Base as of the close of
business on the last day of the immediately preceding week, each such
Certificate to be certified as complete and correct on behalf of the Borrowers
by a Financial Officer of the Lead Borrower;

      (g) promptly after the same become publicly available, copies of all
so-called 10K and 10Q reports and other material reports, proxy statements and
other materials filed by any Loan Party with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of the
functions of said Commission, or with any national securities exchange, as the
case may be;

      (h) promptly upon receipt thereof, copies of all reports submitted to any
Loan Party by independent certified public accountants in connection with each
annual, interim or special audit of the books of the Loan Parties or any of
their Subsidiaries made by such accountants, including any management letter
commenting on the Loan Parties' internal controls submitted by such accountants
to management in connection with their annual audit;

      (i) the financial and collateral reports described on Schedule 5.01(i)
hereto, at the times set forth in such Schedule;

      (j) notice of any intended sale or other disposition of assets of any Loan
Party not in the ordinary course of business or incurrence of any Indebtedness
permitted hereunder, in either case, to the extent the proceeds therefrom would
exceed $5,000,000, at least fifteen (15) days prior to the date of consummation
such sale or disposition or incurrence of such Indebtedness; and


                                       54
<PAGE>
      (k) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of any Loan
Party, or compliance with the terms of any Loan Document, as the Agents or any
Lender may reasonably request.

      SECTION 5.2 Notices of Material Events. The Borrowers will furnish to the
Administrative Agent, the Issuing Bank, the Collateral Agent, and each Lender
prompt written notice of the following:

      (a) the occurrence of any Default or Event of Default;

      (b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting any Loan
Party or any Affiliate thereof that could reasonably be expected to result in a
Material Adverse Effect;

      (c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
a Material Adverse Effect; and

      (d) any other development that results in, or could reasonably be expected
to result in, a Material Adverse Effect.

      (e) any change in any Borrower's chief executive officer, president, or
chief financial officer.

      (f) any failure by any Loan Party to pay rent at any of such Loan Party's
locations, which failure continues for more than ten (10) days following the day
on which such rent first came due.

      (g) the discharge by any Borrower of its present independent accountants
or any withdrawal or resignation by such independent accountants.

      (h) any material change in the business, operations, or financial affairs
of the Loan Parties taken as a whole.

Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Lead Borrower setting
forth the details of the event or development requiring such notice and, if
applicable, any action taken or proposed to be taken with respect thereto.

      SECTION 5.3 Information Regarding Collateral. (a) The Lead Borrower will
furnish to the Agents prompt written notice of any change (i) in any Loan
Party's corporate name or in any trade name used to identify it in the conduct
of its business or in the ownership of its properties, (ii) in the location of
any Loan Party's chief executive office, its principal place of business, any
office in which it maintains books or records relating to Collateral owned by it
or any office or facility at which Collateral owned by it is located (including
the establishment of


                                       55
<PAGE>
any such new office or facility), (iii) in any Loan Party's identity or
corporate structure or (iv) in any Loan Party's Federal Taxpayer Identification
Number. The Lead Borrower also agrees promptly to notify the Agents if any
material portion of the Collateral is damaged or destroyed.

            (b) Each year, at the time of delivery of annual financial
statements with respect to the preceding fiscal year pursuant to clause (a) of
Section 5.01, the Lead Borrower shall deliver to the Agents a certificate of a
Financial Officer of the Lead Borrower setting forth the information required
pursuant to Section 2 of the Perfection Certificate or confirming that there has
been no change in such information since the date of the Perfection Certificate
delivered on the Closing Date or the date of the most recent certificate
delivered pursuant to this Section.

      SECTION 5.4 Existence; Conduct of Business. Each Loan Party will, and will
cause each of the Subsidiaries to, do or cause to be done all things necessary
to comply with its respective charter, certificate of incorporation, articles of
organization, and/or other organizational documents, as applicable; and by-laws
and/or other instruments which deal with corporate governance, and to preserve,
renew and keep in full force and effect its legal existence and, except such as
could not reasonably be expected to have a Material Adverse Effect, the rights,
licenses, permits, privileges, franchises, patents, copyrights, trademarks and
trade names material to the conduct of its business, provided that the foregoing
shall not prohibit any merger, consolidation, liquidation or dissolution
permitted under Section 6.03.

      SECTION 5.5 Payment of Obligations. Each Loan Party will, and will cause
each of the Subsidiaries to, pay its Indebtedness and other obligations,
including tax liabilities, before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) such Loan Party or such Subsidiary
has set aside on its books adequate reserves with respect thereto in accordance
with GAAP, (c) such contest effectively suspends collection of the contested
obligation and enforcement of any Lien securing such obligation and (d) the
failure to make payment pending such contest could not reasonably be expected to
result in a Material Adverse Effect. Nothing contained herein shall be deemed to
limit the rights of the Administrative Agent under Section 2.02(b) hereof.

      SECTION 5.6 Maintenance of Properties. Each Loan Party will, and will
cause each of the Subsidiaries to, keep and maintain all property material to
the conduct of its business in good working order and condition, ordinary wear
and tear excepted and with the exception of storing closings and asset
dispositions permitted hereunder.

      SECTION 5.7 Insurance. (a) Each Loan Party shall (i) maintain insurance
with financially sound and reputable insurers reasonably acceptable to the
Administrative Agent (or, to the extent consistent with prudent business
practice, a program of self-insurance approved by the Administrative Agent) on
such of its property and in at least such amounts and against at least such
risks as is customary with companies in the same or similar businesses operating
in the same or similar locations, including public liability insurance against
claims for personal injury or death occurring upon, in or about or in connection
with the use of any properties owned, occupied or controlled by it (including
the insurance required pursuant to the Security


                                       56
<PAGE>
Documents); (ii) maintain such other insurance as may be required by law; and
(iii) furnish to the Administrative Agent, upon written request, full
information as to the insurance carried.

            (b) Fire and extended coverage policies maintained with respect to
any Collateral shall be endorsed or otherwise amended to include (i) a
non-contributing mortgage clause (regarding improvements to real property) and
lenders' loss payable clause (regarding personal property), in form and
substance satisfactory to the Collateral Agent, which endorsements or amendments
shall provide that the insurer shall pay all proceeds otherwise payable to the
Loan Parties under the policies directly to the Collateral Agent, (ii) a
provision to the effect that none of the Loan Parties, the Administrative Agent,
the Collateral Agent, or any other party shall be a coinsurer and (iii) such
other provisions as the Collateral Agent may reasonably require from time to
time to protect the interests of the Lenders. Commercial general liability
policies shall be endorsed to name the Collateral Agent as an additional
insured. Business interruption policies shall name the Collateral Agent as a
loss payee and shall be endorsed or amended to include (i) a provision that,
from and after the Closing Date, the insurer shall pay all proceeds otherwise
payable to the Loan Parties under the policies directly to the Administrative
Agent or the Collateral Agent, (ii) a provision to the effect that none of the
Loan Parties, the Administrative Agent, the Collateral Agent or any other party
shall be a co-insurer and (iii) such other provisions as the Collateral Agent
may reasonably require from time to time to protect the interests of the
Lenders. Each such policy referred to in this paragraph also shall provide that
it shall not be canceled, modified or not renewed (i) by reason of nonpayment of
premium except upon not less than 30 days' prior written notice thereof by the
insurer to the Collateral Agent (giving the Collateral Agent the right to cure
defaults in the payment of premiums) or (ii) for any other reason except upon
not less than 60 days' prior written notice thereof by the insurer to the
Collateral Agent. The Borrowers shall deliver to the Collateral Agent, prior to
the cancellation, modification or nonrenewal of any such policy of insurance, a
copy of a renewal or replacement policy (or other evidence of renewal of a
policy previously delivered to the Collateral Agent) together with evidence
satisfactory to the Collateral Agent of payment of the premium therefor.

      SECTION 5.8 Casualty and Condemnation. The Lead Borrower will furnish to
the Agents and the Lenders prompt written notice of any casualty or other
insured damage to any material portion of any Collateral or the commencement of
any action or proceeding for the taking of any material portion of the
Collateral or any part thereof or interest therein under power of eminent domain
or by condemnation or similar proceeding.

      SECTION 5.9 Books and Records; Inspection and Audit Rights; Appraisals.
(a) Each Loan Party will, and will cause each of the Subsidiaries to, keep
proper books of record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its business and
activities. Each Loan Party will, and will cause each of the Subsidiaries to,
permit any representatives designated by any Agent, upon reasonable prior
notice, to visit and inspect its properties, to examine and make extracts from
its books and records, and to discuss its affairs, finances and condition with
its officers and independent accountants, all at such reasonable times during
normal business hours and as often as reasonably requested.

            (b) Each Loan Party will, and will cause each of the Subsidiaries
to, from time to time upon the request of the Collateral Agent or the Required
Lenders through the


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Administrative Agent, permit any Agent or professionals (including investment
bankers, consultants, accountants, lawyers and appraisers) retained by the
Agents, upon reasonable prior notice and during normal business hours, to
conduct appraisals, commercial finance examinations and other evaluations,
including, without limitation, of (i) the Borrowers' practices in the
computation of the Borrowing Base and (ii) the assets included in the Borrowing
Base and related financial information such as, but not limited to, sales, gross
margins, payables, accruals and reserves, and pay the reasonable fees and
expenses of the Agents or such professionals with respect to such evaluations
and appraisals, provided that as long as a Default has not occurred and is
continuing, (i) the Borrowers shall not be required to pay for more than three
commercial finance examinations and three inventory appraisals undertaken during
the first fiscal year ended after the Closing Date, and (ii) in each fiscal year
commencing with the Borrowers' fiscal year beginning February, 2002, as long as
average Excess Availability for the last six months of the immediately preceding
fiscal year was equal to or greater than $60,000,000.00, the Borrowers shall not
be required to pay for more than two commercial finance examinations and two
inventory appraisals in the then current fiscal year, provided that if the
average Excess Availability for any thirty day period in any fiscal year is
equal to or less than $50,000,000.00, the Borrowers shall be required to pay for
all commercial finance examinations and appraisals undertaken during such fiscal
year.

      SECTION 5.10 Compliance with Laws. Each Loan Party will, and will cause
each of the Subsidiaries to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

      SECTION 5.11 Use of Proceeds and Letters of Credit. The proceeds of Loans
made hereunder and Letters of Credit issued hereunder will be used only (a) to
refinance existing senior bank facilities, (b) to finance the acquisition of
working capital assets of the Borrowers, including the purchase of inventory and
equipment, in each case in the ordinary course of business, (c) to finance
Capital Expenditures of the Borrowers, (d) to support the obligations under
Existing Synthetic Leases and other similar Synthetic Leases entered into
hereafter in connection with the acquisition of, or the construction of
improvements on, Real Estate, and (e) for general corporate purposes, including
stock and bond repurchases to the extent permitted herein. No part of the
proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board,
including Regulations U and X.

      SECTION 5.12 Additional Subsidiaries. If any additional Subsidiary is
formed or acquired after the Closing Date, the Lead Borrower will notify the
Agents and the Lenders thereof and (a) if such Subsidiary is not a Foreign
Subsidiary, the Borrowers will cause such Subsidiary to become a Loan Party
hereunder and each applicable Security Document in the manner provided therein
within ten Business Days after such Subsidiary is formed or acquired and
promptly take such actions to create and perfect Liens on such Subsidiary's
assets to secure the Obligations as any Agent or the Required Lenders shall
reasonably request and (b) if any shares of capital stock or Indebtedness of
such Subsidiary are owned by or on behalf of any Loan Party, the Borrowers will
cause such shares and promissory notes evidencing such Indebtedness to be
pledged within ten Business Days after such Subsidiary is formed or acquired
(except that,


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if such Subsidiary is a Foreign Subsidiary, shares of stock of such Subsidiary
to be pledged may be limited to 65% of the outstanding shares of voting stock of
such Subsidiary).

      SECTION 5.13 Further Assurances. (a) Each Loan Party will execute any and
all further documents, financing statements, agreements and instruments, and
take all such further actions (including the filing and recording of financing
statements and other documents), that may be required under any applicable law,
or which any Agent or the Required Lenders may reasonably request, to effectuate
the transactions contemplated by the Loan Documents or to grant, preserve,
protect or perfect the Liens created or intended to be created by the Security
Documents or the validity or priority of any such Lien, all at the expense of
the Loan Parties. The Loan Parties also agree to provide to the Agents, from
time to time upon request, evidence reasonably satisfactory to the Agents as to
the perfection and priority of the Liens created or intended to be created by
the Security Documents.

            (b) If any material assets are acquired by any Loan Party after the
Closing Date (other than assets constituting Collateral under the Security
Agreement that become subject to the Lien of the Security Agreement upon
acquisition thereof), the Lead Borrower will notify the Agents and the Lenders
thereof, and the Loan Parties will cause such assets to be subjected to a Lien
securing the Obligations and will take such actions as shall be necessary or
reasonably requested by any Agent or the Required Lenders to grant and perfect
such Liens, including actions described in paragraph (a) of this Section, all at
the expense of the Loan Parties. Without limiting the foregoing, if a Loan Party
acquires title to any real property with, in whole or in part, the proceeds of
any Credit Extension hereunder, the Loan Party shall execute a Mortgage and such
other documents as the Collateral Agent may reasonably request in order to
perfect the Lien of the Collateral Agent therein and in the assets and rights
associated therewith.

      (c) Upon the request of the Administrative Agent, the Borrowers shall
cause each of its customs brokers to deliver an agreement to the Administrative
Agent covering such matters and in such form as the Administrative Agent may
reasonably require.

                                   ARTICLE VI

                               Negative Covenants

      Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder have been paid in full and
all Letters of Credit have expired or terminated and all L/C Disbursements shall
have been reimbursed, each Loan Party covenants and agrees with the Agents and
the Lenders that:

      SECTION 6.1 Indebtedness and Other Obligations. (a) The Loan Parties will
not, and will not permit any Subsidiary to, create, incur, assume or permit to
exist any Indebtedness, except:

                  (i) Indebtedness created under the Loan Documents;

                  (ii) Indebtedness set forth in Schedule 6.01;


                                       59
<PAGE>
                  (iii) Indebtedness of any Loan Party to any other Loan Party;

                  (iv) Guarantees by any Loan Party of Indebtedness of any other
      Loan Party or Subsidiary provided that Guarantees by any Borrower of
      Indebtedness shall be subject to Section 6.04;

                  (v) Indebtedness of any Loan Party to finance the acquisition,
      construction or improvement of any fixed or capital assets or software,
      including Capital Lease Obligations and any Indebtedness assumed in
      connection with the acquisition of any such assets or secured by a Lien on
      any such assets prior to the acquisition thereof, and extensions, renewals
      and replacements of any such Indebtedness that do not increase the
      outstanding principal amount thereof or result in an earlier maturity date
      or decreased weighted average life thereof, provided that the aggregate
      principal amount of Indebtedness permitted by this clause (v) shall not
      exceed $25,000,000.00 at any time outstanding;

                  (vi) Indebtedness incurred to refinance any Real Estate owned
      by any Loan Party or which is the subject of an Existing Synthetic Lease,
      or which is or incurred in connection with sale-leaseback transactions
      permitted hereunder, provided that the terms of such Indebtedness are
      reasonably acceptable to the Administrative Agent;

                  (vii) Indebtedness on account of the Existing Synthetic
      Leases;

                  (viii) Indebtedness of Foreign Subsidiaries (other than the
      Canadian Operating Subsidiary) in an aggregate principal amount not
      exceeding $25,000,000.00 at any time outstanding;

                  (ix) other unsecured Indebtedness or subordinated Indebtedness
      in an aggregate principal amount not exceeding $150,000,000.00 at any time
      outstanding, provided that the terms of such Indebtedness are reasonably
      acceptable to the Administrative Agent;

                  (x) Indebtedness (not incurred under this Agreement) to
      finance the acquisition of the Phoenix distribution center presently
      leased by the Lead Borrower; and

                  (xi) any refinancing of the Indebtedness described in any of
      the foregoing clauses (ii), (iii), (iv), (v), (viii), (ix) or (x) as long
      as the principal balance thereof is not increased, the other limitations
      set forth in those clauses are fulfilled and no Default or Event of
      Default exists or would arise after giving effect thereto.

            (b) Except as contemplated under existing anti-takeover measures and
except for PETsMART.com, Inc., none of the Loan Parties will, nor will they
permit any Subsidiary to, issue any preferred stock (except for preferred stock
(i) all dividends in respect of which are to be paid (and all other payments in
respect of which are to be made) in additional shares of such preferred stock,
in lieu of cash, until all Obligations have been repaid in full and all


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<PAGE>
Commitments terminated, (ii) that is not subject to redemption other than
redemption at the option of the Loan Party issuing such preferred stock and
(iii) all payments in respect of which are expressly subordinated to the
Obligations) or be or become liable in respect of any obligation (contingent or
otherwise) to purchase, redeem, retire, acquire or make any other payment in
respect of (i) any shares of capital stock of any Loan Party or (ii) any option,
warrant or other right to acquire any such shares of capital stock.

      SECTION 6.2 Liens. The Loan Parties will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:

      (a) Liens created under the Loan Documents;

      (b) Permitted Encumbrances;

      (c) any Lien on any property or asset of any Loan Party set forth in
Schedule 6.02, provided that (i) such Lien shall not apply to any other property
or asset of any Loan Party and (ii) such Lien shall secure only those
obligations that it secures as of the Closing Date, and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof;

      (d) Liens on fixed or capital assets or software acquired, constructed or
improved by any Loan Party, provided that (i) such Liens secure Indebtedness
permitted by clause (v) of Section 6.01(a), (ii) such Liens and the Indebtedness
secured thereby are incurred prior to or within 90 days after such acquisition
or the completion of such construction or improvement, (iii) the Indebtedness
secured thereby does not exceed 100% of the cost of acquiring, constructing or
improving such fixed or capital assets or software, and (iv) such Liens shall
not apply to any other property or assets of the Loan Parties;

      (e) Liens to secure Indebtedness permitted by clause (vi) of Section
6.01(a) provided that such Liens shall not apply to any property or assets of
the Loan Parties other than the Real Estate so refinanced or which is the
subject of a sale-leaseback transaction;

      (f) Liens to secure Indebtedness permitted by clause (vii) of Section
6.01(a) and other leases held by FRF or any of its Affiliates;

      (g) Liens to secure Indebtedness permitted by clauses (viii) of Section
6.01, provided that such Liens shall attach only to the property and assets of
the Foreign Subsidiary obligated on such Indebtedness and not to the property of
any Loan Party;

      (h) Liens to secure Indebtedness permitted by clauses (x) of Section 6.01,
provided that such Liens shall attach only to the Phoenix distribution center
and to no other property of any Loan Party;


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<PAGE>
      (i) Liens existing on fixed or capital assets or software of a Person
immediately prior to its being consolidated with or merged into the Lead
Borrower or a Subsidiary or its becoming a Subsidiary, or a Lien existing on any
fixed or capital assets or software acquired by the Lead Borrower or any
Subsidiary at the time such property is so acquired (whether or not the
Indebtedness secured thereby shall have been assumed);

      (j) Precautionary filings in respect of true leases; and

      (k) Refinancings, renewals and replacements of Liens permitted under this
Section 6.2 provided that (A) the amount of Indebtedness secured thereby is not
increased, (B) such Liens do not extend to any property or assets of the Loan
Parties which immediately prior to such refinancing, renewal or replacement were
not subject to a Lien permitted hereunder, and (C) no Default or Event of
Default exists or would arise after giving effect thereto.

      SECTION 6.3 Fundamental Changes. (a) The Loan Parties will not merge into
or consolidate with any other Person, or permit any other Person to merge into
or consolidate with it, or liquidate or dissolve, except that (i) any or all of
the Discontinued Subsidiaries may be dissolved, and (ii) if at the time thereof
and immediately after giving effect thereto no Default shall have occurred and
be continuing, (A) any Subsidiary may merge into a Borrower in a transaction in
which a Borrower is the surviving corporation, and (B) any Subsidiary that is
not a Borrower may merge into any Subsidiary that is not a Borrower, provided
that any such merger involving a Person that is not a wholly owned Subsidiary
immediately prior to such merger shall not be permitted unless also permitted by
Section 6.04.

            (b) The Loan Parties will not engage to any material extent in any
business other than businesses of the type conducted by the Loan Parties on the
date of execution of this Agreement and businesses reasonably related thereto.

      SECTION 6.4 Investments, Loans, Advances, Guarantees and Acquisitions. The
Loan Parties will not purchase, hold or acquire (including pursuant to any
merger with any Person that was not a wholly owned Subsidiary prior to such
merger) any capital stock, evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing)
of, make or permit to exist any loans or advances (other than accounts
receivable created, and extensions of credit made, in the ordinary course of
business) to, guarantee any obligations of, or make or permit to exist any
investment or any other interest in, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) any assets of any other
Person constituting a business unit, except:

      (a) Permitted Investments;

      (b) investments existing on the Closing Date, and set forth on Schedule
6.04, to the extent such investments would not be permitted under any other
clause of this Section;

      (c) equity investments, loans or advances made by any Loan Party to any
other Loan Party, provided that any such loans and advances made by a Loan Party
shall be evidenced by a promissory note pledged pursuant to the Pledge
Agreement;


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<PAGE>
      (d) Guarantees constituting Indebtedness permitted by Section 6.01,
provided that such Guarantees by the Borrowers shall not exceed $5,000,000.00 in
the aggregate at any time outstanding;

      (e) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;

      (f) loans or advances to employees for the purpose of travel,
entertainment or relocation in the ordinary course of business in an amount not
to exceed $500,000.00 to any employee or $2,000,000.00 in the aggregate at any
time outstanding;

      (g) acquisitions of the capital stock or assets of any other Person,
provided that (i) the consideration paid for any such acquisition (including,
without limitation, cash, other real and personal property, promissory notes,
and capital stock) shall not exceed $10,000,000 unless the provisions of clause
(ii) hereof are satisfied, and (ii) if the consideration paid for any such
acquisition (including, without limitation, cash, other real and personal
property, promissory notes, and capital stock) exceeds $10,000,000, the Lead
Borrower shall demonstrate to the reasonable satisfaction of the Administrative
Agent that the Borrowers shall be in compliance with the provisions of Section
6.11 hereof, immediately after giving effect to such acquisition, and on a
twelve month pro forma basis thereafter, and (iii) in either circumstance
described in clauses (i) or (ii), no Default or Event of Default exists
immediately prior to, or after giving effect to, the acquisition, and (iv) the
consideration paid for all such acquisitions after the Closing Date (including,
without limitation, cash, other real and personal property, promissory notes,
and capital stock) shall not exceed $20,000,000 in the aggregate.

      (h) equity investments, loans or advances made by any Loan Party to any
Foreign Subsidiary in an aggregate amount not to exceed $5,000,000 outstanding
at any time provided that (i) the Borrowers shall be in compliance with the
provisions of Section 6.11 hereof, immediately prior to, and immediately after
giving effect to, such investment, loan or advance, and on a twelve month pro
forma basis thereafter, and (ii) no Default or Event of Default exists
immediately prior to, or after giving effect, to any such investment, loan or
advance;

      (i) working capital advances to veterinarians who are tenants of
properties owned by or leased by a Loan Party in an aggregate amount not to
exceed $3,000,000 outstanding at any time, provided that no Default or Event of
Default exists immediately prior to, or after giving effect, to any such
advance;

      (j) loans to, or guarantees of obligations of, officers of any Loan Party
to exercise incentive stock options of the Lead Borrower, to purchase capital
stock of the Lead Borrower or to pay alternative minimum tax obligations of such
officers, provided that no Default or Event of Default exists immediately prior
to, or after giving effect, to any such loan or guarantee, and provided further
that such loans or guarantees shall not exceed an amount equal to $3,000,000.00
in the aggregate at any time outstanding;


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<PAGE>
      (k) investments in capital stock of the Company or its Subsidiaries
permitted under Section 6.6(a); and

      (l) investments in PETsMART.com, Inc. not to exceed (i) $15,000,000 in the
aggregate for the fiscal year of the Lead Borrower ending in January, 2002, and
(ii) $7,500,000 in any other fiscal year of the Lead Borrower.

      SECTION 6.5 Asset Sales. The Loan Parties will not, and will not permit
any of the Subsidiaries to, sell, transfer, lease or otherwise dispose of any
asset, including any capital stock, nor will the Loan Parties permit any of the
Subsidiaries to issue any additional shares of its capital stock or other
ownership interest in such Subsidiary, except:

      (a) (i) sales of Inventory and licensing of intellectual property in the
ordinary course of business, or (ii) sales or disposals of used or surplus
equipment or software, or (iii) Permitted Investments, in each case in the
ordinary course of business;

      (b) sales, transfers and dispositions among the Loan Parties and their
Subsidiaries, provided that any such sales, transfers or dispositions involving
a Subsidiary that is not a Loan Party shall be made in compliance with Section
6.07;

      (c) sale-leaseback transactions involving any Real Estate;

      (d) Provided that no Overadvance shall result after giving effect thereto,
bulk sales or dispositions of the Borrowers' Inventory or Equipment not in the
ordinary course of business in an amount not to exceed, in the aggregate from
and after the Closing Date, fifteen percent (15%) of the Cost of the Borrowers'
Eligible Inventory or Equipment, as applicable, as of the Closing Date;

      (e) the sale of the equine business and/or assets sold in connection
therewith, the pet catalog business, or PETsMART.com, Inc. and its Subsidiaries,
provided that the board of directors of the Lead Borrower has approved the
transaction, and provided further that the cash consideration received is at
least equal to the amount advanced under the Borrowing Base attributable to the
assets so sold;

provided that all sales, transfers, leases and other dispositions permitted
hereby (other than sales, transfers and other disposition permitted under clause
(b)) shall be made at arm's length and for fair value and solely for cash
consideration (other than (x) sales, transfers and other dispositions permitted
under clauses (a)(ii) and (b), and (y) sales, transfers and other dispositions
of assets not included in the Borrowing Base as to which non-Borrowing Base
assets, the cash consideration must be at least 50% of the total consideration);
and further provided that the authority granted under clauses (b) through (e)
hereof may be terminated in whole or in part by the Agents upon the occurrence
and during the continuance of any Event of Default.

      SECTION 6.6 Restricted Payments; Certain Payments of Indebtedness. (a) The
Loan Parties will not, and will not permit any Subsidiary to, declare or make,
or agree to pay or make, directly or indirectly, any Restricted Payment, except
as long as no Default or Event of Default


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<PAGE>
exists or would arise therefrom (i) the Loan Parties may declare and pay
dividends with respect to their capital stock payable solely in additional
shares of their common stock, (ii) the Subsidiaries of the Lead Borrower may
declare and pay dividends ratably with respect to their capital stock, and (iii)
the Lead Borrower may repurchase its capital stock if the Payment Conditions are
then satisfied, provided that the purchase price paid for such capital stock,
together with any amounts paid during such fiscal year for redemption of the
Bonds, as provided below, shall not exceed $35,000,000.00 in the aggregate.

            (b) The Loan Parties will not, and will not permit any Subsidiary
to, make or agree to pay or make, directly or indirectly, any payment or other
distribution (whether in cash securities or other property) of or in respect of
principal of or interest on any Indebtedness, or any payment or other
distribution (whether in cash, securities or other property), including any
sinking fund or similar deposit, on account of the purchase, redemption,
retirement, acquisition, cancellation or termination of any Indebtedness,
except:

                  (i) payment of regularly scheduled interest and principal
      payments as and when due in respect of any permitted Indebtedness;

                  (ii) refinancings of Indebtedness described in clause (i),
      above, to the extent permitted by Section 6.01; and

                  (iii) redemptions of the Indebtedness due under the Bonds, if
      the Payment Conditions are then satisfied, provided that the amounts paid
      on account of such Bonds, together with any amounts paid during such
      fiscal year for the repurchase of the Lead Borrower's capital stock, shall
      not exceed $35,000,000.00 in the aggregate.

      SECTION 6.7 Transactions with Affiliates. The Loan Parties will not, and
will not permit any Subsidiary to, sell, lease or otherwise transfer any
property or assets to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) transactions in the ordinary course of business that are
at prices and on terms and conditions not less favorable to the Loan Parties or
such Subsidiary than could be obtained on an arm's-length basis from unrelated
third parties, (b) investments permitted under clauses (f) or (j) of Section
6.04, and (c) transactions between or among the Borrowers not involving any
other Affiliate.

      SECTION 6.8 Restrictive Agreements. The Loan Parties will not, and will
not permit any Subsidiary to, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement that prohibits, restricts or
imposes any condition upon (a) the ability of the Loan Parties or any Subsidiary
to create, incur or permit to exist any Lien upon any of its property or assets,
other than a negative pledge under any Existing Synthetic Lease, or (b) the
ability of any Subsidiary to pay dividends or other distributions with respect
to any shares of its capital stock or to make or repay loans or advances to the
Loan Parties or any other Subsidiary or to guarantee Indebtedness of the Loan
Parties or any other Subsidiary, provided that (i) the foregoing shall not apply
to restrictions and conditions imposed by law or by any Loan Document, (ii)
clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness and (iii) clause (b)


                                       65
<PAGE>
shall not apply to customary restrictions set forth in agreements of Foreign
Subsidiaries or the Lead Borrower related to their Indebtedness or leases on the
ability to pay dividends, and (iv) clause (a) of the foregoing shall not apply
to customary provisions in leases, licenses and other agreement restricting the
assignment, sublicensing, or subleasing thereof.

      SECTION 6.9 Amendment of Material Documents. The Loan Parties will not,
and will not permit any Subsidiary to, amend, modify or waive any of its rights
under (a) its certificate of incorporation, by-laws or other organizational
documents, (b) any leases or subleases relating to real estate, including,
without limitation, the Real Estate, (c) the Bonds, or (d) any other
instruments, documents or agreements, in each case to the extent that such
amendment, modification or waiver would be adverse to the interests of the
Lenders.

      SECTION 6.10 Additional Subsidiaries. The Loan Parties will not, and will
not permit any Subsidiary to, create any additional Subsidiary unless the
requirements of Section 5.12 are satisfied contemporaneously therewith.

      SECTION 6.11 Financial Covenants.

      (a) The Borrowers shall not permit Excess Availability to be less than
$25,000,000.00 at any time.

      (b) The Borrowers shall not incur Capital Expenditures in any fiscal year
in an amount in excess of the sum of (i) $60,000,000.00, plus (ii) for any
fiscal year commencing with the fiscal year beginning February, 2002, if average
Excess Availability for the last six months of the immediately preceding fiscal
year was equal to or greater than $60,000,000.00, an additional $15,000,000.00.
Notwithstanding the foregoing, for purposes of this Section 6.11(b), the term
"Capital Expenditures" shall exclude the acquisition of the Phoenix distribution
center presently leased by the Lead Borrower.

                                   ARTICLE VII

                                Events of Default

      SECTION 7.1 If any of the following events ("Events of Default") shall
occur:

      (a) the Loan Parties shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any L/C Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or otherwise;

      (b) the Loan Parties shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement or any other Loan Document, within five
(5) Business Days of the date when the same shall become due and payable;

      (c) any representation or warranty made or deemed made by or on behalf of
any Loan Party in or in connection with any Loan Document or any amendment or
modification thereof or


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<PAGE>
waiver thereunder, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document or any
amendment or modification thereof or waiver thereunder, shall prove to have been
incorrect in any material respect when made or deemed made;

      (d) the Loan Parties shall fail to observe or perform any covenant,
condition or agreement contained in Section 2.21, in Sections 5.1, 5.4, 5.7,
5.9(b), 5.11 or 5.12, or in Article VI;

      (e) any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document (other than those
specified in clause (a), (b), (c), or (d) of this Article), and such failure
shall continue unremedied for a period of 15 days after notice thereof from the
Administrative Agent to the Lead Borrower (which notice will be given at the
request of any Lender);

      (f) any Loan Party shall fail to make any payment (whether of principal or
interest and regardless of amount) in respect of any Material Indebtedness when
and as the same shall become due and payable (after giving effect to the
expiration of any grace or cure period set forth therein);

      (g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any such Material Indebtedness or any trustee or agent on
its or their behalf to cause any such Material Indebtedness to become due, or to
require the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity;

      (h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of any Loan Party or its debts, or of a substantial part of its
assets, under any federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect or (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for any Loan
Party or for a substantial part of its assets, and, in any such case, such
proceeding or petition shall continue undismissed for 45 days or an order or
decree approving or ordering any of the foregoing shall be entered;

      (i) any Loan Party shall (i) voluntarily commence any proceeding or file
any petition seeking liquidation, reorganization or other relief under any
federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in clause (h) of this Article, (iii) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator, conservator or similar official
for any Loan Party or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or (vi)
take any action for the purpose of effecting any of the foregoing;


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      (j) any Loan Party shall become unable, admit in writing its inability or
fail generally to pay its debts as they become due;

      (k) one or more judgments for the payment of money to the extent not
covered by insurance (coverage for which has not been disaffirmed or reserved by
the insurer) in an aggregate amount in excess of $5,000,000.00 shall be rendered
against any Loan Party or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any material assets of any Loan Party to enforce
any such judgment;

      (l) an ERISA Event shall have occurred that when taken together with all
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Loan Parties in an aggregate amount exceeding $5,000,000.00;

      (m)   (i) any challenge by or on behalf of any Loan Party to the validity
of any Loan Document or the applicability or enforceability of any Loan Document
strictly in accordance with the subject Loan Document's terms or which seeks to
void, avoid, limit, or otherwise adversely affect any security interest created
by or in any Loan Document or any payment made pursuant thereto.

            (ii) any challenge by or on behalf of any other Person to the
validity of any Loan Document or the applicability or enforceability of any Loan
Document strictly in accordance with the subject Loan Document's terms or which
seeks to void, avoid, limit, or otherwise adversely affect any security interest
created by or in any Loan Document or any payment made pursuant thereto, in each
case, as to which an order or judgment has been entered adverse to the Agents
and the Lenders.

            (iii) any Lien purported to be created under any Security Document
shall cease to be, or shall be asserted by any Loan Party not to be, a valid and
perfected Lien on any Collateral, with the priority required by the applicable
Security Document, except as a result of the sale or other disposition of the
applicable Collateral in a transaction permitted under the Loan Documents;

      (n) a Change in Control shall occur;

      (o) the occurrence of any uninsured loss to the Collateral in excess of
$5,000,000;

      (p) the indictment of, or institution of any legal process or proceeding
against, any Loan Party, under any federal, state, municipal, and other civil or
criminal statute, rule, regulation, order, or other requirement having the force
of law where the relief, penalties, or remedies sought or available include the
forfeiture of any property of any Loan Party with an aggregate value equal to or
greater than $5,000,000 and/or the imposition of any stay or other order, the
effect of which could reasonably be to restrain in any material way the conduct
by the Loan Parties, taken as a whole, of their business in the ordinary course;


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<PAGE>
      (q) except to the extent otherwise permitted in this Agreement, the
determination by any Borrower, whether by vote of such Borrower's board of
directors or otherwise to: suspend the operation of such Borrower's business in
the ordinary course, liquidate all or a material portion of such Borrower's
assets or store locations, or employ an agent or other third party to conduct
any so-called store closing, store liquidation or "Going-Out-Of-Business" sales;
or

      (r) any Default or Event of Default (as defined therein) shall occur under
the Existing Synthetic Leases;

then, and in every such event (other than an event with respect to any Loan
Party described in clause (h) or (i) of this Article), and at any time
thereafter during the continuance of such event, the Administrative Agent may,
and at the request of the Required Lenders shall, by notice to the Lead
Borrower, take either or both of the following actions, at the same or different
times: (i) terminate the Commitments, and thereupon the Commitments shall
terminate immediately, and (ii) declare the Loans then outstanding to be due and
payable in whole (or in part, in which case any principal not so declared to be
due and payable may thereafter be declared to be due and payable), and thereupon
the principal of the Loans so declared to be due and payable, together with
accrued interest thereon and all fees and other obligations of the Borrowers
accrued hereunder, shall become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Loan Parties; and in case of any event with respect to any
Loan Party described in clause (h) or (i) of this Article, the Commitments shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other obligations of the
Borrowers accrued hereunder, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Loan Parties.

      SECTION 7.2 When Continuing.

      For all purposes under this Agreement, each Default and Event of Default
that has occurred shall be deemed to be continuing at all times thereafter
unless it either (a) is cured or corrected to the reasonable written
satisfaction of the Lenders in accordance with Section 9.02, or (b) is waived in
writing by the Lenders in accordance with Section 9.02.

      SECTION 7.3 Remedies on Default

      In case any one or more of the Events of Default shall have occurred and
be continuing, and whether or not the maturity of the Loans shall have been
accelerated pursuant hereto, the Administrative Agent may proceed to protect and
enforce its rights and remedies under this Agreement, the Notes or any of the
other Loan Documents by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement and the other Loan Documents or any instrument
pursuant to which the Obligations are evidenced, and, if such amount shall have
become due, by declaration or otherwise, proceed to enforce the payment thereof
or any other legal or equitable right of the Agents or the Lenders. No remedy
herein is intended to be exclusive of any other remedy and each and every remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of law.


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<PAGE>
      SECTION 7.4 Application of Proceeds

      After the occurrence of an Event of Default and acceleration of the
Obligations, all proceeds realized from any Loan Party or on account of any
Collateral or, without limiting the foregoing, on account of any Prepayment
Event shall be applied in the manner set forth in Section 6.02 of the Security
Agreement. All amounts required to be applied to Loans hereunder (other than
Swingline Loans) shall be applied ratably in accordance with each Lender's
Commitment Percentage.

                                  ARTICLE VIII

                                   The Agents

      SECTION 8.1 Administration by Administrative Agent.

      The general administration of the Loan Documents shall be by the
Administrative Agent. The Lenders, the Collateral Agent and the Issuing Bank
each hereby irrevocably authorizes the Administrative Agent (i) to enter into
the Loan Documents to which it is a party and (ii) at its discretion, to take or
refrain from taking such actions as agent on its behalf and to exercise or
refrain from exercising such powers under the Loan Documents and the Notes as
are delegated by the terms hereof or thereof, as appropriate, together with all
powers reasonably incidental thereto. The Administrative Agent shall have no
duties or responsibilities except as set forth in this Agreement and the
remaining Loan Documents.

      SECTION 8.2 The Collateral Agent.

      Each Lender, the Administrative Agent and the Issuing Bank hereby
irrevocably (i) designate FRF as Collateral Agent under this Agreement and the
other Loan Documents, (ii) authorize the Collateral Agent to enter into the
Collateral Documents and the other Loan Documents to which it is a party and to
perform its duties and obligations thereunder and (iii) agree and consent to all
of the provisions of the Security Documents. All Collateral shall be held or
administered by the Collateral Agent (or its duly-appointed agent) for its
benefit and for the ratable benefit of the other Secured Parties. Any proceeds
received by the Collateral Agent from the foreclosure, sale, lease or other
disposition of any of the Collateral and any other proceeds received pursuant to
the terms of the Security Documents or the other Loan Documents shall be paid
over to the Administrative Agent for application as provided in Sections 2.18,
2.22, or 7.04, as applicable.

      SECTION 8.3 Sharing of Excess Payments.

      Each of the Lenders, the Agents and the Issuing Bank agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against the Loan Parties, including, but not limited to, a secured claim under
Section 506 of the Bankruptcy Code or other security or interest arising from,
or in lieu of, such secured claim and received by such Lender, any Agent or the
Issuing Bank under any applicable bankruptcy, insolvency or other similar law,
or otherwise, obtain payment in respect of the Obligations owed it (an "excess
payment") as a result of which such Lender, such Agent or the Issuing Bank has
received payment of any Loans or other


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Obligations outstanding to it in excess of the amount that it would have
received if all payments at any time applied to the Loans and other Obligations
had been applied in the order of priority set forth in Section 2.22, then such
Lender, Agent or the Issuing Bank shall promptly purchase at par (and shall be
deemed to have thereupon purchased) from the other Lenders, such Agent and the
Issuing Bank, as applicable, a participation in the Loans and Obligations
outstanding to such other Persons, in an amount determined by the Administrative
Agent in good faith as the amount necessary to ensure that the economic benefit
of such excess payment is reallocated in such manner as to cause such excess
payment and all other payments at any time applied to the Loans and other
Obligations to be effectively applied in the order of priority set forth in
Section 2.22 pro rata in proportion to its Commitment; provided, that if any
such excess payment is thereafter recovered or otherwise set aside such purchase
of participations shall be correspondingly rescinded (without interest). The
Loan Parties expressly consent to the foregoing arrangements and agrees that any
Lender, any Agent or the Issuing Bank holding (or deemed to be holding) a
participation in any Loan or other Obligation may exercise any and all rights of
banker's lien, setoff or counterclaim with respect to any and all moneys owing
by such Loan Party to such Lender, such Agent or the Issuing Bank as fully as if
such Lender, Agent or the Issuing Bank held a Note and was the original obligee
thereon, in the amount of such participation.

      SECTION 8.4 Agreement of Required Lenders.

      (i) Upon any occasion requiring or permitting an approval, consent,
waiver, election or other action on the part of only the Required Lenders,
action shall be taken by the Agents for and on behalf or for the benefit of all
Lenders upon the direction of the Required Lenders, and any such action shall be
binding on all Lenders, and (ii) upon any occasion requiring or permitting an
approval, consent, waiver, election or other action on the part of the Required
Supermajority Lenders, action shall be taken by the Agents for and on behalf or
for the benefit of all Lenders upon the direction of the Required Supermajority
Lenders and any such action shall be binding on all Lenders. No amendment,
modification, consent, or waiver shall be effective except in accordance with
the provisions of Section 9.02.

      (ii) Upon the occurrence of an Event of Default, the Agents shall (A)
within a reasonable time after obtaining actual knowledge thereof, notify the
Lenders thereof, and (B) (subject to the provisions of Section 9.02) take such
action with respect thereto as may be reasonably directed by the Required
Lenders; provided that unless and until the Agents shall have received such
directions, the Agents may (but shall not be obligated to) take such action as
it shall deem advisable in the best interests of the Lenders. In no event shall
the Agents be required to comply with any such directions to the extent that the
Agents believe that the Agents' compliance with such directions would be
unlawful or commercially unreasonable.

      SECTION 8.5 Liability of Agents.

      (i) Each of the Agents, when acting on behalf of the Lenders and the
Issuing Bank, may execute any of its respective duties under this Agreement by
or through any of its respective officers, agents and employees, and none of the
Agents nor their respective directors, officers, agents or employees shall be
liable to the Lenders or the Issuing Bank or any of them for any action taken or
omitted to be taken in good faith, or be responsible to the Lenders or the
Issuing Bank or to any of them for the consequences of any oversight or error of
judgment, or for any


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<PAGE>
loss, except to the extent of any liability imposed by law by reason of such
Agent's own gross negligence or willful misconduct. The Agents and their
respective directors, officers, agents and employees shall in no event be liable
to the Lenders or the Issuing Bank or to any of them for any action taken or
omitted to be taken by them pursuant to instructions received by them from the
Required Lenders, or Required Supermajority Lenders, as applicable, or in
reliance upon the advice of counsel selected by it. Without limiting the
foregoing, none of the Agents, nor any of their respective directors, officers,
employees, or agents shall be responsible to any Lender or the Issuing Bank for
the due execution, validity, genuineness, effectiveness, sufficiency, or
enforceability of, or for any statement, warranty or representation in, this
Agreement, any Loan Document or any related agreement, document or order, or
shall be required to ascertain or to make any inquiry concerning the performance
or observance by any Loan Party of any of the terms, conditions, covenants, or
agreements of this Agreement or any of the Loan Documents.

      (ii) None of the Agents nor any of their respective directors, officers,
employees, or agents shall have any responsibility to the Loan Parties on
account of the failure or delay in performance or breach by any Lender (other
than by the Agent in its capacity as a Lender) or the Issuing Bank of any of
their respective obligations under this Agreement or the Notes or any of the
Loan Documents or in connection herewith or therewith.

      (iii) The Administrative Agent and the Collateral Agent, in such
capacities hereunder, shall be entitled to rely on any communication,
instrument, or document reasonably believed by such person to be genuine or
correct and to have been signed or sent by a person or persons believed by such
person to be the proper Person or Persons, and, such Person shall be entitled to
rely on advice of legal counsel, independent public accountants, and other
professional advisers and experts selected by such Person.

      SECTION 8.6 Reimbursement and Indemnification.

      Each Lender agrees (i) to reimburse (x) each Agent for such Lender's
Commitment Percentage of any expenses and fees incurred by such Agent for the
benefit of the Lenders or the Issuing Bank under this Agreement, the Notes and
any of the Loan Documents, including, without limitation, counsel fees and
compensation of agents and employees paid for services rendered on behalf of the
Lenders or the Issuing Bank, and any other expense incurred in connection with
the operations or enforcement thereof not reimbursed by the Loan Parties and (y)
each Agent for such Lender's Commitment Percentage of any expenses of such Agent
incurred for the benefit of the Lenders or the Issuing Bank that the Loan
Parties have agreed to reimburse pursuant to Section 9.03 and has failed to so
reimburse and (ii) to indemnify and hold harmless the Agents and any of their
directors, officers, employees, or agents, on demand, in the amount of such
Lender's Commitment Percentage, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against it or any of them in any way relating to or
arising out of this Agreement, the Notes or any of the Loan Documents or any
action taken or omitted by it or any of them under this Agreement, the Notes or
any of the Loan Documents to the extent not reimbursed by the Loan Parties
(except such as shall result from their respective gross negligence or willful
misconduct).


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<PAGE>
      SECTION 8.7 Rights of Agents.

      It is understood and agreed that FRF shall have the same rights and powers
hereunder (including the right to give such instructions) as the other Lenders
and may exercise such rights and powers, as well as its rights and powers under
other agreements and instruments to which it is or may be party, and engage in
other transactions with the Borrowers (including, without limitation, under the
Existing Synthetic Lease), as though it were not the Administrative Agent or the
Collateral Agent, respectively, of the Lenders under this Agreement.

      SECTION 8.8 Independent Lenders and Issuing Bank.

      The Lenders and the Issuing Bank each acknowledge that they have decided
to enter into this Agreement and to make the Loans or issue the Letters of
Credit hereunder based on their own analysis of the transactions contemplated
hereby and of the creditworthiness of the Loan Parties and agrees that the
Agents shall bear no responsibility therefor.

      SECTION 8.9 Notice of Transfer.

      The Agents may deem and treat a Lender party to this Agreement as the
owner of such Lender's portion of the Loans for all purposes, unless and until,
and except to the extent, an Assignment and Acceptance shall have become
effective as set forth in Section 9.05(b).

      SECTION 8.10 Successor Agent

      Any Agent may resign at any time by giving thirty (30) Business Days'
written notice thereof to the Lenders, the Issuing Bank, the other Agents and
the Lead Borrower. Upon any such resignation of any Agent, the Required Lenders
shall have the right to appoint a successor Agent, which so long as there is no
Default, or Event of Default, shall be reasonably satisfactory to the Lead
Borrower (whose consent shall not be unreasonably withheld or delayed). If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such appointment, within 30 days after the retiring Agent's giving
of notice of resignation, the retiring Agent may, on behalf of the Lenders, the
other Agents and the Issuing Bank, appoint a successor Agent which shall be (i)
a commercial bank (or affiliate thereof) organized under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of a least $100,000,000, (ii) or a Lender capable of complying with all
of the duties of such Agent (and the Issuing Bank), hereunder (in the opinion of
the retiring Agent and as certified to the Lenders in writing by such successor
Agent) which, in the case of (i) and (ii) above, so long as there is no Default,
or Event of Default, shall be reasonably satisfactory to the Lead Borrower
(whose consent shall not be unreasonably withheld or delayed). Upon the
acceptance of any appointment as Agent by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent and the retiring Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring Agent's resignation hereunder as such Agent, the provisions of this
Article VIII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was such Agent under this Agreement.

      SECTION 8.11 Reports and Financial Statements.


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<PAGE>
      Promptly after receipt thereof from the Borrowers, the Administrative
Agent shall remit to each Lender and the Collateral Agent copies of all
financial statements required to be delivered by the Borrowers hereunder and all
commercial finance examinations and appraisals of the Collateral received by the
Administrative Agent.

      SECTION 8.12 Co-Agent, Syndication Agent and Arranger. Notwithstanding the
provisions of this Agreement or any of the other Loan Documents, the Co-Agent,
the Syndication Agent and, except as provided in the commitment letter for this
transaction, the Arranger shall have no powers, rights, duties, responsibilities
or liabilities with respect to this Agreement and the other Loan Documents.

                                   ARTICLE IX

                                  Miscellaneous

      SECTION 9.1 Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:

      (a) if to any Loan Party, to it at 19601 North 27th Avenue, Phoenix,
Arizona 85027, Attention of Thomas Liston, Chief Financial Officer (Telecopy No.
(623) 580-6568) with a copy to Cooley, Godward LLP (Telecopy No. (415) 951-3699)
Attention of Bradley C. Crawford, Esquire;

      (b) if to the Administrative Agent or the Collateral Agent, or the
Swingline Lender to Fleet Retail Finance Inc., 40 Broad Street, Boston,
Massachusetts 02109, Attention of Mark Forti (Telecopy No. (617) 434-4339), with
a copy to Riemer & Braunstein, LLP, Three Center Plaza, Boston, Massachusetts
02108, Attention: David S. Berman, Esquire (Telecopy No. (617) 880-3456);

      (c) if to any other Lender, to it at its address (or telecopy number) set
forth on the signature pages hereto or on any Assignment and Acceptance for such
Lender.

Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.

      SECTION 9.2 Waivers; Amendments. (a) No failure or delay by the Agents,
the Issuing Bank or any Lender in exercising any right or power hereunder or
under any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Agents, the Issuing Bank and the Lenders hereunder and under
the other Loan Documents are cumulative and are not exclusive of any rights or
remedies that they


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<PAGE>
would otherwise have. No waiver of any provision of any Loan Document or consent
to any departure by any Loan Party therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) of this Section, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. Without limiting the generality of the foregoing,
the making of a Loan or issuance of a Letter of Credit shall not be construed as
a waiver of any Default, regardless of whether the Agents, any Lender or the
Issuing Bank may have had notice or knowledge of such Default at the time.

            (b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the Borrowers and the Required Lenders or, in the case of any
other Loan Document, pursuant to an agreement or agreements in writing entered
into by the Agents and the Loan Parties that are parties thereto, in each case
with the consent of the Required Lenders, provided that no such agreement shall
(i) increase the Commitment of any Lender without the written consent of such
Lender, (ii) reduce the principal amount of any Loan or L/C Disbursement or
reduce the rate of interest thereon, or reduce any fees payable hereunder,
without the written consent of each Lender affected thereby, (iii) postpone the
scheduled date of payment of the principal amount of any Loan or L/C
Disbursement, or any interest thereon, or any fees payable hereunder, or reduce
the amount of, waive or excuse any such payment, or postpone the scheduled date
of expiration of the Commitments or the Maturity Date, without the written
consent of each Lender affected thereby, (iv) change Sections 2.18, 2.21, or
2.22 or Section 6.02 of the Security Agreement, without the written consent of
each Lender, (v) change any of the provisions of this Section 9.02 or the
definition of the term "Required Lenders" or "Required Supermajority Lenders" or
any other provision of any Loan Document specifying the number or percentage of
Lenders required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Lender, (vi) release any Loan Party from its obligations under any Loan
Document, or limit its liability in respect of such Loan Document, without the
written consent of each Lender, (vii) except for sales described in Section 6.05
or as permitted in the Security Documents, release any material portion of the
Collateral from the Liens of the Security Documents, without the written consent
of each Lender, (viii) change the definition of the term "Borrowing Base" or any
component definition thereof if as a result thereof the amounts available to be
borrowed by the Borrowers would be increased, without the written consent of
each Lender, provided that the foregoing shall not limit the discretion of the
Administrative Agent to change, establish or eliminate any Reserves, (ix)
increase the Permitted Overadvance, without the written consent of each Lender,
(x) subordinate the Obligations hereunder, or the Liens granted hereunder or
under the other Loan Documents, to any other Indebtedness or Lien, as the case
may be without the prior written consent of each Lender, and provided further
that no such agreement shall amend, modify or otherwise affect the rights or
duties of the Agents or the Issuing Bank without the prior written consent of
the Agents or the Issuing Bank, as the case may be.

      (c) Notwithstanding anything to the contrary contained herein, no
modification, amendment or waiver which increases the maximum amount of the
Swingline Loans to an amount in excess of $12,500,000.00 (or such greater amount
to which such limit has been previously increased in accordance with the
provisions of this Section 9.02(c)) shall be made without the written consent of
the Required Supermajority Lenders.


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<PAGE>
      (d) Notwithstanding anything to the contrary contained in this Section
9.02, in the event that the Borrowers request that this Agreement or any other
Loan Document be modified, amended or waived in a manner which would require the
consent of the Lenders pursuant to Sections 9.02(b) or 9.02(c) and such
amendment is approved by the Required Lenders, but not by the requisite
percentage of the Lenders, the Borrowers and the Required Lenders shall be
permitted to amend this Agreement without the consent of the Lender or Lenders
which did not agree to the modification or amendment requested by the Borrowers
(such Lender or Lenders, collectively the "Minority Lenders") to provide for (w)
the termination of the Commitment of each of the Minority Lenders, (x) the
addition to this Agreement of one or more other financial institutions, or an
increase in the Commitment of one or more of the Required Lenders, so that the
aggregate Commitments after giving effect to such amendment shall be in the same
amount as the aggregate Commitments immediately before giving effect to such
amendment, (y) if any Loans are outstanding at the time of such amendment, the
making of such additional Loans by such new or increasing Lender or Lenders, as
the case may be, as may be necessary to repay in full the outstanding Loans
(including principal, interest, and fees) of the Minority Lenders immediately
before giving effect to such amendment and (z) such other modifications to this
Agreement or the Loan Documents as may be appropriate and incidental to the
foregoing.

      (e) No notice to or demand on any Loan Party shall entitle any Loan Party
to any other or further notice or demand in the same, similar or other
circumstances. Each holder of a Note shall be bound by any amendment,
modification, waiver or consent authorized as provided herein, whether or not a
Note shall have been marked to indicate such amendment, modification, waiver or
consent and any consent by a Lender, or any holder of a Note, shall bind any
Person subsequently acquiring a Note, whether or not a Note is so marked. No
amendment to this Agreement shall be effective against the Borrowers unless
signed by the Borrowers.

      SECTION 9.3 Expenses; Indemnity; Damage Waiver. (a) The Loan Parties
shall, jointly and severally, pay (i) all reasonable out-of-pocket expenses
incurred by the Agents and their Affiliates, including the reasonable fees,
charges and disbursements of counsel for the Agents, outside consultants for the
Agents, appraisers, for commercial finance examinations and environmental site
assessments, in connection with the syndication of the credit facilities
provided for herein, the preparation and administration of the Loan Documents or
any amendments, modifications or waivers of the provisions thereof (whether or
not the transactions contemplated hereby or thereby shall be consummated), (ii)
all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection
with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder and (iii) all reasonable out-of-pocket
expenses incurred by the Agents, the Issuing Bank or any Lender, including the
reasonable fees, charges and disbursements of any counsel and any outside
consultants for the Agents, the Issuing Bank or any Lender, for appraisers,
commercial finance examinations, and environmental site assessments, in
connection with the enforcement or protection of its rights in connection with
the Loan Documents, including its rights under this Section, or in connection
with the Loans made or Letters of Credit issued hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit; provided that the
Lenders who are not the Agents or the Issuing Bank shall be entitled to
reimbursement for no more than one counsel representing all such Lenders (absent
a conflict of interest in which case the Lenders may engage and be reimbursed
for additional counsel).


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<PAGE>
            (b) The Loan Parties shall, jointly and severally, indemnify the
Agents, the Issuing Bank and each Lender, and each Related Party of any of the
foregoing Persons (each such Person being called an "Indemnitee") against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the reasonable and documented fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of any Loan Document or any other
agreement or instrument contemplated hereby, the performance by the parties to
the Loan Documents of their respective obligations thereunder or the
consummation of the transactions contemplated by the Loan Documents or any other
transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use
of the proceeds therefrom (including any refusal by the Issuing Bank to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter
of Credit), (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property currently or formerly owned or operated by any
Loan Party or any of the Subsidiaries, or any Environmental Liability related in
any way to any Loan Party or any of the Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto, provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses resulted from the gross
negligence or wilful misconduct of such Indemnitee or any Affiliate of such
Indemnitee (or of any officer, director, employee, advisor or agent of such
Indemnitee or any such Indemnitee's Affiliates).

            (c) To the extent that any Loan Party fails to pay any amount
required to be paid by it to the Agents or the Issuing Bank under paragraph (a)
or (b) of this Section, each Lender severally agrees to pay to the Agents or the
Issuing Bank, as the case may be, such Lender's pro rata share (determined as of
the time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount, provided that the unreimbursed expense or
indemnified loss, claim, damage, liability or related expense, as the case may
be, was incurred by or asserted against the Agents or the Issuing Bank. For
purposes hereof, a Lender's "pro rata share" shall be determined based upon its
share of the Total Commitments at the time.

            (d) To the extent permitted by applicable law, no Loan Party shall
assert, and each hereby waives, any claim against any Indemnitee, on any theory
of liability, for special, indirect, consequential or punitive damages (as
opposed to direct or actual damages) arising out of, in connection with, or as a
result of, this Agreement or any agreement or instrument contemplated hereby,
the transactions contemplated by the Loan Documents, any Loan or Letter of
Credit or the use of the proceeds thereof.

            (e) All amounts due under this Section shall be payable promptly
after written demand therefor.

      SECTION 9.4 Designation of Lead Borrower as Borrowers' Agent.

      (a) Each Borrower hereby irrevocably designates and appoints the Lead
Borrower as that Borrower's agent to obtain Loans and Letters of Credit
hereunder, the proceeds of which shall be available to each Borrower for those
uses as those set forth herein. As the disclosed principal for its agent, each
Borrower shall be obligated to the Agents and each Lender on


                                       77
<PAGE>
account of Loans so made and Letters of Credit so issued hereunder as if made
directly by the Lenders to that Borrower, notwithstanding the manner by which
such Loans and Letters of Credit are recorded on the books and records of the
Lead Borrower and of any Borrower.

      (b) Each Borrower recognizes that credit available to it hereunder is in
excess of and on better terms than it otherwise could obtain on and for its own
account and that one of the reasons therefor is its joining in the credit
facility contemplated herein with all other Borrowers. Consequently, each
Borrower hereby assumes and agrees to discharge all Obligations of all other
Borrowers as if the Borrower so assuming were each other Borrower.

      (c) The Lead Borrower shall act as a conduit for each Borrower (including
itself, as a "Borrower") on whose behalf the Lead Borrower has requested a Loan.

                  (i) The Lead Borrower shall cause the transfer of the proceeds
      of each Loan to the (those) Borrower(s) on whose behalf such Loan was
      obtained. Neither the Agents nor any Lender shall have any obligation to
      see to the application of such proceeds.

                  (ii) If, for any reason, and at any time during the term of
      this Agreement,

                        (A) any Borrower, including the Lead Borrower, as agent
            for the Borrowers, shall be unable to, or prohibited from carrying
            out the terms and conditions of this Agreement (as determined by the
            Administrative Agent in the Administrative Agent's sole and absolute
            discretion); or

                        (B) the Administrative Agent deems it inexpedient (in
            the Administrative Agent's sole and absolute discretion) to continue
            making Loans and cause Letters of Credit to be issued to or for the
            account of any particular Borrower, or to channel such Loans and
            Letters of Credit through the Lead Borrower,

      then the Lenders may make Loans directly to, and cause the issuance of
      Letters of Credit directly for the account of such of the Borrowers as the
      Administrative Agent determines to be expedient, which Loans may be made
      without regard to the procedures otherwise included herein.

      (d) In the event that the Administrative Agent determines to forgo the
procedures included herein pursuant to which Loans and Letters of Credit are to
be channeled through the Lead Borrower, then the Administrative Agent may
designate one or more of the Borrowers to fulfill the financial and other
reporting requirements otherwise imposed herein upon the Lead Borrower.

      (e) Each of the Borrowers shall remain liable to the Agents and the
Lenders for the payment and performance of all Obligations (which payment and
performance shall continue to


                                       78
<PAGE>
be secured by all Collateral granted by each of the Borrowers) notwithstanding
any determination by the Administrative Agent to cease making Loans or causing
Letters of Credit to be issued to or for the benefit of any Borrower.

      (f) The authority of the Lead Borrower to request Loans on behalf of, and
to bind, the Borrowers, shall continue unless and until the Administrative Agent
acts as provided in subparagraph (c), above, or the Administrative Agent
actually receives

                  (i) written notice of: (i) the termination of such authority,
      and (ii) the subsequent appointment of a successor Lead Borrower, which
      notice is signed by the respective Presidents of each Borrower (other than
      the President of the Lead Borrower being replaced) then eligible for
      borrowing under this Agreement; and

                  (ii) written notice from such successive Lead Borrower (i)
      accepting such appointment; (ii) acknowledging that such removal and
      appointment has been effected by the respective Presidents of such
      Borrowers eligible for borrowing under this Agreement; and (iii)
      acknowledging that from and after the date of such appointment, the newly
      appointed Lead Borrower shall be bound by the terms hereof, and that as
      used herein, the term "Lead Borrower" shall mean and include the newly
      appointed Lead Borrower.

      SECTION 9.5 Successors and Assigns. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), except that no Loan Party
may assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Lender (and any such attempted
assignment or transfer without such consent shall be null and void). Nothing in
this Agreement, expressed or implied, shall be construed to confer upon any
Person (other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit) and, to the extent expressly contemplated hereby, the Related
Parties of each of the Agents, the Issuing Bank and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.

            (b) Any Lender may assign to one or more assignees all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans at the time owing to it), provided that (i)
except in the case of an assignment to a Lender or an Affiliate of a Lender,
each of the Lead Borrower (but only after the completion of the initial
syndication and if no Default then exists), the Agents and the Issuing Bank must
give their prior written consent to such assignment (which consent shall not be
unreasonably withheld or delayed), (ii) except in the case of an assignment to a
Lender or an Affiliate of a Lender or an assignment of the entire remaining
amount of the assigning Lender's Commitment or Loans, the amount of the
Commitment or Loans of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Administrative Agent) shall not be less than (A)
$10,000,000 prior to the occurrence of an Event of Default and (B) $5,000,000
after the occurrence and during the continuance of an Event of Default, unless
in each case the Administrative Agent and (only if no


                                       79
<PAGE>
Default then exists) the Lead Borrower otherwise consent, (iii) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender's rights and obligations, (iv) the parties to each assignment
shall execute and deliver to the Administrative Agent an Assignment and
Acceptance, and, after completion of the syndication of the Loans, together with
a processing and recordation fee of $3,500. Subject to acceptance and recording
thereof pursuant to paragraph (d) of this Section, from and after the effective
date specified in each Assignment and Acceptance the assignee thereunder shall
be a party hereto and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Section 9.03). Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.

            (c) The Administrative Agent, acting for this purpose as an agent of
the Loan Parties, shall maintain at one of its offices in Boston, Massachusetts
a copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and L/C Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive and the Loan Parties, the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Lead Borrower, the Issuing Bank and any Lender,
at any reasonable time and from time to time upon reasonable prior notice.

            (d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the processing and recordation
fee referred to in paragraph (b) of this Section and any written consent to such
assignment required by paragraph (b) of this Section, the Administrative Agent
shall accept such Assignment and Acceptance and record the information contained
therein in the Register. No assignment shall be effective for purposes of this
Agreement unless it has been recorded in the Register as provided in this
paragraph.

            (e) Any Lender may, without the consent of the Loan Parties, the
Agents, and the Issuing Bank, sell participations to one or more banks or other
entities (a "Participant") in all or a portion of such Lender's rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it), provided that (i) such Lender's obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Loan Parties, the Agents, the Issuing Bank and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement. Any agreement or
instrument pursuant to which a Lender sells such a participation in the
Commitments, the Loans and the Letters of Credit Outstandings shall provide that
such Lender shall retain the sole right to enforce the Loan Documents and to
approve any amendment,


                                       80
<PAGE>
modification or waiver of any provision of the Loan Documents, provided that
such agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 9.02(b) that affects such Participant.
Subject to paragraph (f) of this Section, the Loan Parties agree that each
Participant shall be entitled to the benefits of Sections 2.23, 2.25 and 2.26 to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section. To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 9.09 as
though it were a Lender, provided such Participant agrees to be subject to
Section 2.25(c) as though it were a Lender.

            (f) A Participant shall not be entitled to receive any greater
payment under Section 2.23 or 2.26 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the Lead
Borrower's prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.26 unless
(i) the Lead Borrower is notified of the participation sold to such Participant
and such Participant agrees, for the benefit of the Borrowers, to comply with
Section 2.26(f) as though it were a Lender and (ii) such Participant is eligible
for exemption from the withholding tax referred to therein, following compliance
with Section 2.26(f).

            (g) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest, provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.

      SECTION 9.6 Survival. All covenants, agreements, representations and
warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Agents, the Issuing Bank or any
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Commitments have not expired or terminated. The provisions of
Sections 2.23, 2.26 and 9.03 and Article VIII shall survive and remain in full
force and effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Loans, the expiration or termination of the Letters
of Credit and the Commitments or the termination of this Agreement or any
provision hereof.

      SECTION 9.7 Counterparts; Integration; Effectiveness. This Agreement may
be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single


                                       81
<PAGE>
contract. This Agreement, the other Loan Documents and any separate letter
agreements with respect to fees payable to the Agents constitute the entire
contract among the parties relating to the subject matter hereof and supersede
any and all previous agreements and understandings, oral or written, relating to
the subject matter hereof. Except as provided in Section 4.01, this Agreement
shall become effective when it shall have been executed by the Agents and the
Lenders and when the Administrative Agent shall have received counterparts
hereof that, when taken together, bear the signatures of each of the other
parties hereto, and thereafter shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. Delivery of an
executed counterpart of a signature page of this Agreement by telecopy shall be
effective as delivery of a manually executed counterpart of this Agreement.

      SECTION 9.8 Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

      SECTION 9.9 Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is 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 obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of the Loan
Parties against any of and all the obligations of the Loan Parties now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff) that such Lender may have.

      SECTION 9.10 Governing Law; Jurisdiction; Consent to Service of Process.

      (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS.

      (b) Each Loan Party hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Superior Court
of the Commonwealth of Massachusetts sitting in Suffolk County and of the United
States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to any Loan Document, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such Superior Court of the
Commonwealth of Massachusetts or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right that
the Agents, the Issuing Bank or any Lender


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<PAGE>
may otherwise have to bring any action or proceeding relating to this Agreement
or any other Loan Document against any Loan Party or their properties in the
courts of any jurisdiction.

      (c) Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of any suit, action or proceeding arising out of or relating to this Agreement
or any other Loan Document in any court referred to in paragraph (b) of this
Section.

      (d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.

      SECTION 9.11 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

      SECTION 9.12 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

      SECTION 9.13 Interest Rate Limitation. Notwithstanding anything herein to
the contrary, if at any time the interest rate applicable to any Loan, together
with all fees, charges and other amounts that are treated as interest on such
Loan under applicable law (collectively the "Charges"), shall exceed the maximum
lawful rate (the "Maximum Rate") that may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.


                                       83
<PAGE>
      SECTION 9.14 Additional Waivers.

      (a) The Obligations are the joint and several obligations of each Loan
Party. To the fullest extent permitted by applicable law, the obligations of
each Loan Party hereunder shall not be affected by (i) the failure of any Agent
or any other Secured Party to assert any claim or demand or to enforce or
exercise any right or remedy against any other Loan Party under the provisions
of this Agreement, any other Loan Document or otherwise, (ii) any rescission,
waiver, amendment or modification of, or any release from any of the terms or
provisions of, this Agreement, any other Loan Document, or any other agreement,
including with respect to any other Borrower of the Obligations under this
Agreement, or (iii) the failure to perfect any security interest in, or the
release of, any of the security held by or on behalf of the Collateral Agent or
any other Secured Party.

      (b) The obligations of each Loan Party hereunder shall not be subject to
any reduction, limitation, impairment or termination for any reason (other than
the final payment in full in cash of the Obligations), including any claim of
waiver, release, surrender, alteration or compromise of any of the Obligations,
and shall not be subject to any defense or set-off, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Loan Party hereunder shall
not be discharged or impaired or otherwise affected by the failure of any Agent
or any other Secured Party to assert any claim or demand or to enforce any
remedy under this Agreement, any other Loan Document or any other agreement, by
any waiver or modification of any provision of any thereof, by any default,
failure or delay, wilful or otherwise, in the performance of the Obligations, or
by any other act or omission that may or might in any manner or to any extent
vary the risk of any Loan Party or that would otherwise operate as a discharge
of any Loan Party as a matter of law or equity (other than the final payment in
full in cash of all the Obligations).

      (c) To the fullest extent permitted by applicable law, each Loan Party
waives any defense based on or arising out of any defense of any other Loan
Party or the unenforceability of the Obligations or any part thereof from any
cause, or the cessation from any cause of the liability of any other Loan Party,
other than the final payment in full in cash of all the Obligations. The
Collateral Agent and the other Secured Parties may, at their election, foreclose
on any security held by one or more of them by one or more judicial or
nonjudicial sales, accept an assignment of any such security in lieu of
foreclosure, compromise or adjust any part of the Obligations, make any other
accommodation with any other Loan Party, or exercise any other right or remedy
available to them against any other Loan Party, without affecting or impairing
in any way the liability of any Loan Party hereunder except to the extent that
all the Obligations have been finally paid in full in cash. Pursuant to
applicable law, each Loan Party waives any defense arising out of any such
election even though such election operates, pursuant to applicable law, to
impair or to extinguish any right of reimbursement or subrogation or other right
or remedy of such Loan Party against any other Loan Party, as the case may be,
or any security.


                                       84
<PAGE>
      (d) Upon payment by any Loan Party of any Obligations, all rights of such
Loan Party against any other Loan Party arising as a result thereof by way of
right of subrogation, contribution, reimbursement, indemnity or otherwise shall
in all respects be subordinate and junior in right of payment to the prior final
payment in full in cash of all the Obligations, as more particularly set forth
in an Indemnity, Subrogation and Contribution Agreement to be entered into
amongst the Loan Parties. In addition, any indebtedness of any Loan Party now or
hereafter held by any other Loan Party is hereby subordinated in right of
payment to the prior payment in full of the Obligations. None of the Loan
Parties will demand, sue for, or otherwise attempt to collect any such
indebtedness. If any amount shall erroneously be paid to any Loan Party on
account of (a) such subrogation, contribution, reimbursement, indemnity or
similar right or (b) any such indebtedness of any Loan Party, such amount shall
be held in trust for the benefit of the Secured Parties and shall forthwith be
paid to the Collateral Agent to be credited against the payment of the
Obligations, whether matured or unmatured, in accordance with the terms of the
Loan Documents.

      SECTION 9.15 Designated Senior Indebtedness. The Obligations shall
constitute Designated Senior Indebtedness for all purposes under the Bonds.

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as a sealed instrument as
of the day and year first above written.

                                      PETSMART, INC.
                                      as Lead Borrower and Borrower

                                      By___________________________
                                      Name:
                                      Title:


                                      PETSMART DIRECT, INC.


                                      By___________________________
                                      Name:
                                      Title:


                                       85
<PAGE>
                                      PETSMART STORE SUPPORT GROUP, INC.

                                      By___________________________
                                      Name:
                                      Title:


                                      PETSMART.COM..INC.

                                      By___________________________
                                      Name:
                                      Title:

                                      PET CATALOG, LLC


                                      By___________________________
                                      Name:
                                      Title:


                                      FLEET RETAIL FINANCE INC.,
                                      as Administrative Agent, as
                                      Collateral Agent, as Swingline
                                      Lender, and as Lender

                                      By:__________________________

                                      Name:________________________

                                      Title:_______________________

                                      Address:
                                      40 Broad Street, 10th Floor
                                      Boston, Massachusetts 02109
                                      Attn: Mark Forti
                                      Telephone: (617) 434-4364
                                      Telecopy: (617) 434-4339


                                       86
<PAGE>
                                FLEET NATIONAL BANK,
                                      as Issuing Bank

                                      By:__________________________

                                      Name:________________________

                                      Title:_______________________

                                      Address:
                                      100 Federal Street
                                      Boston, Massachusetts 02110
                                      Mark Forti
                                      Telephone: (617) 434-4364
                                      Telecopy: (617) 434-4339


                                GMAC BUSINESS CREDIT, LLC,
                                      as Lender

                                      By:__________________________

                                      Name:________________________

                                      Title:_______________________

                                      Address:
                                      461 5th Avenue, 21st Floor
                                      New York, New York 10017
                                      Attn: George Grieco
                                      Telephone: (212) 489-4755
                                      Telecopy: (212) 489-3980


                                       87
<PAGE>
                                CONGRESS FINANCIAL CORPORATION (WESTERN),
                                      as Co-Agent and Lender

                                      By:__________________________

                                      Name:________________________

                                      Title:_______________________

                                      Address:
                                      251 South Lake Ave.
                                      Pasadena, California 91101
                                      Attn: Gary Whitaker
                                      Telephone: (626) 304-4959
                                      Telecopy: (626) 304-4949

                                FOOTHILL CAPITAL CORPORATION,
                                      as Lender

                                      By:__________________________

                                      Name:________________________

                                      Title:_______________________

                                      Address:
                                      2450 Colorado Avenue,
                                      Suite 3000 West
                                      Santa Monica, California 90404
                                      Attn: Juan Barrera
                                      Telephone: (310) 453-7312
                                      Telecopy: (310) 453-7446


                                       88
<PAGE>
                                HELLER FINANCIAL, INC.,
                                      as Lender

                                      By:__________________________

                                      Name:________________________

                                      Title:_______________________

                                      Address:
                                      622 Third Avenue
                                      New York, New York 10017
                                      Attn: Tara Wrobel
                                      Telephone: (212) 880-2014
                                      Telecopy: (212) 880-2050


                                LASALLE BUSINESS CREDIT, INC.
                                      as Lender

                                      By:__________________________

                                      Name:________________________

                                      Title:_______________________

                                      Address:
                                      135 S. Lasalle, Suite 425
                                      Chicago, Illinois 60603
                                      Attn: William Stapel
                                      Telephone: (312) 904-5311
                                      Telecopy: (312) 904-7425


                                       89
<PAGE>
                                TEXTRON FINANCIAL CORPORATION,
                                      as Lender

                                      By:__________________________

                                      Name:________________________

                                      Title:_______________________

                                      Address:
                                      450 North Point Parkway
                                      Alphareeta, Georgia 30022
                                      Attn: Christine MacKay
                                      Telephone:(770) 360-1649
                                      Telecopy: (770) 360-1612


                                debis FINANCIAL SERVICES, INC.,
                                      as Lender

                                      By:__________________________

                                      Name:________________________

                                      Title:_______________________

                                      Address:
                                      1055 Parsippany Blvd, Suite 405
                                      Parsippany, New Jersey 07054
                                      Attn: John C. Williams
                                      Telephone: (973) 541-7313
                                      Telecopy: (973) 541-7339


                                       90
<PAGE>
                                IBJ WHITEHALL BUSINESS CREDIT CORPORATION,
                                      as Lender

                                      By:__________________________

                                      Name:________________________

                                      Title:_______________________

                                      Address:
                                      One State Street
                                      New York, New York 10004
                                      Attn: Adam Moskowitz
                                      Telephone: (212) 858-2668
                                      Telecopy: (212) 858-2151

                                SIEMENS FINANCIAL SERVICES, INC.,
                                      as Lender

                                      By:__________________________

                                      Name:________________________

                                      Title:_______________________

                                      Address:
                                      200 Somerset Corporate Blvd.
                                      Bridgewater, New jersey 08807
                                      Attn: Michael Coiley
                                      Telephone: (908) 575-4070
                                      Telecopy: (908) 575-4060

                                ORIX FINANCIAL SERVICES, INC.,
                                      as Lender

                                      By:__________________________

                                      Name:________________________

                                      Title:_______________________

                                      Address:
                                      846 Algonquin Rd, #A-100
                                      Schaumburg, Illinois 60173
                                      Attn: Michael Stockrahm
                                      Telephone: (847) 303-6097
                                      Telecopy: (847) 397-7845


                                       91
<PAGE>
                                THE PROVIDENT BANK,
                                      as Lender

                                      By:__________________________

                                      Name:________________________

                                      Title:_______________________

                                      Address:
                                      One East Fourth Street, ML 249A
                                      Cincinnati, Ohio 45202
                                      Attn: Jose Garde
                                      Telephone: (513) 579-2655
                                      Telecopy: (513) 639-1588
633147.7


                                       92



<PAGE>
                      FIRST AMENDMENT TO CREDIT AGREEMENT

      This First Amendment to Credit Agreement (the "First Amendment"), is made
as of this 20th day of November, 2001 by and among

      PETSMART, INC., a Delaware corporation, having a principal place of
      business at 19601 North 27th Avenue, Phoenix, Arizona 85027, as Lead
      Borrower for the Borrowers, being

            said PETSMART, INC., and

            PETSMART DIRECT, INC., a New York corporation, having a principal
            place of business at 1989 Transit Way, Brockport, New York 14420;

            PETSMART STORE SUPPORT GROUP, INC., a Delaware corporation, having a
            principal place of business at 19601 North 27th Avenue, Phoenix,
            Arizona 85027;

            PETSMART.COM., INC., a Delaware corporation, having a principal
            place of business at 35 Hugus Alley, Suite 200, Pasadena, California
            91103; and

            PET CATALOG, LLC, a Delaware limited liability company, having a
            principal place of business at 19601 North 27th Avenue, Phoenix,
            Arizona 85027

      each of the Lenders party to the Credit Agreement (defined below)
      (together with each of their successors and assigns, referred to
      individually as a "Lender" and collectively as the "Lenders"), and

      FLEET NATIONAL BANK, as Issuing Bank, a national banking association
      having a place of business at 100 Federal Street, Boston, Massachusetts
      02110; and

      FLEET RETAIL FINANCE INC., as Administrative Agent and Collateral Agent
      for the Lenders, a Delaware corporation, having its principal place of
      business at 40 Broad Street, Boston, Massachusetts 02109; and

      CONGRESS FINANCIAL CORPORATION (WESTERN), as Co-Agent.

in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.

                               W I T N E S S E T H

      A. Reference is made to the Credit Agreement (the "Credit Agreement")
dated as of April 30, 2001 by and among the Lead Borrower, the Borrowers, the
Lenders, the Issuing Bank, the Agents, and the Co-Agent.

      B. The parties to the Credit Agreement desire to modify and amend certain
<PAGE>
provisions of the Credit Agreement, as provided herein.

      Accordingly, the parties hereto agree as follows:

      1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreement.

      2. Amendment to Article 6 of the Credit Agreement. The provisions of
Section 6.11(b) of the Credit Agreement are hereby amended as follows:

            (b) The Borrowers shall not incur Capital Expenditures in an amount
            in excess of (i) for the fiscal year ending January 31, 2002,
            $85,000,000.00, and (ii) for any fiscal year thereafter, in an
            amount in excess of the sum of (A) $60,000,000.00, plus (B) if
            average Excess Availability for the last six months of the
            immediately preceding fiscal year was equal to or greater than
            $60,000,000.00, an additional $15,000,000.00. Notwithstanding the
            foregoing, for purposes of this Section 6.11(b), the term "Capital
            Expenditures" shall exclude the acquisition of the Phoenix
            distribution center.

      3. Conditions Precedent to Effectiveness. This First Amendment shall not
be effective until each of the following conditions precedent have been
fulfilled to the satisfaction of the Administrative Agent:

      a.    This First Amendment shall have been duly executed and delivered by
            the respective parties hereto and, shall be in full force and effect
            and shall be in form and substance satisfactory to the
            Administrative Agent and the Lenders.

      b.    All action on the part of the Borrowers necessary for the valid
            execution, delivery and performance by the Borrowers of this First
            Amendment shall have been duly and effectively taken and evidence
            thereof satisfactory to the Administrative Agent shall have been
            provided to the Administrative Agent.

      c.    The Borrowers shall have provided such additional instruments and
            documents to the Administrative Agent as the Administrative Agent
            and Administrative Agent's counsel may have reasonably requested.

      4. Miscellaneous.

      a.    This First Amendment may be executed in several counterparts and by
            each party on a separate counterpart, each of which when so executed
            and delivered shall be an original, and all of which together shall
            constitute one instrument.
<PAGE>
      b.    This First Amendment expresses the entire understanding of the
            parties with respect to the transactions contemplated hereby. No
            prior negotiations or discussions shall limit, modify, or otherwise
            affect the provisions hereof.

      c.    Any determination that any provision of this First Amendment or any
            application hereof is invalid, illegal or unenforceable in any
            respect and in any instance shall not effect the validity, legality,
            or enforceability of such provision in any other instance, or the
            validity, legality or enforceability of any other provisions of this
            First Amendment.

      d.    The Borrowers shall pay on demand all costs and expenses of the
            Agents, including, without limitation, reasonable attorneys' fees in
            connection with the preparation, negotiation, execution and delivery
            of this First Amendment.

      e.    The Borrowers warrant and represent that the Borrowers have
            consulted with independent legal counsel of the Borrowers' selection
            in connection with this First Amendment and is not relying on any
            representations or warranties of the Agents, the Lenders or their
            counsel in entering into this First Amendment.

      IN WITNESS WHEREOF, the parties have duly executed this First Amendment as
of the day and year first above written.

                                        PETSMART, INC.
                                        as Lead Borrower and Borrower


                                        By_________________________
                                        Name:
                                        Title:

                                        PETSMART DIRECT, INC.


                                        By_________________________
                                        Name:
                                        Title:

                                        PETSMART STORE SUPPORT
                                        GROUP, INC.


                                        By_________________________
                                          Name:
                                          Title:
<PAGE>
                                        PETSMART.COM..INC.


                                        By_________________________
                                        Name:
                                        Title:

                                        PET CATALOG, LLC


                                        By_________________________
                                        Name:
                                        Title:

                                        FLEET RETAIL FINANCE INC.,
                                        as Administrative Agent, as
                                        Collateral Agent, as Swingline
                                        Lender, and as Lender


                                        By:________________________

                                        Name:______________________

                                        Title:_____________________

                                  FLEET NATIONAL BANK,
                                        as Issuing Bank


                                        By:________________________

                                        Name:______________________

                                        Title:_____________________
<PAGE>
                                  GMAC BUSINESS CREDIT, LLC,
                                        as Lender


                                        By:________________________

                                        Name:______________________

                                        Title:_____________________


                                  CONGRESS FINANCIAL
                                  CORPORATION (WESTERN),
                                        as Co-Agent and Lender


                                        By:________________________

                                        Name:______________________

                                        Title:_____________________

                                  FOOTHILL CAPITAL CORPORATION,
                                        as Lender


                                        By:________________________

                                        Name:______________________

                                        Title:_____________________

                                  HELLER FINANCIAL, INC.,
                                        as Lender


                                        By:________________________

                                        Name:______________________

                                        Title:_______________________
<PAGE>
                                  LASALLE BUSINESS CREDIT, INC.
                                        as Lender


                                        By:________________________

                                        Name:______________________

                                        Title:_____________________

                                  TEXTRON FINANCIAL CORPORATION,
                                        as Lender


                                        By:________________________

                                        Name:______________________

                                        Title:_____________________

                                  debis FINANCIAL SERVICES, INC.,
                                        as Lender


                                        By:________________________

                                        Name:______________________

                                        Title:_____________________

                                  IBJ WHITEHALL BUSINESS CREDIT
                                  CORPORATION,
                                        as Lender


                                        By:________________________

                                        Name:______________________

                                        Title:_____________________
<PAGE>
                                  SIEMENS FINANCIAL SERVICES, INC.,
                                        as Lender


                                        By:________________________

                                        Name:______________________

                                        Title:_____________________

                                  ORIX FINANCIAL SERVICES, INC.,
                                        as Lender


                                        By:________________________

                                        Name:______________________

                                        Title:_____________________

                                  THE PROVIDENT BANK,
                                        as Lender


                                        By:________________________

                                        Name:______________________

                                        Title:_____________________

678882.2
<PAGE>
                      SECOND AMENDMENT TO CREDIT AGREEMENT

      This Second Amendment to Credit Agreement (the "Second Amendment") is made
as of this__ day of__________, 2002 by and among

      PETSMART, INC., a Delaware corporation, having a principal place of
      business at 19601 North 27th Avenue, Phoenix, Arizona 85027, as Lead
      Borrower for the Borrowers, being

            said PETSMART, INC., and

            PETSMART DIRECT, INC., a New York corporation, having a principal
            place of business at 1989 Transit Way, Brockport, New York 14420;

            PETSMART STORE SUPPORT GROUP, INC., a Delaware corporation, having a
            principal place of business at 19601 North 27th Avenue, Phoenix,
            Arizona 85027;

            PETSMART.COM., INC., a Delaware corporation, having a principal
            place of business at 35 Hugus Alley, Suite 200, Pasadena, California
            91103; and

            PET CATALOG, LLC, a Delaware limited liability company, having a
            principal place of business at 19601 North 27th Avenue, Phoenix,
            Arizona 85027

      each of the Lenders party to the Credit Agreement (defined below)
      (together with each of their successors and assigns, referred to
      individually as a "Lender" and collectively as the "Lenders"), and

      FLEET NATIONAL BANK, as Issuing Bank, a national banking association
      having a place of business at 100 Federal Street, Boston, Massachusetts
      02110; and

      FLEET RETAIL FINANCE INC., as Administrative Agent and Collateral Agent
      for the Lenders, a Delaware corporation, having its principal place of
      business at 40 Broad Street, Boston, Massachusetts 02109; and

      CONGRESS FINANCIAL CORPORATION (WESTERN), as Co-Agent.

in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.

                               W I T N E S S E T H

      A. Reference is made to the Credit Agreement (as amended and in effect,
the "Credit Agreement") dated as of April 30, 2001 by and among the Lead
Borrower, the Borrowers, the Lenders, the Issuing Bank, the Agents, and the
Co-Agent.

      B. The parties to the Credit Agreement desire to modify and amend certain
<PAGE>
provisions of the Credit Agreement, as provided herein.

      Accordingly, the parties hereto agree as follows:

      1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreement.

      2. Amendment to Article I of the Credit Agreement. The provisions of
Section 1.01 of the Credit Agreement are hereby amended by deleting the
definition of "Payment Conditions" in its entirety and substituting the
following in its stead:

            "Payment Conditions" means, at the time of determination, that (a)
            no Default or Event of Default then exists or would arise as a
            result of the making of the subject payment, and (b) prior to, and
            immediately after giving effect to, the subject payment, and on a
            pro forma six months basis thereafter, Excess Availability shall be
            equal to or greater than (i) $50,000,000.00 in the fiscal year
            ending February 2, 2003, and (ii) $85,000,000.00 in each fiscal year
            thereafter.

      3. Amendment to Article 5 of the Credit Agreement. The provisions of
Section 5.02 of the Credit Agreement are hereby amended to add the following new
subparagraph:

            (i) notice of any redemption or conversion of the Bonds within
            fifteen days after the date thereof.

      4. Amendment to Article 6 of the Credit Agreement. The provisions of
Article VI of the Credit Agreement are hereby amended as follows:

            a.    The provisions of Section 6.06(a) of the Credit Agreement are
                  hereby amended by deleting the proviso at the end thereof and
                  substituting the following in its stead:

                        provided that the purchase price paid for such capital
                        stock in the fiscal year ending February 2, 2003 shall
                        not exceed $35,000,000 in the aggregate; and provided
                        further that the purchase price paid for such capital
                        stock, together with any amounts paid during such fiscal
                        year for redemption of the Bonds, as provided below,
                        shall not exceed $35,000,000 in the aggregate for any
                        fiscal year other than the fiscal year ending February
                        2, 2003.

            b.    The provisions of Section 6.06(b)(iii) of the Credit Agreement
                  are hereby amended by deleting the proviso at the end thereof
                  and substituting the following in its stead:

                        provided that the amounts paid on account of such Bonds,
                        together with any amounts paid during such fiscal year
                        for the repurchase of the Lead Borrower's capital stock,
                        shall not exceed $35,000,000 in
<PAGE>
                        the aggregate for any fiscal year other than the fiscal
                        year ending February 2, 2003 (as to which fiscal year no
                        dollar limitation shall apply with respect to the
                        Bonds).

            c.    The provisions of Section 6.11(b) of the Credit Agreement are
                  hereby deleted in their entirety and the following substituted
                  in their stead:

                        (b) The Borrowers shall not incur Capital Expenditures
                        in an amount in excess of (i) for the fiscal year ending
                        January 31, 2002, $135,000,000.00, and (ii) for any
                        fiscal year thereafter, $100,000,000.00. Notwithstanding
                        the foregoing, for purposes of this Section 6.11(b), the
                        term "Capital Expenditures" shall exclude the
                        acquisition of the Phoenix distribution center.

      5. Conditions Precedent to Effectiveness. This Second Amendment shall not
be effective until each of the following conditions precedent have been
fulfilled to the satisfaction of the Administrative Agent:

      a.    This Second Amendment shall have been duly executed and delivered by
            the Required Lenders and the other parties hereto and, shall be in
            full force and effect and shall be in form and substance
            satisfactory to the Administrative Agent and the Required Lenders.

      b.    All action on the part of the Borrowers necessary for the valid
            execution, delivery and performance by the Borrowers of this Second
            Amendment shall have been duly and effectively taken and evidence
            thereof satisfactory to the Administrative Agent shall have been
            provided to the Administrative Agent.

      c.    The Borrower shall have paid to the Administrative Agent, for the
            pro rata accounts of the Lenders, an amendment fee in the sum of
            $100,000. Such amendment fee shall be fully earned upon payment and
            shall not be subject to refund or rebate under any circumstances.

      6. Miscellaneous.

      a.    This Second Amendment may be executed in several counterparts and by
            each party on a separate counterpart, each of which when so executed
            and delivered shall be an original, and all of which together shall
            constitute one instrument.

      b.    This Second Amendment expresses the entire understanding of the
            parties with respect to the transactions contemplated hereby. No
            prior negotiations or discussions shall limit, modify, or otherwise
            affect the provisions hereof.

      c.    Any determination that any provision of this Second Amendment or any
            application hereof is invalid, illegal or unenforceable in any
            respect and in any instance shall not effect the validity, legality,
            or enforceability of such provision
<PAGE>
            in any other instance, or the validity, legality or enforceability
            of any other provisions of this Second Amendment.

      d.    The Borrowers shall pay on demand all costs and expenses of the
            Agents, including, without limitation, reasonable attorneys' fees in
            connection with the preparation, negotiation, execution and delivery
            of this Second Amendment.

      e.    The Borrowers warrant and represent that the Borrowers have
            consulted with independent legal counsel of the Borrowers' selection
            in connection with this Second Amendment and is not relying on any
            representations or warranties of the Agents, the Lenders or their
            counsel in entering into this Second Amendment.

      IN WITNESS WHEREOF, the parties have duly executed this Second Amendment
as of the day and year first above written.

                                          PETSMART, INC.
                                          as Lead Borrower and Borrower


                                          By_________________________
                                          Name:
                                          Title:

                                          PETSMART DIRECT, INC.


                                          By_________________________
                                          Name:
                                          Title:

                                          PETSMART STORE SUPPORT
                                          GROUP, INC.


                                          By_________________________
                                          Name:
                                          Title:
<PAGE>
                                          PETSMART.COM..INC.


                                          By_________________________
                                          Name:
                                          Title:

                                          PET CATALOG, LLC


                                          By_________________________
                                          Name:
                                          Title:

                                          FLEET RETAIL FINANCE INC.,
                                          as Administrative Agent, as
                                          Collateral Agent, as Swingline
                                          Lender, and as Lender


                                          By:________________________

                                          Name:______________________

                                          Title:_____________________

                                    FLEET NATIONAL BANK,
                                                as Issuing Bank


                                          By:________________________

                                          Name:______________________

                                          Title:_____________________
<PAGE>
                                    GMAC BUSINESS CREDIT, LLC,
                                          as Lender


                                          By:________________________

                                          Name:______________________

                                          Title:_____________________

                                    CONGRESS FINANCIAL
                                    CORPORATION (WESTERN),
                                          as Co-Agent and Lender


                                          By:________________________

                                          Name:______________________

                                          Title:_____________________

                                    FOOTHILL CAPITAL CORPORATION,
                                          as Lender


                                          By:________________________

                                          Name:______________________

                                          Title:_____________________

                                    HELLER FINANCIAL, INC.,
                                          as Lender


                                          By:________________________

                                          Name:______________________

                                          Title:_____________________
<PAGE>
                                    LASALLE BUSINESS CREDIT, INC.
                                    as Lender


                                          By:________________________

                                          Name:______________________

                                          Title:_____________________

                                    TEXTRON FINANCIAL CORPORATION,
                                          as Lender


                                          By:________________________

                                          Name:______________________

                                          Title:_____________________

                                    debis FINANCIAL SERVICES, INC.,
                                          as Lender


                                          By:________________________

                                          Name:______________________

                                          Title:_____________________

                                    IBJ WHITEHALL BUSINESS CREDIT
                                    CORPORATION,
                                          as Lender


                                          By:________________________

                                          Name:______________________

                                          Title:_____________________
<PAGE>
                                    SIEMENS FINANCIAL SERVICES, INC.,
                                          as Lender


                                          By:________________________

                                          Name:______________________

                                          Title:_____________________

                                    ORIX FINANCIAL SERVICES, INC.,
                                          as Lender


                                          By:________________________

                                          Name:______________________

                                          Title:_____________________

                                    THE PROVIDENT BANK,
                                          as Lender


                                          By:________________________

                                          Name:______________________

                                          Title:_____________________

693728.5