Document:

<PAGE>

                                                                    Exhibit 10.4
--------------------------------------------------------------------------------

                    HORIZON FEDERAL SAVINGS BANK 401(K) PLAN

--------------------------------------------------------------------------------

<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

                             ADOPTION AGREEMENT #001
                     STANDARDIZED 401(k) PROFIT SHARING PLAN

      The undersigned, Horizon Federal Savings Bank ("Employer"), by executing
this Adoption Agreement, elects to establish a retirement plan and trust
("Plan") under the Qualified Plan Consultants, LLC Defined Contribution
Prototype Plan Document (basic plan document # 01). The Employer, subject to
the Employer's Adoption Agreement elections, adopts fully the Prototype Plan and
Trust provisions. This Adoption Agreement, the basic plan document and any
attached appendices or addenda, constitute the Employer's entire plan and trust
document. All section references within this Adoption Agreement are Adoption
Agreement section references unless the Adoption Agreement or the context
indicate otherwise. All article references are basic plan document and Adoption
Agreement references as applicable. Numbers in parenthesis which follow headings
are references to basic plan document sections. The Employer makes the following
elections granted under the corresponding provisions of the basic plan document.

                                    ARTICLE I
                                   DEFINITIONS

1. PLAN (1.21). The name of the Plan as adopted by the Employer is Horizon
Federal Savings Bank 401(k) Plan.

2. TRUSTEE (1.33). The Trustee executing this Adoption Agreement is: (Choose one
of (a), (b) or (c))

|X|   (a) A discretionary Trustee. See Plan Section 10.03[A].

|_|   (b) A nondiscretionary Trustee. See Plan Section 10.03[B].

|_|   (c) A Trustee under a separate trust agreement. See Plan Section 10.03[G].

3. EMPLOYEE (1.11). The following Employees are not eligible to participate in
the Plan: (Choose (a) or one or both of (b) or (c) as applicable)

|X|   (a) No exclusions.

|_|   (b) Collective bargaining Employees.

|_|   (c) Nonresident aliens.

4. COMPENSATION (1.07). The Employer makes the following election(s) regarding
the definition of Compensation for purposes of the contribution allocation
formula under Article III: (Choose one of (a), (b) or (c))

|X|   (a) W-2 wages increased by Elective Contributions.

|_|   (b) Code ss.3401(a) federal income tax withholding wages increased by
      Elective Contributions.

|_|   (c) 415 compensation.

[Note: Each of the Compensation definitions in (a), (b) and (c) includes
Elective Contributions. See Plan Section 1.07(D). To exclude Elective
Contributions, the Employer must elect (g).]

            Compensation taken into account. For the Plan Year in which an
Employee first becomes a Participant, the Plan Administrator will determine the
allocation of Employer contributions (excluding deferral contributions) by
taking into account: (Choose one of (d) or (e))

|X|   (d) Plan Year. The Employee's Compensation for the entire Plan Year.

|_|   (e) Compensation while a Participant. The Employee's Compensation only for
      the portion of the Plan Year in which the Employee actually is a
      Participant.

Modifications to Compensation definition. The Employer elects to modify the
Compensation definition elected in (a), (b) or (c) as follows. (Choose one or
more of (f), (g) or (h) as applicable)

|_|   (f) Fringe benefits. The Plan excludes all reimbursements or other expense
      allowances, fringe benefits (cash and noncash), moving expenses, deferred
      compensation and welfare benefits.

|_|   (g) Elective Contributions. The Plan excludes a Participant's Elective
      Contributions. See Plan Section 1.07(D).

|_|   (h) Exclusion. The Plan excludes Compensation of each Highly Compensated
      Employee in excess of: _____________.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       1
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

5. PLAN YEAR/LIMITATION YEAR (1.24). Plan Year and Limitation Year mean the
12-consecutive month period (except for a short Plan Year) ending every: (Choose
(a) or (b). Choose (c) if applicable)

|X|   (a) December 31.

|_|   (b) Other: _____________.

|_|   (c) Short Plan Year: commencing on: _________ and ending on: __________.

6. EFFECTIVE DATE (1.10). The Employer's adoption of the Plan is a: (Choose one
of (a) or (b))

|X|   (a) New Plan. The Effective Date of the Plan is: April 1, 2004.

|_|   (b) Restated Plan. The restated Effective Date is:___________.

         This Plan is an amendment and restatement of an existing retirement
         plan(s) originally established effective as of:___________.

7. HOUR OF SERVICE/ELAPSED TIME METHOD (1.15). The crediting method for Hours of
Service is: (Choose one or more of (a) through (d) as applicable)

|X|   (a) Actual Method. See Plan Section 1.15(B).

|_|   (b) Equivalency Method. The Equivalency Method is:_______________. [Note:
      Insert "daily," "weekly," "semi-monthly payroll periods" or "monthly."]
      See Plan Section 1.15(C).

|_|   (c) Combination Method. In lieu of the Equivalency Method specified in
      (b), the Actual Method applies for purposes of:_____________.

|_|   (d) Elapsed Time Method. In lieu of crediting Hours of Service, the
      Elapsed Time Method applies for purposes of crediting Service for: (Choose
      one or more of (1), (2) or (3) as applicable)

      |_|   (1) Eligibility under Article II.

      |_|   (2) Vesting under Article V.

      |_|   (3) Contribution allocations under Article III.

8. PREDECESSOR EMPLOYER SERVICE (1.30). In addition to the predecessor service
the Plan must credit by reason of Section 1.30 of the Plan, the Plan credits as
Service under this Plan, service with the following predecessor employer(s):
N/A.

[Note: If the Plan does not credit any additional predecessor service under this
Section 1.30, insert "N/A" in the blank line. The Employer also may elect to
credit predecessor service with specified Participating Employers only. See the
Participation Agreement.] Service with the designated predecessor employer(s)
applies: (Choose one or more of (a) through (d) as applicable)

|_|   (a) Eligibility. For eligibility under Article II. See Plan Section 1.30
      for time of Plan entry.

|_|   (b) Vesting. For vesting under Article V.

|_|   (c) Contribution allocation. For contribution allocations under Article
      III.

|_|   (d) Exceptions. Except for the following Service:__________.

                                   ARTICLE II
                            ELIGIBILITY REQUIREMENTS

9.    ELIGIBILITY (2.01).

Eligibility conditions. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions: (Choose one or more of (a) through
(e) as applicable) [Note: If the Employer does not elect (c), the Employer's
elections under (a) and (b) apply to all types of contributions. The Employer as
to deferral contributions may not elect (b)(2) and may not elect more than 12
months in (b)(4) and (b)(5).]

|X|   (a) Age. Attainment of age 18 (not to exceed age 21).

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       2
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

|X|   (b) Service. Service requirement. (Choose one of (1) through (5))

      |X|   (1) One Year of Service.

      |_|   (2) Two Years of Service, without an intervening Break in Service.
            See Plan Section 2.03(A).

      |_|   (3) One Hour of Service (immediate completion of Service
            requirement). The Employee satisfies the Service requirement on
            his/her Employment Commencement Date.

      |_|   (4) __________ months (not exceeding 24).

      |_|   (5) An Employee must complete ______ Hours of Service within the
            ______ time period following an Employee's Employment Commencement
            Date. If an Employee does not complete the stated Hours of Service
            during the specified time period (if any), the Employee is subject
            to the One Year of Service requirement. [Note: The number of hours
            may not exceed 1,000 and the time period may not exceed 24 months.
            If the Plan does not require the Employee to satisfy the Hours of
            Service requirement within a specified time period, insert "N/A" in
            the second blank line.]

|_|   (c) Alternative 401(k)/401(m) eligibility conditions. In lieu of the
      elections in (a) and (b), the Employer elects the following eligibility
      conditions for the following types of contributions: (Choose (1) or (2) or
      both if the Employer wishes to impose less restrictive eligibility
      conditions for deferral/Employee contributions or for matching
      contributions)

            (1)   |_| Deferral/Employee contributions: (Choose one of a. through
                      d. Choose e. if applicable)

            a.    |_| One Year of Service

            b.    |_| One Hour of Service (immediate completion of Service
                      requirement)

            c.    |_| _____ months (not exceeding 12)

            d.    |_| An Employee must complete _____ Hours of Service within
                      the _________ time period following an Employee's
                      Employment Commencement Date. If an Employee does not
                      complete the stated Hours of Service during the specified
                      time period (if any), the Employee is subject to the One
                      Year of Service requirement. [Note: The number of hours
                      may not exceed 1,000 and the time period may not exceed 12
                      months. If the Plan does not require the Employee to
                      satisfy the Hours of Service requirement within a
                      specified time period, insert "N/A" in the second blank
                      line.]

            e.    |_| Age ______ (not to exceed age 21)

            (2)   |_| Matching contributions: (Choose one of f. through i.
                      Choose j. if applicable)

            f.    |_| One Year of Service

            g.    |_| One Hour of Service (immediate completion of Service
                      requirement)

            h.    |_| ______ months (not exceeding 24)

            i.    |_| An Employee must complete ________ Hours of Service within
                      the ________ time period following an Employee's
                      Employment Commencement Date. If an Employee does not
                      complete the stated Hours of Service during the specified
                      time period (if any), the Employee is subject to the One
                      Year of Service requirement. [Note: The number of hours
                      may not exceed 1,000 and the time period may not exceed 24
                      months. If the Plan does not require the Employee to
                      satisfy the Hours of Service requirement within a
                      specified time period, insert "N/A" in the second blank
                      line.]

            j.    |_| Age _____ (not to exceed age 21)

      |_|   (d) Service requirements: _________.

            [Note: Any Service requirement the Employer elects in (d) must be
            available under other Adoption Agreement elections or a combination
            thereof.]

      |X|   (e) Dual eligibility. The eligibility conditions of this Section
            2.01 apply solely to an Employee employed by the Employer after
            April 1, 2004. If the Employee was employed by the Employer by the
            specified date, the Employee will become a Participant on the latest
            of: (i) the Effective Date; (ii) the restated Effective Date; (iii)
            the Employee's Employment Commencement Date; or (iv) on the date the
            Employee attains age 18 (not exceeding age 21).

Plan Entry Date. "Plan Entry Date" means the Effective Date and: (Choose one of
(f) through (j). Choose (k) if applicable) [Note: If the Employer does not elect
(k), the elections under (f) through (j) apply to all types of contributions.
The Employer must elect at least one Entry Date per Plan Year.]

|_|   (f) Semi-annual Entry Dates. The first day of the Plan Year and the first
      day of the seventh month of the Plan Year.

|_|   (g) The first day of the Plan Year.

|_|   (h) Employment Commencement Date (immediate eligibility).

|X|   (i) The first day of each: Plan Year quarter (e.g., "Plan Year quarter").

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       3
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

|_|   (j) The following Plan Entry Dates: __________.

|_|   (k) Alternative 401(k)/401(m) Plan Entry Date(s). For the alternative
      401(k)/401(m) eligibility conditions under (c), Plan Entry Date means:
      (Choose (1) or (2) or both as applicable)

      (1) |_|                              (2) |_| Matching contributions
      Deferral/Employee contributions              (Choose one of e. through h.)
      (Choose one of a. through d.)

      a. |_| Semi-annual Entry Dates        e. |_| Semi-annual Entry Dates
      b. |_| The first day of the           f. |_| The first day of the
             Plan Year                             Plan Year
      c. |_| Employment Commencement Date   g. |_| Employment Commencement Date
             (immediate eligibility)               (immediate eligibility)
      d. |_| The first day of each:         h. |_| The first day of each:

Time of participation. An Employee will become a Participant, unless excluded
under Section 1.11, on the Plan Entry Date (if employed on that date): (Choose
one of (l), (m) or (n). Choose (o) if applicable): [Note: If the Employer does
not elect (o), the election under (l), (m) or (n) applies to all types of
contributions.]

|X|   (l) Immediately following or coincident with

|_|   (m) Immediately preceding or coincident with

|_|   (n) Nearest

|_|   (o) Alternative 401(k)/401(m) election(s): (Choose (1) or (2) or both as
      applicable)

      (1) |_| Deferral contributions       (2) |_| Matching contributions
                                                   (Choose one of b., c. or d.)

          a. |_| Immediately following         b. |_| Immediately following
                 or coincident with                  or coincident with
                                               c. |_| Immediately preceding
                                                      or coincident with
                                               d. |_| Nearest

the date the Employee completes the eligibility conditions described in this
Section 2.01. [Note: Unless otherwise excluded under Section 1.11, an Employee
must become a Participant by the earlier of: (1) the first day of the Plan Year
beginning after the date the Employee completes the age and service requirements
of Code ss.410(a); or (2) 6 months after the date the Employee completes those
requirements.]

10. YEAR OF SERVICE - ELIGIBILITY (2.02). (Choose (a) and (b) as applicable):
[Note: If the Employer does not elect a Year of Service condition or elects the
Elapsed Time Method, the Employer should not complete (a) or (b).]

|X|   (a) Year of Service. An Employee must complete 1,000 Hour(s) of Service
      during an eligibility computation period to receive credit for a Year of
      Service under Article II: [Note: The number may not exceed 1,000. If left
      blank, the requirement is 1,000.]

|X|   (b) Eligibility computation period. After the initial eligibility
      computation period described in Plan Section 2.02, the Plan measures the
      eligibility computation period as: (Choose one of (1) or (2))

      |X|   (1) The Plan Year beginning with the Plan Year which includes the
            first anniversary of the Employee's Employment Commencement Date.

      |_|   (2) The 12-consecutive month period beginning with each anniversary
            of an Employee's Employment Commencement Date.

11. PARTICIPATION - BREAK IN SERVICE (2.03). The one year hold-out rule
described in Plan Section 2.03(B): (Choose one of (a), (b) or (c))

|X|   (a) Not applicable. Does not apply to the Plan.

|_|   (b) Applicable. Applies to the Plan and to all Participants.

|_|   (c) Limited application. Applies to the Plan, but only to a Participant
      who has incurred a Separation from Service.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       4
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

                                   ARTICLE III
         EMPLOYER CONTRIBUTIONS, DEFERRAL CONTRIBUTIONS AND FORFEITURES

12.   AMOUNT AND TYPE (3.01). The amount and type(s) of the Employer's
      contribution to the Trust for a Plan Year or other specified period will
      equal: (Choose one or more of (a) through (f) as applicable)

|X|   (a) Deferral contributions (401(k) arrangement). The dollar or percentage
      amount by which each Participant has elected to reduce his/her
      Compensation, as provided in the Participant's salary reduction agreement
      and in accordance with Section 3.02.

|X|   (b) Matching contributions (other than safe harbor matching contributions
      under Section 3.01(d)). The matching contributions made in accordance with
      Section 3.03.

|X|   (c) Nonelective contributions (profit sharing). The following nonelective
      contribution: (Choose (1) or (2) or both as applicable) [Note: The
      Employer may designate as a qualified nonelective contribution, all or any
      portion of its nonelective contribution. See Plan Section 3.04(F).]

      |X|   (1) Discretionary. An amount the Employer in its sole discretion may
            determine.

      |_|   (2) Fixed. The following amount: _______

|_|   (d) 401(k) safe harbor contributions. The following 401(k) safe harbor
      contributions described in Plan Section 14.02 (D): (Choose one of (1), (2)
      or (3). Choose (4) if applicable)

      |_|   (1) Safe harbor nonelective contribution. The safe harbor
            nonelective contribution equals ____% of a Participant's
            Compensation [Note: the amount in the blank must be at least 3%.]

      |_|   (2) Basic safe harbor matching contribution. A matching contribution
            equal to 100% of each Participant's deferral contributions not
            exceeding 3% of the Participant's Compensation, plus 50% of each
            Participant's deferral contributions in excess of 3% but not in
            excess of 5% of the Participant's Compensation. For this purpose,
            "Compensation" means Compensation for:______. [Note: The Employer
            must complete the blank line with the applicable time period for
            computing the Employer's basic safe harbor match, such as "each
            payroll period," "each month," "each Plan Year quarter" or "the Plan
            Year".]

      |_|   (3) Enhanced safe harbor matching contribution. (Choose one of a. or
            b.).

      |_|   a. Uniform percentage. An amount equal to ______% of each
            Participant's deferral contributions not exceeding ______% of the
            Participant's Compensation. For this purpose, "Compensation" means
            Compensation for: ________. [See the Note in (d)(2).]

      |_|   b. Tiered formula. An amount equal to the specified matching
            percentage for the corresponding level of each Participant's
            deferral contribution percentage. For this purpose, "Compensation"
            means Compensation for: ________. [See the Note in (d)(2).]

              Deferral Contribution Percentage        Matching Percentage
              --------------------------------        -------------------

                       ________                            ________
                       ________                            ________
                       ________                            ________

[Note: The matching percentage may not increase as the deferral contribution
percentage increases and the enhanced matching formula otherwise must satisfy
the requirements of Code ss.ss.401(k)(12)(B)(ii) and (iii). If the Employer
wishes to avoid ACP testing on its enhanced safe harbor matching contribution,
the Employer also must limit deferral contributions taken into account (the
"Deferral Contribution Percentage") for the matching contribution to 6% of Plan
Year Compensation.]

      |_|   (4) Another plan. The Employer will satisfy the 401(k) safe harbor
            contribution in the following plan paired with this Plan: . [Note:
            If the Employer elects to make its safe harbor contribution to
            another plan, the plan must be a paired plan.]

|_|   (e) SIMPLE 401(k) Plan. The SIMPLE 401(k) Plan contributions described in
      Plan Section 14.02(E). The Employer operationally will elect for each Plan
      Year to make a SIMPLE matching contribution or a SIMPLE nonelective
      contribution as described in Plan Section 14.02(E)(3). The Employer must
      notify Participants of the Employer's SIMPLE contribution election and of
      the Participants' deferral election rights and limitations, within a
      reasonable period of time before the 60th day prior to the beginning of
      the Plan Year. [Note: If the Employer elects (e), it may not elect
      Sections 3.01(a) through (d) or (f).]

|_|   (f) Frozen Plan. This Plan is a frozen Plan effective: _______. For any
      period following the specified date, the Employer will not contribute to
      the Plan, a Participant may not contribute and an otherwise eligible
      Employee will not become a Participant in the Plan.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       5
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

13.   DEFERRAL CONTRIBUTIONS (3.02). The following limitations and terms apply
      to an Employee's deferral contributions. (If the Employer elects Section
      3.01(a), the Employer must elect (a). Choose (b) if applicable)13 p.66

      |X|   (a) Limitation on amount. An Employee's deferral contributions are
            subject to the following limitation(s) in addition to those imposed
            by the Code: (Choose (1), (2) or (3) as applicable)

            |_|   (1) Maximum deferral amount: _______.

            |_|   (2) Minimum deferral amount: _______.

            |X|   (3) No limitations.

      For the Plan Year in which an Employee first becomes a Participant, the
      Plan Administrator will apply any percentage limitation the Employer
      elects in (1) or (2) to the Employee's Compensation: (Choose one of (4) or
      (5) unless the Employer elects (3))

            |_|   (4) Only for the portion of the Plan Year in which the
                  Employee actually is a Participant.

            |_|   (5) For the entire Plan Year.

      |_|   (b) Negative deferral election. The Employer will withhold _____%
            from the Participant's Compensation unless the Participant elects a
            lesser percentage (including zero) under his/her salary reduction
            agreement. See Plan Section 14.02(C). The negative election will
            apply to: (Choose one of (1) or (2))

            |_|   (1) All participants who have not deferred at least the
                  automatic deferral amount as of: ________.

            |_|   (2) Each Employee whose Plan Entry Date is on or following the
                  negative election effective date.

      Modification/revocation of salary reduction agreement. A Participant
      prospectively may modify or revoke a salary reduction agreement, or may
      file a new salary reduction agreement following a prior revocation, at
      least once per Plan Year or during any election period specified by the
      basic plan document or required by the Internal Revenue Service. The Plan
      Administrator also may provide for more frequent elections in the Plan's
      salary reduction agreement form.

14.   MATCHING CONTRIBUTIONS (INCLUDING ADDITIONAL SAFE HARBOR MATCH UNDER PLAN
      SECTION 14.02(D)(3)) (3.03). The Employer matching contribution is (If the
      Employer elects Section 3.01(b), the Employer must elect one or more of
      (a), (b) or (c) as applicable):

      |_|   (a) Fixed formula. An amount equal to _______% of each Participant's
            deferral contributions.

      |X|   (b) Discretionary formula. An amount (or additional amount) equal to
            a matching percentage the Employer from time to time may deem
            advisable of the Participant's deferral contributions. The Employer,
            in its sole discretion, may designate as a qualified matching
            contribution, all or any portion of its discretionary matching
            contribution. The portion of the Employer's discretionary matching
            contribution for a Plan Year not designated as a qualified matching
            contribution is a regular matching contribution.

      |_|   (c) Multiple level formula. An amount equal to the following
            percentages for each level of the Participant's deferral
            contributions. [Note: The matching percentage only will apply to
            deferral contributions in excess of the previous level and not in
            excess of the stated deferral contribution percentage. The matching
            percentage may not increase as the deferral contributions percentage
            increases.]

              Deferral Contributions                Matching Percentage
              ----------------------                -------------------

                     ________                            ________
                     ________                            ________
                     ________                            ________

      Time period for matching contributions. The Employer will determine its
      matching contribution based on deferral contributions made during each:
      (Choose one of (d) through (g))

      |_|   (d) Plan Year.

      |_|   (e) Plan Year quarter.

      |_|   (f) Payroll period.

      |X|   (g) Alternative time period: monthly. [Note: Any alternative time
            period the Employer elects in (g) must be the same for all
            Participants and may not exceed the Plan Year.]

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       6
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

      Deferral contributions taken into account. In determining a Participant's
      deferral contributions taken into account for the above-specified time
      period under the matching contribution formula, the following limitations
      apply: (Choose one of (h), (i) or (j))

      |_|   (h) All deferral contributions. The Plan Administrator will take
            into account all deferral contributions.

      |_|   (i) Specific limitation. The Plan Administrator will disregard
            deferral contributions exceeding % of the Participant's
            Compensation. [Note: To avoid the ACP test in a safe harbor 401(k)
            plan, the Employer must limit deferrals and Employee contributions
            which are subject to match to 6% of Plan Year Compensation.]

      |X|   (j) Discretionary. The Plan Administrator will take into account the
            deferral contributions as a percentage of the Participant's
            Compensation as the Employer determines.

      Other matching contribution requirements. The matching contribution
      formula is subject to the following additional requirements: (Choose (k)
      or (l) or both as applicable)

      |_|   (k) Matching contribution limits. A Participant's matching
            contributions may not exceed: (Choose one of (1) or (2))

            |_|   (1) __________. [Note: The Employer may elect (1) to place an
                  overall dollar or percentage limit on matching contributions.]

            |_|   (2) 4% of a Participant's Compensation for the Plan Year under
                  the discretionary matching contribution formula. [Note: The
                  Employer must elect (2) if it elects a discretionary matching
                  formula with the safe harbor 401(k) contribution formula and
                  wishes to avoid the ACP test.]

      |_|   (l) Qualified matching contributions. The Plan Administrator will
            allocate as qualified matching contributions, the matching
            contributions specified in Adoption Agreement Section: ______. The
            Plan Administrator will allocate all other matching contributions as
            regular matching contributions. [Note: If the Employer elects two
            matching formulas, the Employer may use (l) to designate one of the
            formulas as a qualified matching contribution.]

      15. CONTRIBUTION ALLOCATION (3.04).
          -------------------------------

      Employer nonelective contributions (3.04(A)). The Plan Administrator will
      allocate the Employer's nonelective contribution under the following
      contribution allocation formula: (Choose one of (a), (b) or (c). Choose
      (d) if applicable)

      |X|   (a) Nonintegrated (pro rata) allocation formula.

      |_|   (b) Permitted disparity. The following permitted disparity formula
            and definitions apply to the Plan: (Choose one of (1) or (2). Also
            choose (3))

            |_|   (1) Two-tiered allocation formula.

            |_|   (2) Four-tiered allocation formula.

            |_|   (3) For purposes of Section 3.04(b), "Excess Compensation"
                  means Compensation in excess of: (Choose one of a. or b.)

                  |_|   a. ______% of the taxable wage base in effect on the
                        first day of the Plan Year, rounded to the next highest
                        $ _____(not exceeding the taxable wage base).

                  |_|   b. The following integration level: _____.
                        [Note: The integration level cannot exceed the taxable
                        wage base in effect for the Plan Year for which this
                        Adoption Agreement first is effective.]

      |_|   (c) Uniform points allocation formula. Under the uniform points
            allocation formula, a Participant receives: (Choose (1) or both (1)
            and (2) as applicable)

            |_|   (1) _______ point(s) for each Year of Service. Year of Service
                  means: ______.

            |_|   (2) One point for each $______ [not to exceed $200] increment
                  of Plan Year Compensation.

      |_|   (d) Incorporation of contribution formula. The Plan Administrator
            will allocate the Employer's nonelective contribution under
            Section(s) 3.01(c)(2), (d)(1) or (e) in accordance with the
            contribution formula adopted by the Employer under that Section.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       7
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

      Qualified nonelective contributions. (3.04(F)). The Plan Administrator
      will allocate the Employer's qualified nonelective contributions to:
      (Choose one of (e) or (f))

            |X|   (e) Nonhighly compensated Employees only.

            |_|   (f) All Participants.

      16. FORFEITURE ALLOCATION (3.05). The Plan Administrator will allocate a
      Participant forfeiture: (Choose one or more of (a), (b) or (c) as
      applicable) [Note: Even if the Employer elects immediate vesting, the
      Employer should complete Section 3.05. See Plan Section 9.11.]

      |_|   (a) Matching contribution forfeitures. To the extent attributable to
            matching contributions: (Choose one of (1) through (4))

            |_|   (1) As a discretionary matching contribution.

            |_|   (2) To reduce matching contributions.

            |_|   (3) As a discretionary nonelective contribution.

            |_|   (4) To reduce nonelective contributions.

      |_|   (b) Nonelective contribution forfeitures. To the extent attributable
            to Employer nonelective contributions: (Choose one of (1) through
            (4))

            |_|   (1) As a discretionary nonelective contribution.

            |_|   (2) To reduce nonelective contributions.

            |_|   (3) As a discretionary matching contribution.

            |_|   (4) To reduce matching contributions.

      |X|   (c) Reduce administrative expenses. First to reduce the Plan's
            ordinary and necessary administrative expenses for the Plan Year and
            then allocate any remaining forfeitures in the manner described in
            Sections 3.05(a) or (b) as applicable.

      Timing of forfeiture allocation. The Plan Administrator will allocate
      forfeitures under Section 3.05 in the Plan Year: (Choose one of (d) or
      (e))

      |X|   (d) In which the forfeiture occurs.

      |_|   (e) Immediately following the Plan Year in which the forfeiture
            occurs.

17. ALLOCATION CONDITIONS (3.06).
    ----------------------------

      Allocation conditions. The Plan does not apply any allocation conditions
      to deferral contributions, 401(k) safe harbor contributions (under Section
      3.01(d)) or to SIMPLE 401(k) contributions (under Section 3.01(e)). To
      receive an allocation of matching contributions, nonelective
      contributions, qualified nonelective contributions or Participant
      forfeitures, a Participant must satisfy the following allocation
      condition(s): (Choose one or more of (a) through (d) as applicable)

      |X|   (a) No allocation conditions.

      |_|   (b) Termination of Service/501 Hours of Service coverage rule. The
            Participant either must be employed by the Employer on the last day
            of the Plan Year or must complete at least 501 Hours of Service
            during the Plan Year. If the Plan uses the Elapsed Time Method of
            crediting Service, the Participant must complete at least 91
            consecutive calendar days of employment with the Employer during the
            Plan Year.

      |_|   (c) Death, Disability or Normal Retirement Age. Any condition
            specified in Section 3.06(b) applies if the Participant incurs a
            Separation from Service during the Plan Year on account of:
            ______(e.g., death, Disability or Normal Retirement Age).

      |_|   (d) Limited allocation conditions. The Plan does not impose an
            allocation condition for the following types of contributions:
            _______.

            [Note: Any election to limit the Plan's allocation contributions to
            certain contributions must be the same for all Participants, be
            definitely determinable and not discriminate in favor of Highly
            Compensated Employees.]

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       8
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

                                   ARTICLE IV
                            PARTICIPANT CONTRIBUTIONS

      18. EMPLOYEE (AFTER TAX) CONTRIBUTIONS (4.02). The following elections
      apply to Employee contributions: (Choose one of (a) or (b). Choose (c) if
      applicable)

      |X|   (a) Not permitted. The Plan does not permit Employee contributions.

      |_|   (b) Permitted. The Plan permits Employee contributions subject to
            the following limitations:______. [Note: Any designated
            limitation(s) must be the same for all Participants, be definitely
            determinable and not discriminate in favor of Highly Compensated
            Employees.]

      |_|   (c) Matching contribution. For each Plan Year, the Employer's
            matching contribution made with respect to Employee contributions
            is:________.

                                    ARTICLE V
                              VESTING REQUIREMENTS

      19.   NORMAL/EARLY RETIREMENT AGE (5.01). A Participant attains Normal
            Retirement Age (or Early Retirement Age, if applicable) under the
            Plan on the following date: (Choose one of (a) or (b). Choose (c) if
            applicable)

      |X|   (a) Specific age. The date the Participant attains age 65 . [Note:
            The age may not exceed age 65.]

      |_|   (b) Age/participation. The later of the date the Participant attains
            years of age or the anniversary of the first day of the Plan Year in
            which the Participant commenced participation in the Plan. [Note:
            The age may not exceed age 65 and the anniversary may not exceed the
            5th.]

      |_|   (c) Early Retirement Age. Early Retirement Age is the later of: (i)
            the date a Participant attains age ____ or (ii) the date a
            Participant reaches his/her ____ anniversary of the first day of the
            Plan Year in which the Participant commenced participation in the
            Plan.

      20. PARTICIPANT'S DEATH OR DISABILITY (5.02). The 100% vesting rule under
      Section 5.02 of the Plan does not apply to: (Choose (a) or (b) or both as
      applicable)

      |_|   (a) Death.

      |_|   (b) Disability.

      21. VESTING SCHEDULE (5.03). A Participant has a 100% Vested interest at
      all times in his/her deferral contributions, qualified nonelective
      contributions, qualified matching contributions, 401(k) safe harbor
      contributions and SIMPLE 401(k) contributions. The following vesting
      schedule applies to Employer regular matching contributions and to
      Employer nonelective contributions: (Choose (a) or choose one or more of
      (b) through (f) as applicable)

      |_|   (a) Immediate vesting. 100% Vested at all times. [Note: The Employer
            must elect (a) if the Service condition under Section 2.01 exceeds
            One Year of Service or more than twelve months.]

      |X|   (b) Top-heavy vesting schedules. (The Employer must choose one of
            (b)(1), (2) or (3) if it does not elect (a).)

            |_|   (1) 6-year graded as specified in the Plan.

            |_|   (2) 3-year cliff as specified in the Plan.

            |X|   (3) Modified top-heavy schedule

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       9
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

                                  Years of                     Vested
                                   Service                   Percentage
                                   -------                   ----------

                       Less than 1 ...................            0%
                                                                  -

                          1 ..........................           20%
                                                                 --

                          2 ..........................           40%
                                                                 --

                          3 ..........................           60%
                                                                 --

                          4 ..........................           80%
                                                                 --

                          5 ..........................          100%
                                                                ---

      |X|   (c) Non-top-heavy vesting schedules. [Note: The Employer may elect
            one of (c)(1), (2) or (3) in addition to (b).]

            |_|   (1) 7-year graded as specified in the Plan.

            |_|   (2) 5-year cliff as specified in the Plan.

            |X|   (3) Modified non-top-heavy schedule

                                  Years of                     Vested
                                  Service                    Percentage
                                  -------                    ----------

                       Less than 1 ...................             0%
                                                                   -

                          1 ..........................            20%
                                                                  --

                          2 ..........................            40%
                                                                  --

                          3 ..........................            60%
                                                                  --

                          4 ..........................            80%
                                                                  --

                          5 ..........................           100%
                                                                 ---

                          7 or more ..................           100%
                                                                 ---

      If the Employer does not elect (c), the vesting schedule elected in (b)
      applies to all Plan Years. [Note: The modified top-heavy schedule of
      (b)(3) must satisfy Code ss.416. If the Employer elects (c)(3), the
      modified non-top-heavy schedule must satisfy Code ss.411(a)(2).]

      |_|   (d) Separate vesting election for regular matching contributions. In
            lieu of the election under (a), (b) or (c), the following vesting
            schedule applies to a Participant's regular matching contributions:
            (Choose one of (1) or (2))

            |_|   (1) 100% Vested at all times.

            |_|   (2) Regular matching vesting schedule: ______.

            [Note: The vesting schedule completed under (d)(2) must comply with
            Code ss.411(a)(4).]

      |_|   (e) Application of top-heavy schedule. The non-top-heavy schedule
            elected under (c) applies in all Plan Years in which the Plan is not
            a top-heavy plan. [Note: If the Employer does not elect (e), the
            top-heavy vesting schedule will apply for the first Plan Year in
            which the Plan is top-heavy and then in all subsequent Plan Years.]

      |_|   (f) Special vesting provisions:______. [Note: Any special vesting
            provision must satisfy Code ss.411(a). Any special vesting provision
            must be definitely determinable, not discriminate in favor of Highly
            Compensated Employees and not violate Code ss.401(a)(4).]

      22. YEAR OF SERVICE - VESTING (5.06). (Choose (a) and (b)): [Note: If the
      Employer elects the Elapsed Time Method or elects immediate vesting, the
      Employer should not complete (a) or (b).]

      |X|   (a) Year of Service. An Employee must complete at least 1,000 Hours
            of Service during a vesting computation period to receive credit for
            a Year of Service under Article V. [Note: The number may not exceed
            1,000. If left blank, the requirement is 1,000.]

      |X|   (b) Vesting computation period. The Plan measures a Year of Service
            on the basis of the following 12-consecutive month period: (Choose
            one of (1) or (2))

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       10
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

            |_|   (1) Plan Year.

            |X|   (2) Employment year (anniversary of Employment Commencement
                  Date).

      23. EXCLUDED YEARS OF SERVICE - VESTING (5.08). The Plan excludes the
      following Years of Service for purposes of vesting: (Choose (a) or choose
      one or more of (b) through (f) as applicable)

      |X|   (a) None. None other than as specified in Plan Section 5.08(a).

      |_|   (b) Age 18. Any Year of Service before the Year of Service during
            which the Participant attained the age of 18.

      |_|   (c) Prior to Plan establishment. Any Year of Service during the
            period the Employer did not maintain this Plan or a predecessor
            plan.

      |_|   (d) Parity Break in Service. Any Year of Service excluded under the
            rule of parity. See Plan Section 5.10.

      |_|   (e) Prior Plan terms. Any Year of Service disregarded under the
            terms of the Plan as in effect prior to this restated Plan.

      |_|   (f) Additional exclusions. Any Year of Service before:_____.

            [Note: Any exclusion specified under (f) must comply with Code
            ss.411(a)(4). Any exclusion must be definitely determinable, not
            discriminate in favor of Highly Compensated Employees and not
            violate Code ss.401(a)(4). If the Employer elects immediate vesting,
            the Employer should not complete Section 5.08.]

                                   ARTICLE VI
                         DISTRIBUTION OF ACCOUNT BALANCE

      24. TIME OF PAYMENT OF ACCOUNT BALANCE (6.01). The following time of
      distribution elections apply to the Plan:

      Separation from Service/Vested Account Balance not exceeding $5,000.
      Subject to the limitations of Plan Section 6.01(A)(1), the Trustee will
      distribute in a lump sum (regardless of the Employer's election under
      Section 6.04) a separated Participant's Vested Account Balance not
      exceeding $5,000: (Choose one of (a) through (d))

      |X|   (a) Immediate. As soon as administratively practicable following the
            Participant's Separation from Service.

      |_|   (b) Designated Plan Year. As soon as administratively practicable in
            the _______ Plan Year beginning after the Participant's Separation
            from Service.

      |_|   (c) Designated Plan Year quarter. As soon as administratively
            practicable in the _______ Plan Year quarter beginning after the
            Participant's Separation from Service.

      |_|   (d) Designated distribution. As soon as administratively practicable
            in the: ______ following the Participant's Separation from Service.
            [Note: The designated distribution time must be the same for all
            Participants, be definitely determinable, not discriminate in favor
            of Highly Compensated Employees and not violate Code ss.401(a)(4).]

      Separation from Service/Vested Account Balance exceeding $5,000. A
      separated Participant whose Vested Account Balance exceeds $5,000 may
      elect to commence distribution of his/her Vested Account Balance no
      earlier than: (Choose one of (e) through (i). Choose (j) if applicable)

      |X|   (e) Immediate. As soon as administratively practicable following the
            Participant's Separation from Service.

      |_|   (f) Designated Plan Year. As soon as administratively practicable in
            the ______ Plan Year beginning after the Participant's Separation
            from Service.

      |_|   (g) Designated Plan Year quarter. As soon as administratively
            practicable in the ______ Plan Year quarter following the Plan Year
            quarter in which the Participant elects to receive a distribution.

      |_|   (h) Normal Retirement Age. As soon as administratively practicable
            after the close of the Plan Year in which the Participant attains
            Normal Retirement Age and within the time required under Plan
            Section 6.01(A)(2).

      |_|   (i) Designated distribution. As soon as administratively practicable
            in the: ______ following the Participant's Separation from Service.
            [Note: The designated distribution time must be the same for all
            Participants, be definitely determinable, not discriminate in favor
            of Highly Compensated Employees and not violate Code ss.401(a)(4).]

      |_|   (j) Limitation on Participant's right to delay distribution. A
            Participant may not elect to delay commencement of distribution of
            his/her Vested Account Balance beyond the later of attainment of age
            62 or Normal Retirement Age.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       11
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

            [Note: If the Employer does not elect (j), the Plan permits a
            Participant who has Separated from Service to delay distribution
            until his/her required beginning date. See Plan Section 6.01(A)(2).]

      Participant elections prior to Separation from Service. A Participant,
      prior to Separation from Service may elect any of the following
      distribution options in accordance with Plan Section 6.01(C): (Choose (k)
      or one or more of (l) through (o) as applicable) [Note: If the Employer
      elects any in-service distribution option, a Participant may elect to
      receive one in-service distribution per Plan Year unless the Plan's
      in-service distribution form provides for more frequent in-service
      distributions.]

      |_|   (k) None. A Participant does not have any distribution option prior
            to Separation from Service, except as may be provided under Plan
            Section 6.01(C).

      |X|   (l) Deferral contributions. Distribution of all or any portion (as
            permitted by the Plan) of a Participant's Account Balance
            attributable to deferral contributions if: (Choose one or more of
            (1), (2) or (3) as applicable)

            |X|   (1) Hardship (safe harbor hardship). The Participant has
                  incurred a hardship in accordance with Plan Sections 6.09 and
                  14.11(A).

            |_|   (2) Age. The Participant has attained age _____ (Must be at
                  least age 59 1/2).

            |_|   (3) Disability. The Participant has incurred a Disability.

      |_|   (m) Qualified nonelective contributions/qualified matching
            contributions/safe harbor contributions. Distribution of all or any
            portion of a Participant's Account Balance attributable to qualified
            nonelective contributions, to qualified matching contributions, or
            to 401(k) safe harbor contributions if: (Choose (1) or (2) or both
            as applicable)

            |_|   (1) Age. The Participant has attained age _____ (Must be at
                  least age 59 1/2).

            |_|   (2) Disability. The Participant has incurred a Disability.

      |_|   (n) Nonelective contributions/regular matching contributions/SIMPLE
            401(k) contributions. Distribution of all or any portion of a
            Participant's Vested Account Balance attributable to nonelective
            contributions, regular matching contributions or SIMPLE 401(k)
            contributions if: (Choose one or more of (1) through (5) as
            applicable)

            |_|   (1) Age/Service conditions. (Choose one or more of a. through
                  d. as applicable)

            |_|   a. Age. The Participant has attained age ______.

            |_|   b. Two-year allocations. The Plan Administrator has allocated
                  the contributions to be distributed for a period of not less
                  than ________ Plan Years before the distribution date. [Note:
                  The minimum number of years is 2.]

            |_|   c. Five years of participation. The Participant has
                  participated in the Plan for at least ________ Plan Years.
                  [Note: The minimum number of years is 5.]

            |_|   d. Vested. The Participant is ________% Vested in his/her
                  Account Balance. See Plan Section 5.03(A).

            [Note: If an Employer makes more than one election under Section
            6.01(n)(1), a Participant must satisfy all conditions before the
            Participant is eligible for the distribution.]

            |_|   (2) Hardship. The Participant has incurred a hardship in
                  accordance with Plan Section 6.09.

            |_|   (3) Hardship (safe harbor hardship). The Participant has
                  incurred a hardship in accordance with Plan Sections 6.09 and
                  14.11(A).

            |_|   (4) Disability. The Participant has incurred a Disability.

            |_|   (5) Designated condition. The Participant has satisfied the
                  following condition(s):____. [Note: Any designated
                  condition(s) must be the same for all Participants, be
                  definitely determinable and not discriminate in favor of
                  Highly Compensated Employees.]

      |X|   (o) Participant contributions. Distribution of all or any portion of
            a Participant's Account Balance attributable to the following
            Participant contributions described in Plan Section 4.01: (Choose
            one of (1), (2) or (3))

            |_|   (1) All Participant contributions.

            |_|   (2) Employee contributions only.

            |X|   (3) Rollover contributions only.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       12
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

Participant loan default/offset. See Section 6.08 of the Plan.

      25. DISTRIBUTION METHOD (6.03). A separated Participant whose Vested
      Account Balance exceeds $5,000 may elect distribution under one of the
      following method(s) of distribution described in Plan Section 6.03:
      (Choose one or more of (a) through (d) as applicable)

      |X|   (a) Lump sum.

      |_|   (b) Installments.

      |_|   (c) Installments for required minimum distributions only.

      |_|   (d) Annuity distribution option(s):_______.

            [Note: Any optional method of distribution may not be subject to
            Employer, Plan Administrator or Trustee discretion.]

      26. JOINT AND SURVIVOR ANNUITY REQUIREMENTS (6.04). The joint and survivor
      annuity distribution requirements of Plan Section 6.04: (Choose one of (a)
      or (b))

      |X|   (a) Profit sharing plan exception. Do not apply to a Participant,
            unless the Participant is a Participant described in Section 6.04(H)
            of the Plan.

      |_|   (b) Applicable. Apply to all Participants.

                                   ARTICLE IX
       PLAN ADMINISTRATOR - DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS

      27. ALLOCATION OF NET INCOME, GAIN OR LOSS (9.08). For each type of
      contribution provided under the Plan, the Plan allocates net income, gain
      or loss using the following method: (Choose one or more of (a) through (e)
      as applicable)

      |X|   (a) Deferral contributions/Employee contributions. (Choose one or
            more of (1) through (5) as applicable)

            |X|   (1) Daily valuation method. Allocate on each business day of
                  the Plan Year during which Plan assets for which there is an
                  established market are valued and the Trustee is conducting
                  business.

            |_|   (2) Balance forward method. Allocate using the balance forward
                  method.

            |_|   (3) Weighted average method. Allocate using the weighted
                  average method, based on the following weighting
                  period:________. See Plan Section 14.12.

            |_|   (4) Balance forward method with adjustment. Allocate pursuant
                  to the balance forward method, except treat as part of the
                  relevant Account at the beginning of the valuation period
                  _______% of the contributions made during the following
                  valuation period: ______.

            |_|   (5) Individual account method. Allocate using the individual
                  account method. See Plan Section 9.08.

      |X|   (b) Matching contributions. (Choose one or more of (1) through (5)
            as applicable)

            |X|   (1) Daily valuation method. Allocate on each business day of
                  the Plan Year during which Plan assets for which there is an
                  established market are valued and the Trustee is conducting
                  business.

            |_|   (2) Balance forward method. Allocate using the balance forward
                  method.

            |_|   (3) Weighted average method. Allocate using the weighted
                  average method, based on the following weighting period:_____.
                  See Plan Section 14.12.

            |_|   (4) Balance forward method with adjustment. Allocate pursuant
                  to the balance forward method, except treat as part of the
                  relevant Account at the beginning of the valuation period
                  ______% of the contributions made during the following
                  valuation period:________.

            |_|   (5) Individual account method. Allocate using the individual
                  account method. See Plan Section 9.08.

      |X|   (c) Employer nonelective contributions. (Choose one or more of (1)
            through (5) as applicable)

            |X|   (1) Daily valuation method. Allocate on each business day of
                  the Plan Year during which Plan assets for which there is an
                  established market are valued and the Trustee is conducting
                  business.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       13
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

            |_|   (2) Balance forward method. Allocate using the balance forward
                  method.

            |_|   (3) Weighted average method. Allocate using the weighted
                  average method, based on the following weighting period:
                  ______. See Plan Section 14.12.

            |_|   (4) Balance forward method with adjustment. Allocate pursuant
                  to the balance forward method, except treat as part of the
                  relevant Account at the beginning of the valuation period
                  ______% of the contributions made during the following
                  valuation period:______.

            |_|   (5) Individual account method. Allocate using the individual
                  account method. See Plan Section 9.08.

      |_|   (d) Specified method. Allocate pursuant to the following
            method:______.

            [Note: The specified method must be a definite predetermined formula
            which is not based on Compensation, which satisfies the
            nondiscrimination requirements of Treas. Reg. ss.1.401(a)(4) and
            which is applied uniformly to all Participants.]

      |_|   (e) Interest rate factor. In accordance with Plan Section 9.08(E),
            the Plan includes interest at the following rate on distributions
            made more than 90 days after the most recent valuation date:______.

                                    ARTICLE X
                    TRUSTEE AND CUSTODIAN, POWERS AND DUTIES

      28. INVESTMENT POWERS (10.03). The following additional investment options
      or limitations apply under Plan Section 10.03: N/A. [Note: Enter "N/A" if
      not applicable.]

      29. VALUATION OF TRUST (10.15). In addition to the last day of the Plan
      Year, the Trustee must value the Trust Fund on the following valuation
      date(s): (Choose one of (a) through (d))

      |X|   (a) Daily valuation dates. Each business day of the Plan Year on
            which Plan assets for which there is an established market are
            valued and the Trustee is conducting business.

      |_|   (b) Last day of a specified period. The last day of each _______ of
            the Plan Year.

      |_|   (c) Specified dates: _______.

      |_|   (d) No additional valuation dates.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       14
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

                                 Execution Page

      The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Prototype Plan and Trust. The Employer hereby agrees to the provisions of this
Plan and Trust, and in witness of its agreement, the Employer by its duly
authorized officers, has executed this Adoption Agreement, and the Trustee (and
Custodian, if applicable) has signified its acceptance, on: ____________________
______________________________________.

                               Name of Employer:   Horizon Federal Savings Bank
                                                 -------------------------------
                               Employer's EIN:   42-0451797
                                               ---------------------------------
                               Signed:
                                       -----------------------------------------

                                          --------------------------------------
                                                                    [Name/Title]

                               Name(s) of Trustee:

                                          Robert D. DeCook, President
                                          --------------------------------------

                                          --------------------------------------

                                          --------------------------------------

                                          --------------------------------------

                                          --------------------------------------

                                          --------------------------------------

                                          --------------------------------------

                               Trust EIN (Optional):

                               Signed:
                                       -----------------------------------------

                                          --------------------------------------
                                                                    [Name/Title]
                               Signed:
                                       -----------------------------------------

                                          --------------------------------------
                                                                    [Name/Title]
                               Signed:
                                       -----------------------------------------

                                          --------------------------------------
                                                                    [Name/Title]

                               Signed:
                                       -----------------------------------------

                                          --------------------------------------
                                                                    [Name/Title]
                               Signed:
                                       -----------------------------------------

                                          --------------------------------------
                                                                    [Name/Title]
                               Signed:
                                       -----------------------------------------

                                          --------------------------------------
                                                                    [Name/Title]
                               Signed:
                                       -----------------------------------------

                                          --------------------------------------
                                                                    [Name/Title]
                               Signed:
                                       -----------------------------------------

                                          --------------------------------------
                                                                    [Name/Title]

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       15
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

                               Name of Custodian (Optional):

                                          --------------------------------------

                               Signed:
                                       -----------------------------------------

                                          --------------------------------------
                                                                    [Name/Title]

30. Plan Number. The 3-digit plan number the Employer assigns to this Plan for
ERISA reporting purposes (Form 5500 Series) is: 002.

Use of Adoption Agreement. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
Employer only may use this Adoption Agreement in conjunction with the basic plan
document referenced by its document number on Adoption Agreement page one.

Execution for Page Substitution Amendment Only. If this paragraph is completed,
this Execution Page documents an amendment to Adoption Agreement Section(s)
________ effective ______________________________, by substitute Adoption
Agreement page number(s) _______.

Prototype Plan Sponsor. The Prototype Plan Sponsor identified on the first page
of the basic plan document will notify all adopting employers of any amendment
of this Prototype Plan or of any abandonment or discontinuance by the Prototype
Plan Sponsor of its maintenance of this Prototype Plan. For inquiries regarding
the adoption of the Prototype Plan, the Prototype Plan Sponsor's intended
meaning of any Plan provisions or the effect of the opinion letter issued to the
Prototype Plan Sponsor, please contact the Prototype Plan Sponsor at the
following address and telephone number: 3900 Westown Parkway, Ste. D, West Des
Moines, IA 50266, (515) 222-0980.

Reliance on Sponsor Opinion Letter. The Prototype Plan Sponsor has obtained from
the IRS an opinion letter specifying the form of this Adoption Agreement and the
basic plan document satisfy, as of the date of the opinion letter, Code ss.401.
An adopting Employer may rely on the Prototype Plan Sponsor's IRS opinion
letter, except to the extent provided in Rev. Proc. 2000-20, 2000-6 I.R.B. 553
and Announcement 2001-77, 2001-30 I.R.B. An Employer who has ever maintained or
who later adopts any plan (including a welfare benefit fund, as defined in Code
ss.419(e), which provides post-retirement medical benefits allocated to separate
accounts for key employees, as defined in Code ss.419A(d)(3), or an individual
medical account, as defined in Code ss.415(l)(2)) in addition to this Plan may
not rely on the opinion letter with respect to the requirements of Code
ss.ss.415 and 416. If an Employer who adopts or maintains multiple plans wishes
to obtain reliance with respect to the requirements of Code ss.ss.415 and 416,
the Employer must apply for a determination letter to Employee Plans
Determinations of the Internal Revenue Service. An Employer may not rely on the
opinion letter in certain other circumstances, which are specified in the
opinion letter issued with respect to the plan or in Revenue Procedure 2000-20
and Announcement 2001-77.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       16
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

                             PARTICIPATION AGREEMENT

         |X| Check here if not applicable and do not complete this page.

      The undersigned Employer, by executing this Participation Agreement,
elects to become a Participating Employer in the Plan identified in Section 1.21
of the accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Adoption Agreement. The Participating Employer accepts, and
agrees to be bound by, all of the elections granted under the provisions of the
Prototype Plan as made by the Signatory Employer to the Execution Page of the
Adoption Agreement, except as otherwise provided in this Participation
Agreement.

31.   EFFECTIVE DATE (1.10). The Effective Date of the Plan for the
      Participating Employer is:______________.

32.   NEW PLAN/RESTATEMENT. The Participating Employer's adoption of this Plan
      constitutes: (Choose one of (a) or (b))

|_|   (a) The adoption of a new plan by the Participating Employer.

|_|   (b) The adoption of an amendment and restatement of a plan currently
      maintained by the Participating Employer, identified as:__________________
      ___________________________________, and having an original effective date
      of:_____________________________________________________.

33.   PREDECESSOR EMPLOYER SERVICE (1.30). In addition to the predecessor
      service credited by reason of Section 1.30 of the Plan, the Plan credits
      as Service under this Plan, service with this Participating Employer.
      (Choose one or more of (a) through (d) as applicable): [Note: If the Plan
      does not credit any additional predecessor service under Section 1.30 for
      this Participating Employer, do not complete this election.]

      |_|   (a) Eligibility. For eligibility under Article II. See Plan Section
            1.30 for time of Plan entry.

      |_|   (b) Vesting. For vesting under Article V.

      |_|   (c) Contribution allocation. For contribution allocations under
            Article III.

      |_|   (d) Exceptions. Except for the following Service: _______.

Name of Plan:                            Name of Participating Employer:

--------------------------------         ---------------------------------------

                                         Signed:
                                                 -------------------------------
                                                                    [Name/Title]

                                         ---------------------------------------
                                                                          [Date]
                                         Participating Employer's EIN:
                                                                       ---------
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.

Name of Signatory Employer:              Name(s) of Trustee:

--------------------------------         ---------------------------------------

--------------------------------         ---------------------------------------
                    [Name/Title]                                    [Name/Title]

Signed:                                  Signed:
       -------------------------                --------------------------------

--------------------------------         ---------------------------------------
                          [Date]                                          [Date]

[Note: Each Participating Employer must execute a separate Participation
Agreement. If the Plan does not have a Participating Employer, the Signatory
Employer may delete this page from the Adoption Agreement.]

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       17
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

                                   APPENDIX A
                    TESTING ELECTIONS/EFFECTIVE DATE ADDENDUM

34.   The following testing elections and special effective dates apply: (Choose
      one or more of (a) through (n) as applicable)

      |_|   (a) Highly Compensated Employee (1.14). For Plan Years beginning
            after , the Employer makes the following election(s) regarding the
            definition of Highly Compensated Employee:

            (1)   |_| Top paid group election.

            (2)   |_| Calendar year data election (fiscal year plan).

      |_|   (b) 401(k) current year testing. The Employer will apply the current
            year testing method in applying the ADP and ACP tests effective for
            Plan Years beginning after: _____. [Note: For Plan Years beginning
            on or after the Employer's execution of its "GUST" restatement, the
            Employer must use the same testing method within the same Plan Year
            for both the ADP and ACP tests.]

      |_|   (c) Compensation. The Compensation definition under Section 1.07
            will apply for Plan Years beginning after: ______.

      |_|   (d) 401(k) safe harbor. The 401(k) safe harbor provisions under
            Section 3.01(d) are effective: ______.

      |_|   (e) SIMPLE 401(k). The SIMPLE 401(k) provisions of Section 3.01(e)
            are effective for Plan (calendar) Years: ______.

      |_|   (f) Negative election. The negative election provision under Section
            3.02(b) is effective: ______.

      |_|   (g) Contribution/allocation formula. The specified contribution(s)
            and allocation method(s) under Sections 3.01 and 3.04 are effective:
            ______.

      |_|   (h) Allocation conditions. The allocation conditions of Section 3.06
            are effective: ______.

      |_|   (i) Benefit payment elections. The distribution elections of
            Section(s) ________ are effective: _________.

      |_|   (j) Election to continue pre-SBJPA required beginning date. A
            Participant may not elect to defer commencement of the distribution
            of his/her Vested Account Balance beyond the April 1 following the
            calendar year in which the Participant attains age 70 1/2. See Plan
            Section 6.02(A).

      |_|   (k) Elimination of age 70 1/2 in-service distributions. The Plan
            eliminates a Participant's (other than a more than 5% owner) right
            to receive in-service distributions on April 1 of the calendar year
            following the year in which the Participant attains age 70 1/2 for
            Plan Years beginning after: ______.

      |_|   (l) Allocation of earnings. The earnings allocation provisions under
            Section 9.08 are effective:_______.

      |_|   (m) Elimination of optional forms of benefit. The Employer elects
            prospectively to eliminate the following optional forms of benefit:
            (Choose one or more of (1), (2) and (3) as applicable)

            |_|   (1) QJSA and QPSA benefits as described in Plan Sections 6.04,
                  6.05 and 6.06 effective: ______.

            |_|   (2) Installment distributions as described in Section 6.03
                  effective: ______.

            |_|   (3) Other optional forms of benefit (Any election to eliminate
                  must be consistent with Treas. Reg. ss.1.411(d)-4): ______.

      |_|   (n) Special effective date(s): ______.

            For periods prior to the above-specified special effective date(s),
      the Plan terms in effect prior to its restatement under this Adoption
      Agreement will control for purposes of the designated provisions. A
      special effective date may not result in the delay of a Plan provision
      beyond the permissible effective date under any applicable law.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       18
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

                                   APPENDIX B
                    GUST Remedial Amendment Period Elections

35.   The following GUST restatement elections apply: (Choose one or more of (a)
      through (j) as applicable)35 p.1919

      |_|   (a) Highly Compensated Employee elections. The Employer makes the
            following remedial amendment period elections with respect to the
            Highly Compensated Employee definition:

<TABLE>
<S>                                                            <C>
              (1) 1997: |_| Top paid group election.           |_| Calendar year election.
                        |_| Calendar year data election.
              (2) 1998: |_| Top paid group election.           |_| Calendar year data election.
              (3) 1999: |_| Top paid group election.           |_| Calendar year data election.
              (4) 2000: |_| Top paid group election.           |_| Calendar year data election.
              (5) 2001: |_| Top paid group election.           |_| Calendar year data election.
              (6) 2002: |_| Top paid group election.           |_| Calendar year data election.
</TABLE>

      |_|   (b) 401(k) testing methods. The Employer makes the following
            remedial amendment period elections with respect to the ADP test and
            the ACP test: [Note: The Employer may use a different testing method
            for the ADP and ACP tests through the end of the Plan Year in which
            the Employer executes its GUST restated Plan.]

<TABLE>
                                    ADP test                               ACP test
<S>                                                         <C>
              (1) 1997: |_| prior year  |_| current year    1997: |_|prior year  |_|current year
              (2) 1998: |_| prior year  |_| current year    1998: |_|prior year  |_|current year
              (3) 1999: |_| prior year  |_| current year    1999: |_|prior year  |_|current year
              (4) 2000: |_| prior year  |_| current year    2000: |_|prior year  |_|current year
              (5) 2001: |_| prior year  |_| current year    2001: |_|prior year  |_|current year
              (6) 2002: |_| prior year  |_| current year    2002: |_|prior year  |_|current year
</TABLE>

      |_|   (c) Delayed application of SBJPA required beginning date. The
            Employer elects to delay the effective date for the required
            beginning date provision of Plan Section 6.02 until Plan Years
            beginning after: .

      |_|   (d) Model Amendment for required minimum distributions. The Employer
            adopts the IRS Model Amendment in Plan Section 6.02(E) effective .
            [Note: The date must not be earlier than January 1, 2001.]

Defined Benefit Limitation

      |_|   (e) Code ss.415(e) repeal. The repeal of the Code ss.415(e)
            limitation is effective for Limitation Years beginning after .
            [Note: If the Employer does not make an election under (e), the
            repeal is effective for Limitation Years beginning after December
            31, 1999.]

Code ss.415(e) limitation. To the extent necessary to satisfy the limitation
under Section 3.17 for Limitation Years beginning prior to the repeal of Code
ss.415(e), the Employer will reduce: (Choose one of (f) or (g))

      |_|   (f) The Participant's projected annual benefit under the defined
            benefit plan.

      |_|   (g) The Employer's contribution or allocation on behalf of the
            Participant to the defined contribution plan and then, if necessary,
            the Participant's projected annual benefit under the defined benefit
            plan.

Coordination with top-heavy minimum allocation. The Plan Administrator will
apply the top-heavy minimum allocation provisions of Article XII with the
following modifications: (Choose (h) or choose (i) or (j) or both as applicable)

      |_|   (h) No modifications.

      |_|   (i) For Non-Key Employees participating only in this Plan, the
            top-heavy minimum allocation is the minimum allocation determined by
            substituting _____% (not less than 4%) for "3%," except: (Choose one
            of (1) or (2))

            |_|   (1) No exceptions.

            |_|   (2) Plan Years in which the top-heavy ratio exceeds 90%.

      |_|   (j) For Non-Key Employees also participating in the defined benefit
            plan, the top-heavy minimum is: (Choose one of (1) or (2))

            |_|   (1) 5% of Compensation irrespective of the contribution rate
                  of any Key Employee: (Choose one of a. or b.)

                  |_|   a. No exceptions.

                  |_|   b. Substituting "7 1/2%" for "5%" if the top-heavy ratio
                        does not exceed 90%.

            |_|   (2) 0%. [Note: The defined benefit plan must satisfy the
                  top-heavy minimum benefit requirement for these Non-Key
                  Employees.]

Actuarial assumptions for top-heavy calculation. To determine the top-heavy
ratio, the Plan Administrator will use the following interest rate and mortality
assumptions to value accrued benefits under a defined benefit plan: _____.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       19
<PAGE>

                                        Horizon Federal Savings Bank 401(k) Plan

                        CHECKLIST OF EMPLOYER INFORMATION
                      AND EMPLOYER ADMINISTRATIVE ELECTIONS

Commencing with the 2004 Plan Year

      The Prototype Plan permits the Employer to make certain administrative
elections not reflected in the Adoption Agreement. This form lists those
administrative elections and provides a means of recording the Employer's
elections. This checklist is not part of the Plan document.

36.   Employer Information.

      Horizon Federal Savings Bank
      --------------------------------------------------------------------------
      [Employer Name]

      301 First Avenue East, P.O. Box 8
      --------------------------------------------------------------------------
      [Address]

      Oskaloosa, Iowa 52577                   (800) 659-2492
      -----------------------------------     ----------------------------------
      [City, State and Zip Code]              [Telephone Number]

37.   Form of Business.

     (a)  |X| Corporation                     (b) |_| S Corporation
     (c)  |_| Limited Liability Company       (d) |_| Sole Proprietorship
     (e)  |_| Partnership                     (f) |_| ________

38.   Section 1.07(F) - Nondiscriminatory definition of Compensation. When
      testing non-discrimination under the Plan, the Plan permits the Employer
      to make elections regarding the definition of Compensation. [Note: This
      election solely is for purposes of nondiscrimination testing. The election
      does not affect the Employer's elections under Section 1.07 which apply
      for purposes of allocating Employer contributions and Participant
      forfeitures.]

      (a)   |X| The Plan will "gross up" Compensation for Elective
            Contributions.

      (b)   |_| The Plan will exclude Elective Contributions.

39.   Section 4.04 - Rollover contributions.39 p.2020

      (a)   |X| The Plan accepts rollover contributions.

      (b)   |_| The Plan does not accept rollover contributions.

40.   Section 8.06 - Participant direction of investment/404(c). The Plan
      authorizes Participant direction of investment with Trustee consent. If
      the Trustee permits Participant direction of investment, the Employer and
      the Trustee should adopt a policy which establishes the applicable
      conditions and limitations, including whether they intend the Plan to
      comply with ERISA ss.404(c).

      (a)   |X| The Plan permits Participant direction of investment and is a
            404(c) plan.

      (b)   |_| The Plan does not permit Participant direction of investment or
            is a non-404(c) plan.

41.   Section 9.04[A] - Participant loans. The Plan authorizes the Plan
      Administrator to adopt a written loan policy to permit Participant
      loans.

      (a)   |_| The Plan permits Participant loans subject to the following
            conditions:

            (1)   |_| Minimum loan amount: $ ____.

            (2)   |_| Maximum number of outstanding loans: _____.

            (3)   |_| Reasons for which a Participant may request a loan:

                  a. |_| Any purpose.

                  b. |_| Hardship events.

                  c. |_| Other: _________.

            (4)   |_| Suspension of loan repayments:

                  a. |_| Not permitted.

                  b. |_| Permitted for non-military leave of absence.

                  c. |_| Permitted for military service leave of absence.

            (5)   |_| The Participant must be a party in interest.

      (b)   |X| The Plan does not permit Participant loans.

42.   Section 11.01 - Life insurance. The Plan with Employer approval authorizes
      the Trustee to acquire life insurance.

      (a)   |_| The Plan will invest in life insurance contracts.

      (b)   |X| The Plan will not invest in life insurance contracts.

43.   Surety bond company: _______. Surety bond amount: $_____

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       20
<PAGE>

                                     EGTRRA
                                AMENDMENT TO THE

                    HORIZON FEDERAL SAVINGS BANK 401(K) PLAN

<PAGE>

                                                                EGTRRA - Sponsor

                                    ARTICLE I
                                    PREAMBLE

1.1   Adoption and effective date of amendment. This amendment of the plan is
      adopted to reflect certain provisions of the Economic Growth and Tax
      Relief Reconciliation Act of 2001 ("EGTRRA"). This amendment is intended
      as good faith compliance with the requirements of EGTRRA and is to be
      construed in accordance with EGTRRA and guidance issued thereunder. Except
      as otherwise provided, this amendment shall be effective as of the first
      day of the first plan year beginning after December 31, 2001.

1.2   Adoption by prototype sponsor. Except as otherwise provided herein,
      pursuant to Section 5.01 of Revenue Procedure 2000-20 (or pursuant to the
      corresponding provision in Revenue Procedure 89-9 or Revenue Procedure
      89-13), the sponsor hereby adopts this amendment on behalf of all adopting
      employers.

1.3   Supersession of inconsistent provisions. This amendment shall supersede
      the provisions of the plan to the extent those provisions are inconsistent
      with the provisions of this amendment.

                                   ARTICLE II
                          ADOPTION AGREEMENT ELECTIONS

      --------------------------------------------------------------------------

      The questions in this Article II only need to be completed in order to
      override the default provisions set forth below. If all of the default
      provisions will apply, then these questions should be skipped.

      Unless the employer elects otherwise in this Article II, the following
      defaults apply:

      1)    The vesting schedule for matching contributions will be a 6 year
            graded schedule (if the plan currently has a graded schedule that
            does not satisfy EGTRRA) or a 3 year cliff schedule (if the plan
            currently has a cliff schedule that does not satisfy EGTRRA), and
            such schedule will apply to all matching contributions (even those
            made prior to 2002).

      2)    Rollovers are automatically excluded in determining whether the
            $5,000 threshold has been exceeded for automatic cash-outs (if the
            plan is not subject to the qualified joint and survivor annuity
            rules and provides for automatic cash-outs). This is applied to all
            participants regardless of when the distributable event occurred.

      3)    The suspension period after a hardship distribution is made will be
            6 months and this will only apply to hardship distributions made
            after 2001.

      4)    Catch-up contributions will be allowed.

      5)    For target benefit plans, the increased compensation limit of
            $200,000 will be applied retroactively (i.e., to years prior to
            2002).

      --------------------------------------------------------------------------

2.1   Vesting Schedule for Matching Contributions

      If there are matching contributions subject to a vesting schedule that
      does not satisfy EGTRRA, then unless otherwise elected below, for
      participants who complete an hour of service in a plan year beginning
      after December 31, 2001, the following vesting schedule will apply to all
      matching contributions subject to a vesting schedule:

      If the plan has a graded vesting schedule (i.e., the vesting schedule
      includes a vested percentage that is more than 0% and less than 100%) the
      following will apply:

                Years of vesting service           Nonforfeitable percentage

                         2                                   20%
                         3                                   40%
                         4                                   60%
                         5                                   80%
                         6                                  100%

      If the plan does not have a graded vesting schedule, then matching
      contributions will be nonforfeitable upon the completion of 3 years of
      vesting service.

      In lieu of the above vesting schedule, the employer elects the following
      schedule:

      a. |_| 3 year cliff (a participant's accrued benefit derived from employer
             matching contributions shall be nonforfeitable upon the
             participant's completion of three years of vesting service).

      b. |_| 6 year graded schedule (20% after 2 years of vesting service and an
             additional 20% for each year thereafter).

      c. |_| Other (must be at least as liberal as a. or the b. above):

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       1
<PAGE>

                                                                EGTRRA - Sponsor

                  Years of vesting service           Nonforfeitable percentage

                          --------                           ---------%
                          --------                           ---------%
                          --------                           ---------%
                          --------                           ---------%
                          --------                           ---------%

      The vesting schedule set forth herein shall only apply to participants who
      complete an hour of service in a plan year beginning after December 31,
      2001, and, unless the option below is elected, shall apply to all matching
      contributions subject to a vesting schedule.

      d. |_| The vesting schedule will only apply to matching contributions made
             in plan years beginning after December 31, 2001 (the prior schedule
             will apply to matching contributions made in prior plan years).

2.2      Exclusion of Rollovers in Application of Involuntary Cash-out
         Provisions (for profit sharing and 401(k) plans only). If the plan is
         not subject to the qualified joint and survivor annuity rules and
         includes involuntary cash-out provisions, then unless one of the
         options below is elected, effective for distributions made after
         December 31, 2001, rollover contributions will be excluded in
         determining the value of the participant's nonforfeitable account
         balance for purposes of the plan's involuntary cash-out rules.

      a. |_| Rollover contributions will not be excluded.

      b. |_| Rollover contributions will be excluded only with respect to
             distributions made after ________. (Enter a date no earlier than
             December 31, 2001.)

      c. |_| Rollover contributions will only be excluded with respect to
             participants who separated from service after . (Enter a date. The
             date may be earlier than December 31, 2001.)

2.3   Suspension period of hardship distributions. If the plan provides for
      hardship distributions upon satisfaction of the safe harbor (deemed)
      standards as set forth in Treas. Reg. Section 1.401(k)-1(d)(2)(iv), then,
      unless the option below is elected, the suspension period following a
      hardship distribution shall only apply to hardship distributions made
      after December 31, 2001.

         |_| With regard to hardship distributions made during 2001, a
             participant shall be prohibited from making elective deferrals and
             employee contributions under this and all other plans until the
             later of January 1, 2002, or 6 months after receipt of the
             distribution.

2.4   Catch-up contributions (for 401(k) profit sharing plans only): The plan
      permits catch-up contributions (Article VI) unless the option below is
      elected.

         |_| The plan does not permit catch-up contributions to be made.

2.5   For target benefit plans only: The increased compensation limit ($200,000
      limit) shall apply to years prior to 2002 unless the option below is
      elected.

         |_| The increased compensation limit will not apply to years prior to
             2002.

                                   ARTICLE III
                        VESTING OF MATCHING CONTRIBUTIONS

3.1   Applicability. This Article shall apply to participants who complete an
      Hour of Service after December 31, 2001, with respect to accrued benefits
      derived from employer matching contributions made in plan years beginning
      after December 31, 2001. Unless otherwise elected by the employer in
      Section 2.1 above, this Article shall also apply to all such participants
      with respect to accrued benefits derived from employer matching
      contributions made in plan years beginning prior to January 1, 2002.

3.2   Vesting schedule. A participant's accrued benefit derived from employer
      matching contributions shall vest as provided in Section 2.1 of this
      amendment.

                                   ARTICLE IV
                              INVOLUNTARY CASH-OUTS

4.1   Applicability and effective date. If the plan provides for involuntary
      cash-outs of amounts less than $5,000, then unless otherwise elected in
      Section 2.2 of this amendment, this Article shall apply for distributions
      made after December 31, 2001, and shall apply to all participants.
      However, regardless of the preceding, this Article shall not apply if the
      plan is subject to the qualified joint and survivor annuity requirements
      of Sections 401(a)(11) and 417 of the Code.

4.2   Rollovers disregarded in determining value of account balance for
      involuntary distributions. For purposes of the Sections of the plan that
      provide for the involuntary distribution of vested accrued benefits of
      $5,000 or less, the value of a participant's nonforfeitable account
      balance shall be determined without regard to that portion of the account
      balance that is attributable to rollover contributions (and earnings
      allocable thereto) within the meaning of Sections 402(c), 403(a)(4),
      403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) of the Code. If the value of
      the participant's nonforfeitable account balance as so determined is
      $5,000 or less, then the plan shall immediately distribute the
      participant's entire nonforfeitable account balance.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       2
<PAGE>

                                                                EGTRRA - Sponsor

                                    ARTICLE V
                             HARDSHIP DISTRIBUTIONS

5.1   Applicability and effective date. If the plan provides for hardship
      distributions upon satisfaction of the safe harbor (deemed) standards as
      set forth in Treas. Reg. Section 1.401(k)-1(d)(2)(iv), then this Article
      shall apply for calendar years beginning after 2001.

5.2   Suspension period following hardship distribution. A participant who
      receives a distribution of elective deferrals after December 31, 2001, on
      account of hardship shall be prohibited from making elective deferrals and
      employee contributions under this and all other plans of the employer for
      6 months after receipt of the distribution. Furthermore, if elected by the
      employer in Section 2.3 of this amendment, a participant who receives a
      distribution of elective deferrals in calendar year 2001 on account of
      hardship shall be prohibited from making elective deferrals and employee
      contributions under this and all other plans until the later of January 1,
      2002, or 6 months after receipt of the distribution.

                                   ARTICLE VI
                             CATCH-UP CONTRIBUTIONS

Catch-up Contributions. Unless otherwise elected in Section 2.4 of this
amendment, all employees who are eligible to make elective deferrals under this
plan and who have attained age 50 before the close of the plan year shall be
eligible to make catch-up contributions in accordance with, and subject to the
limitations of, Section 414(v) of the Code. Such catch-up contributions shall
not be taken into account for purposes of the provisions of the plan
implementing the required limitations of Sections 402(g) and 415 of the Code.
The plan shall not be treated as failing to satisfy the provisions of the plan
implementing the requirements of Section 401(k)(3), 401(k)(11), 401(k)(12),
410(b), or 416 of the Code, as applicable, by reason of the making of such
catch-up contributions.

                                   ARTICLE VII
                         INCREASE IN COMPENSATION LIMIT

Increase in Compensation Limit. The annual compensation of each participant
taken into account in determining allocations for any plan year beginning after
December 31, 2001, shall not exceed $200,000, as adjusted for cost-of-living
increases in accordance with Section 401(a)(17)(B) of the Code. Annual
compensation means compensation during the plan year or such other consecutive
12-month period over which compensation is otherwise determined under the plan
(the determination period). If this is a target benefit plan, then except as
otherwise elected in Section 2.5 of this amendment, for purposes of determining
benefit accruals in a plan year beginning after December 31, 2001, compensation
for any prior determination period shall be limited to $200,000. The
cost-of-living adjustment in effect for a calendar year applies to annual
compensation for the determination period that begins with or within such
calendar year.

                                  ARTICLE VIII
                                   PLAN LOANS

Plan loans for owner-employees or shareholder-employees. If the plan permits
loans to be made to participants, then effective for plan loans made after
December 31, 2001, plan provisions prohibiting loans to any owner-employee or
shareholder-employee shall cease to apply.

                                   ARTICLE IX
              LIMITATIONS ON CONTRIBUTIONS (IRC SECTION 415 LIMITS)

9.1   Effective date. This Section shall be effective for limitation years
      beginning after December 31, 2001.

9.2   Maximum annual addition. Except to the extent permitted under Article VI
      of this amendment and Section 414(v) of the Code, if applicable, the
      annual addition that may be contributed or allocated to a participant's
      account under the plan for any limitation year shall not exceed the lesser
      of:

      a.    $40,000, as adjusted for increases in the cost-of-living under
            Section 415(d) of the Code, or

      b.    100 percent of the participant's compensation, within the meaning of
            Section 415(c)(3) of the Code, for the limitation year.

      The compensation limit referred to in b. shall not apply to any
      contribution for medical benefits after separation from service (within
      the meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is
      otherwise treated as an annual addition.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       3
<PAGE>

                                                                EGTRRA - Sponsor

                                    ARTICLE X
                         MODIFICATION OF TOP-HEAVY RULES

10.1     Effective date. This Article shall apply for purposes of determining
         whether the plan is a top-heavy plan under Section 416(g) of the Code
         for plan years beginning after December 31, 2001, and whether the plan
         satisfies the minimum benefits requirements of Section 416(c) of the
         Code for such years. This Article amends the top-heavy provisions of
         the plan.

10.2     Determination of top-heavy status.
         ----------------------------------

10.2.1   Key employee. Key employee means any employee or former employee
         (including any deceased employee) who at any time during the plan year
         that includes the determination date was an officer of the employer
         having annual compensation greater than $130,000 (as adjusted under
         Section 416(i)(1) of the Code for plan years beginning after December
         31, 2002), a 5-percent owner of the employer, or a 1-percent owner of
         the employer having annual compensation of more than $150,000. For this
         purpose, annual compensation means compensation within the meaning of
         Section 415(c)(3) of the Code. The determination of who is a key
         employee will be made in accordance with Section 416(i)(1) of the Code
         and the applicable regulations and other guidance of general
         applicability issued thereunder.

10.2.2   Determination of present values and amounts. This Section 10.2.2 shall
         apply for purposes of determining the present values of accrued
         benefits and the amounts of account balances of employees as of the
         determination date.

         a.    Distributions during year ending on the determination date. The
               present values of accrued benefits and the amounts of account
               balances of an employee as of the determination date shall be
               increased by the distributions made with respect to the employee
               under the plan and any plan aggregated with the plan under
               Section 416(g)(2) of the Code during the 1-year period ending on
               the determination date. The preceding sentence shall also apply
               to distributions under a terminated plan which, had it not been
               terminated, would have been aggregated with the plan under
               Section 416(g)(2)(A)(i) of the Code. In the case of a
               distribution made for a reason other than separation from
               service, death, or disability, this provision shall be applied by
               substituting "5-year period" for "1-year period."

         b.    Employees not performing services during year ending on the
               determination date. The accrued benefits and accounts of any
               individual who has not performed services for the employer during
               the 1-year period ending on the determination date shall not be
               taken into account.

10.3     Minimum benefits.
         -----------------

10.3.1   Matching contributions. Employer matching contributions shall be taken
         into account for purposes of satisfying the minimum contribution
         requirements of Section 416(c)(2) of the Code and the plan. The
         preceding sentence shall apply with respect to matching contributions
         under the plan or, if the plan provides that the minimum contribution
         requirement shall be met in another plan, such other plan. Employer
         matching contributions that are used to satisfy the minimum
         contribution requirements shall be treated as matching contributions
         for purposes of the actual contribution percentage test and other
         requirements of Section 401(m) of the Code.

10.3.2   Contributions under other plans. The employer may provide, in an
         addendum to this amendment, that the minimum benefit requirement shall
         be met in another plan (including another plan that consists solely of
         a cash or deferred arrangement which meets the requirements of Section
         401(k)(12) of the Code and matching contributions with respect to which
         the requirements of Section 401(m)(11) of the Code are met). The
         addendum should include the name of the other plan, the minimum benefit
         that will be provided under such other plan, and the employees who will
         receive the minimum benefit under such other plan.

                                   ARTICLE XI
                                DIRECT ROLLOVERS

11.1     Effective date. This Article shall apply to distributions made after
         December 31, 2001.

11.2     Modification of definition of eligible retirement plan. For purposes of
         the direct rollover provisions of the plan, an eligible retirement plan
         shall also mean an annuity contract described in Section 403(b) of the
         Code and an eligible plan under Section 457(b) of the Code which is
         maintained by a state, political subdivision of a state, or any agency
         or instrumentality of a state or political subdivision of a state and
         which agrees to separately account for amounts transferred into such
         plan from this plan. The definition of eligible retirement plan shall
         also apply in the case of a distribution to a surviving spouse, or to a
         spouse or former spouse who is the alternate payee under a qualified
         domestic relation order, as defined in Section 414(p) of the Code.

11.3     Modification of definition of eligible rollover distribution to exclude
         hardship distributions. For purposes of the direct rollover provisions
         of the plan, any amount that is distributed on account of hardship
         shall not be an eligible rollover distribution and the distributee may
         not elect to have any portion of such a distribution paid directly to
         an eligible retirement plan.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       4
<PAGE>

                                                                EGTRRA - Sponsor

11.4  Modification of definition of eligible rollover distribution to include
      after-tax employee contributions. For purposes of the direct rollover
      provisions in the plan, a portion of a distribution shall not fail to be
      an eligible rollover distribution merely because the portion consists of
      after-tax employee contributions which are not includible in gross income.
      However, such portion may be transferred only to an individual retirement
      account or annuity described in Section 408(a) or (b) of the Code, or to a
      qualified defined contribution plan described in Section 401(a) or 403(a)
      of the Code that agrees to separately account for amounts so transferred,
      including separately accounting for the portion of such distribution which
      is includible in gross income and the portion of such distribution which
      is not so includible.

                                   ARTICLE XII
                           ROLLOVERS FROM OTHER PLANS

Rollovers from other plans. The employer, operationally and on a
nondiscriminatory basis, may limit the source of rollover contributions that may
be accepted by this plan.

                                  ARTICLE XIII
                           REPEAL OF MULTIPLE USE TEST

Repeal of Multiple Use Test. The multiple use test described in Treasury
Regulation Section 1.401(m)-2 and the plan shall not apply for plan years
beginning after December 31, 2001.

                                   ARTICLE XIV
                               ELECTIVE DEFERRALS

14.1  Elective Deferrals - Contribution Limitation. No participant shall be
      permitted to have elective deferrals made under this plan, or any other
      qualified plan maintained by the employer during any taxable year, in
      excess of the dollar limitation contained in Section 402(g) of the Code in
      effect for such taxable year, except to the extent permitted under Article
      VI of this amendment and Section 414(v) of the Code, if applicable.

14.2  Maximum Salary Reduction Contributions for SIMPLE plans. If this is a
      SIMPLE 401(k) plan, then except to the extent permitted under Article VI
      of this amendment and Section 414(v) of the Code, if applicable, the
      maximum salary reduction contribution that can be made to this plan is the
      amount determined under Section 408(p)(2)(A)(ii) of the Code for the
      calendar year.

                                   ARTICLE XV
                           SAFE HARBOR PLAN PROVISIONS

Modification of Top-Heavy Rules. The top-heavy requirements of Section 416 of
the Code and the plan shall not apply in any year beginning after December 31,
2001, in which the plan consists solely of a cash or deferred arrangement which
meets the requirements of Section 401(k)(12) of the Code and matching
contributions with respect to which the requirements of Section 401(m)(11) of
the Code are met.

                                   ARTICLE XVI
                    DISTRIBUTION UPON SEVERANCE OF EMPLOYMENT

16.1  Effective date. This Article shall apply for distributions and
      transactions made after December 31, 2001, regardless of when the
      severance of employment occurred.

16.2  New distributable event. A participant's elective deferrals, qualified
      nonelective contributions, qualified matching contributions, and earnings
      attributable to these contributions shall be distributed on account of the
      participant's severance from employment. However, such a distribution
      shall be subject to the other provisions of the plan regarding
      distributions, other than provisions that require a separation from
      service before such amounts may be distributed.

(C) Copyright 2001 Qualified Plan Consultants, LLC 11/04

                                       5
<PAGE>

                                                                EGTRRA - Sponsor

Except with respect to any election made by the employer in Article II, this
amendment is hereby adopted by the prototype sponsor on behalf of all adopting
employers on:

[Sponsor's signature and Adoption Date are on file with Sponsor]

NOTE: The employer only needs to execute this amendment if an election has been
made in Article II of this amendment.

This amendment has been executed this _________________ day of
______________________________, ________.

Name of Employer: Horizon Federal Savings Bank
                  ----------------------------

By:
    -------------------------------------
                  EMPLOYER

Name of Plan: Horizon Federal Savings Bank 401(k) Plan
              ----------------------------------------

                                       6
<PAGE>

                                   POST-EGTRRA
                                AMENDMENT TO THE

                    HORIZON FEDERAL SAVINGS BANK 401(K) PLAN

<PAGE>

                                    ARTICLE I
                                    PREAMBLE

1.1   Adoption and effective date of amendment. This amendment of the plan is
      adopted to reflect certain provisions of the Economic Growth and Tax
      Relief Reconciliation Act of 2001 ("EGTRRA"), the Job Creation and Worker
      Assistance Act of 2002, IRS Regulations issued pursuant to IRC
      ss.401(a)(9), and other IRS guidance. This amendment is intended as good
      faith compliance with the requirements of EGTRRA and is to be construed in
      accordance with EGTRRA and guidance issued thereunder. Except as otherwise
      provided, this amendment shall be effective as of the first day of the
      first plan year beginning after December 31, 2001.

1.2   Supersession of inconsistent provisions. This amendment shall supersede
      the provisions of the plan to the extent those provisions are inconsistent
      with the provisions of this amendment.

1.3   Adoption by prototype sponsor. Except as otherwise provided herein,
      pursuant to Section 5.01 of Revenue Procedure 2000-20, the sponsor hereby
      adopts this amendment on behalf of all adopting employers.

                                   ARTICLE II
                          ADOPTION AGREEMENT ELECTIONS

      The questions in this Article II only need to be completed in order to
      override the default provisions set forth below. If all of the default
      provisions will apply, then these questions should be skipped.

      Unless the employer elects otherwise in this Article II, the following
      defaults apply:

      1.    If catch-up contributions are permitted, then the catch-up
            contributions are treated like any other elective deferrals for
            purposes of determining matching contributions under the plan.

      2.    For plans subject to the qualified joint and survivor annuity rules,
            rollovers are automatically excluded in determining whether the
            $5,000 threshold has been exceeded for automatic cash-outs (if the
            plan provides for automatic cash-outs). This is applied to all
            participants regardless of when the distributable event occurred.

      3.    The minimum distribution requirements are effective for distribution
            calendar years beginning with the 2002 calendar year. In addition,
            participants or beneficiaries may elect on an individual basis
            whether the 5-year rule or the life expectancy rule in the plan
            applies to distributions after the death of a participant who has a
            designated beneficiary.

      4.    Amounts that are "deemed 125 compensation" are not included in the
            definition of compensation.

2.1   Exclusion of Rollovers in Application of Involuntary Cash-out Provisions.
      If the plan is subject to the joint and survivor annuity rules and
      includes involuntary cash-out provisions, then unless one of the options
      below is elected, effective for distributions made after December 31,
      2001, rollover contributions will be excluded in determining the value of
      a participant's nonforfeitable account balance for purposes of the plan's
      involuntary cash-out rules.

      a. |_| Rollover contributions will not be excluded.

      b. |_| Rollover contributions will be excluded only with respect to
             distributions made after _____ (Enter a date no earlier than
             December 31, 2001).

      c. |_| Rollover contributions will only be excluded with respect to
             participants who separated from service after _____. (Enter a date.
             The date may be earlier than December 31, 2001.)

2.2   Catch-up contributions (for 401(k) profit sharing plans only): The plan
      permits catch-up contributions effective for calendar years beginning
      after December 31, 2001, (Article V) unless otherwise elected below.

      a. |_| The plan does not permit catch-up contributions to be made.

      b. |_| Catch-up contributions are permitted effective as of:_____ (enter a
             date no earlier than January 1, 2002).

      And, catch-up contributions will be taken into account in applying any
      matching contribution under the Plan unless otherwise elected below.

      c. |_| Catch-up contributions will not be taken into account in applying
             any matching contribution under the Plan.

2.3   Amendment for Section 401(a)(9) Final and Temporary Treasury Regulations.

      a.    Effective date. Unless a later effective date is specified in below,
            the provisions of Article VI of this amendment will apply for
            purposes of determining required minimum distributions for calendar
            years beginning with the 2002 calendar year.

<PAGE>

            |_|   This amendment applies for purposes of determining required
                  minimum distributions for distribution calendar years
                  beginning with the 2003 calendar year, as well as required
                  minimum distributions for the 2002 distribution calendar year
                  that are made on or after (leave blank if this amendment does
                  not apply to any minimum distributions for the 2002
                  distribution calendar year).

      b.    Election to not permit Participants or Beneficiaries to Elect 5-Year
            Rule.

            Unless elected below, Participants or beneficiaries may elect on an
            individual basis whether the 5-year rule or the life expectancy rule
            in Sections 6.2.2 and 6.4.2 of this amendment applies to
            distributions after the death of a Participant who has a designated
            beneficiary. The election must be made no later than the earlier of
            September 30 of the calendar year in which distribution would be
            required to begin under Section 6.2.2 of this amendment, or by
            September 30 of the calendar year which contains the fifth
            anniversary of the Participant's (or, if applicable, surviving
            spouse's) death. If neither the Participant nor beneficiary makes an
            election under this paragraph, distributions will be made in
            accordance with Sections 6.2.2 and 6.4.2 of this amendment and, if
            applicable, the elections in Section 2.3.c of this amendment below.

            |_|   The provision set forth above in this Section 2.3.b shall not
                  apply. Rather, Sections 6.2.2 and 6.4.2 of this amendment
                  shall apply except as elected in Section 2.3.c of this
                  amendment below.

      c.    Election to Apply 5-Year Rule to Distributions to Designated
            Beneficiaries.

            |_|   If the Participant dies before distributions begin and there
                  is a designated beneficiary, distribution to the designated
                  beneficiary is not required to begin by the date specified in
                  the Plan, but the Participant's entire interest will be
                  distributed to the designated beneficiary by December 31 of
                  the calendar year containing the fifth anniversary of the
                  Participant's death. If the Participant's surviving spouse is
                  the Participant's sole designated beneficiary and the
                  surviving spouse dies after the Participant but before
                  distributions to either the Participant or the surviving
                  spouse begin, this election will apply as if the surviving
                  spouse were the Participant.

                  If the above is elected, then this election will apply to:

                  1. |_| All distributions.

                  2. |_| The following distributions: _____.

      d.    Election to Allow Designated Beneficiary Receiving Distributions
            Under 5-Year Rule to Elect Life Expectancy Distributions.

            |_|   A designated beneficiary who is receiving payments under the
                  5-year rule may make a new election to receive payments under
                  the life expectancy rule until December 31, 2003, provided
                  that all amounts that would have been required to be
                  distributed under the life expectancy rule for all
                  distribution calendar years before 2004 are distributed by the
                  earlier of December 31, 2003, or the end of the 5-year period.

2.4   Deemed 125 Compensation. Article VII of this amendment shall not apply
      unless otherwise elected below.

            |_|   Article VII of this amendment (Deemed 125 Compensation) shall
                  apply effective as of Plan Years and Limitation Years
                  beginning on or after ______ (insert the later of January 1,
                  1998, or the first day of the first plan year the Plan used
                  this definition).

                                   ARTICLE III
                              INVOLUNTARY CASH-OUTS

3.1   Applicability and effective date. If the plan is subject to the qualified
      joint and survivor annuity rules and provides for involuntary cash-outs of
      amounts less than $5,000, then unless otherwise elected in Section 2.1 of
      this amendment, this Article shall apply for distributions made after
      December 31, 2001, and shall apply to all participants.

3.2   Rollovers disregarded in determining value of account balance for
      involuntary distributions. For purposes of the Sections of the plan that
      provide for the involuntary distribution of vested accrued benefits of
      $5,000 or less, the value of a participant's nonforfeitable account
      balance shall be determined without regard to that portion of the account
      balance that is attributable to rollover contributions (and earnings
      allocable thereto) within the meaning of Sections 402(c), 403(a)(4),
      403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) of the Code. If the value of
      the participant's nonforfeitable account balance as so determined is
      $5,000 or less, then the plan shall immediately distribute the
      participant's entire nonforfeitable account balance.

<PAGE>

                                   ARTICLE IV
                             HARDSHIP DISTRIBUTIONS

Reduction of Section 402(g) of the Code following hardship distribution. If the
plan provides for hardship distributions upon satisfaction of the safe harbor
(deemed) standards as set forth in Treas. Reg. Section 1.401(k)-1(d)(2)(iv),
then effective as of the date the elective deferral suspension period is reduced
from 12 months to 6 months pursuant to EGTRRA, there shall be no reduction in
the maximum amount of elective deferrals that a Participant may make pursuant to
Section 402(g) of the Code solely because of a hardship distribution made by
this plan or any other plan of the Employer.

                                    ARTICLE V
                             CATCH-UP CONTRIBUTIONS

Catch-up Contributions. Unless otherwise elected in Section 2.2 of this
amendment, effective for calendar years beginning after December 31, 2001, all
employees who are eligible to make elective deferrals under this plan and who
have attained age 50 before the close of the calendar year shall be eligible to
make catch-up contributions in accordance with, and subject to the limitations
of, Section 414(v) of the Code. Such catch-up contributions shall not be taken
into account for purposes of the provisions of the plan implementing the
required limitations of Sections 402(g) and 415 of the Code. The plan shall not
be treated as failing to satisfy the provisions of the plan implementing the
requirements of Sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of
the Code, as applicable, by reason of the making of such catch-up contributions.

If elected in Section 2.2, catch-up contributions shall not be treated as
elective deferrals for purposes of applying any Employer matching contributions
under the plan.

                                   ARTICLE VI
                         REQUIRED MINIMUM DISTRIBUTIONS

6.1   GENERAL RULES

6.1.1 Effective Date. Unless a later effective date is specified in Section
      2.3.a of this amendment, the provisions of this amendment will apply for
      purposes of determining required minimum distributions for calendar years
      beginning with the 2002 calendar year.

6.1.2 Coordination with Minimum Distribution Requirements Previously in Effect.
      If the effective date of this amendment is earlier than calendar years
      beginning with the 2003 calendar year, required minimum distributions for
      2002 under this amendment will be determined as follows. If the total
      amount of 2002 required minimum distributions under the Plan made to the
      distributee prior to the effective date of this amendment equals or
      exceeds the required minimum distributions determined under this
      amendment, then no additional distributions will be required to be made
      for 2002 on or after such date to the distributee. If the total amount of
      2002 required minimum distributions under the Plan made to the distributee
      prior to the effective date of this amendment is less than the amount
      determined under this amendment, then required minimum distributions for
      2002 on and after such date will be determined so that the total amount of
      required minimum distributions for 2002 made to the distributee will be
      the amount determined under this amendment.

6.1.3 Precedence. The requirements of this amendment will take precedence over
      any inconsistent provisions of the Plan.

6.1.4 Requirements of Treasury Regulations Incorporated. All distributions
      required under this amendment will be determined and made in accordance
      with the Treasury regulations under Section 401(a)(9) of the Internal
      Revenue Code.

6.1.5 TEFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of
      this amendment, distributions may be made under a designation made before
      January 1, 1984, in accordance with Section 242(b)(2) of the Tax Equity
      and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that
      relate to Section 242(b)(2) of TEFRA.

6.2   TIME AND MANNER OF DISTRIBUTION

6.2.1 Required Beginning Date. The Participant's entire interest will be
      distributed, or begin to be distributed, to the Participant no later than
      the Participant's required beginning date.

6.2.2 Death of Participant Before Distributions Begin. If the Participant dies
      before distributions begin, the Participant's entire interest will be
      distributed, or begin to be distributed, no later than as follows:

      (a) If the Participant's surviving spouse is the Participant's sole
      designated beneficiary, then, except as provided in Article VI,
      distributions to the surviving spouse will begin by December 31 of the
      calendar year immediately following the calendar year in which the
      Participant died, or by December 31 of the calendar year in which the
      Participant would have attained age 70 1/2, if later.

<PAGE>

      (b) If the Participant's surviving spouse is not the Participant's sole
      designated beneficiary, then, except as provided in Section 2.3 of this
      amendment, distributions to the designated beneficiary will begin by
      December 31 of the calendar year immediately following the calendar year
      in which the Participant died.

      (c) If there is no designated beneficiary as of September 30 of the year
      following the year of the Participant's death, the Participant's entire
      interest will be distributed by December 31 of the calendar year
      containing the fifth anniversary of the Participant's death.

      (d) If the Participant's surviving spouse is the Participant's sole
      designated beneficiary and the surviving spouse dies after the Participant
      but before distributions to the surviving spouse begin, this Section
      6.2.2, other than Section 6.2.2(a), will apply as if the surviving spouse
      were the Participant.

      For purposes of this Section 6.2.2 and Section 2.3, unless Section
      6.2.2(d) applies, distributions are considered to begin on the
      Participant's required beginning date. If Section 6.2.2(d) applies,
      distributions are considered to begin on the date distributions are
      required to begin to the surviving spouse under Section 6.2.2(a). If
      distributions under an annuity purchased from an insurance company
      irrevocably commence to the Participant before the Participant's required
      beginning date (or to the Participant's surviving spouse before the date
      distributions are required to begin to the surviving spouse under Section
      6.2.2(a)), the date distributions are considered to begin is the date
      distributions actually commence.

6.2.3 Forms of Distribution. Unless the Participant's interest is distributed in
      the form of an annuity purchased from an insurance company or in a single
      sum on or before the required beginning date, as of the first distribution
      calendar year distributions will be made in accordance with Sections 6.3
      and 6.4 of this amendment. If the Participant's interest is distributed in
      the form of an annuity purchased from an insurance company, distributions
      thereunder will be made in accordance with the requirements of Section
      401(a)(9) of the Code and the Treasury regulations.

6.3   REQUIRED MINIMUM DISTRIBUTIONS DURING PARTICIPANT'S LIFETIME

6.3.1 Amount of Required Minimum Distribution For Each Distribution Calendar
      Year. During the Participant's lifetime, the minimum amount that will be
      distributed for each distribution calendar year is the lesser of:

      (a) the quotient obtained by dividing the Participant's account balance by
      the distribution period in the Uniform Lifetime Table set forth in Section
      1.401(a)(9)-9 of the Treasury regulations, using the Participant's age as
      of the Participant's birthday in the distribution calendar year; or

      (b) if the Participant's sole designated beneficiary for the distribution
      calendar year is the Participant's spouse, the quotient obtained by
      dividing the Participant's account balance by the number in the Joint and
      Last Survivor Table set forth in Section 1.401(a)(9)-9 of the Treasury
      regulations, using the Participant's and spouse's attained ages as of the
      Participant's and spouse's birthdays in the distribution calendar year.

6.3.2 Lifetime Required Minimum Distributions Continue Through Year of
      Participant's Death. Required minimum distributions will be determined
      under this Section 6.3 beginning with the first distribution calendar year
      and up to and including the distribution calendar year that includes the
      Participant's date of death.

6.4   REQUIRED MINIMUM DISTRIBUTIONS AFTER PARTICIPANT'S DEATH

6.4.1 Death On or After Date Distributions Begin.
      -------------------------------------------

            (a) Participant Survived by Designated Beneficiary. If the
      Participant dies on or after the date distributions begin and there is a
      designated beneficiary, the minimum amount that will be distributed for
      each distribution calendar year after the year of the Participant's death
      is the quotient obtained by dividing the Participant's account balance by
      the longer of the remaining life expectancy of the Participant or the
      remaining life expectancy of the Participant's designated beneficiary,
      determined as follows:

            (1) The Participant's remaining life expectancy is calculated using
            the age of the Participant in the year of death, reduced by one for
            each subsequent year.

            (2) If the Participant's surviving spouse is the Participant's sole
            designated beneficiary, the remaining life expectancy of the
            surviving spouse is calculated for each distribution calendar year
            after the year of the Participant's death using the surviving
            spouse's age as of the spouse's birthday in that year. For
            distribution calendar years after the year of the surviving spouse's
            death, the remaining life expectancy of the surviving spouse is
            calculated using the age of the surviving spouse as of the spouse's
            birthday in the calendar year of the spouse's death, reduced by one
            for each subsequent calendar year.

            (3) If the Participant's surviving spouse is not the Participant's
            sole designated beneficiary, the designated beneficiary's remaining
            life expectancy is calculated using the age of the beneficiary in
            the year following the year of the Participant's death, reduced by
            one for each subsequent year.

<PAGE>

            (b) No Designated Beneficiary. If the Participant dies on or after
      the date distributions begin and there is no designated beneficiary as of
      September 30 of the year after the year of the Participant's death, the
      minimum amount that will be distributed for each distribution calendar
      year after the year of the Participant's death is the quotient obtained by
      dividing the Participant's account balance by the Participant's remaining
      life expectancy calculated using the age of the Participant in the year of
      death, reduced by one for each subsequent year.

6.4.2 Death Before Date Distributions Begin.

      (a) Participant Survived by Designated Beneficiary. Except as provided in
      Section 2.3, if the Participant dies before the date distributions begin
      and there is a designated beneficiary, the minimum amount that will be
      distributed for each distribution calendar year after the year of the
      Participant's death is the quotient obtained by dividing the Participant's
      account balance by the remaining life expectancy of the Participant's
      designated beneficiary, determined as provided in Section 6.4.1.

      (b) No Designated Beneficiary. If the Participant dies before the date
      distributions begin and there is no designated beneficiary as of September
      30 of the year following the year of the Participant's death, distribution
      of the Participant's entire interest will be completed by December 31 of
      the calendar year containing the fifth anniversary of the Participant's
      death.

      (c) Death of Surviving Spouse Before Distributions to Surviving Spouse Are
      Required to Begin. If the Participant dies before the date distributions
      begin, the Participant's surviving spouse is the Participant's sole
      designated beneficiary, and the surviving spouse dies before distributions
      are required to begin to the surviving spouse under Section 6.2.2(a), this
      Section 6.4.2 will apply as if the surviving spouse were the Participant.

6.5   DEFINITIONS

6.5.1 Designated beneficiary. The individual who is designated as the
      Beneficiary under the Plan and is the designated beneficiary under Section
      401(a)(9) of the Internal Revenue Code and Section 1.401(a)(9)-1, Q&A-4,
      of the Treasury regulations.

6.5.2 Distribution calendar year. A calendar year for which a minimum
      distribution is required. For distributions beginning before the
      Participant's death, the first distribution calendar year is the calendar
      year immediately preceding the calendar year which contains the
      Participant's required beginning date. For distributions beginning after
      the Participant's death, the first distribution calendar year is the
      calendar year in which distributions are required to begin under Section
      6.2.2. The required minimum distribution for the Participant's first
      distribution calendar year will be made on or before the Participant's
      required beginning date. The required minimum distribution for other
      distribution calendar years, including the required minimum distribution
      for the distribution calendar year in which the Participant's required
      beginning date occurs, will be made on or before December 31 of that
      distribution calendar year.

6.5.3 Life expectancy. Life expectancy as computed by use of the Single Life
      Table in Section 1.401(a)(9)-9 of the Treasury regulations.

6.5.4 Participant's account balance. The account balance as of the last
      valuation date in the calendar year immediately preceding the distribution
      calendar year (valuation calendar year) increased by the amount of any
      contributions made and allocated or forfeitures allocated to the account
      balance as of the dates in the valuation calendar year after the valuation
      date and decreased by distributions made in the valuation calendar year
      after the valuation date. The account balance for the valuation calendar
      year includes any amounts rolled over or transferred to the Plan either in
      the valuation calendar year or in the distribution calendar year if
      distributed or transferred in the valuation calendar year.

6.5.5 Required beginning date. The date specified in the Plan when distributions
      under Section 401(a)(9) of the Internal Revenue Code are required to
      begin.

                                   ARTICLE VII
                             DEEMED 125 COMPENSATION

If elected, this Article shall apply as of the effective date specified in
Section 2.4 of this amendment. For purposes of any definition of compensation
under this Plan that includes a reference to amounts under Section 125 of the
Code, amounts under Section 125 of the Code include any amounts not available to
a Participant in cash in lieu of group health coverage because the Participant
is unable to certify that he or she has other health coverage. An amount will be
treated as an amount under Section 125 of the Code only if the Employer does not
request or collect information regarding the Participant's other health coverage
as part of the enrollment process for the health plan.

<PAGE>

Except with respect to any election made by the employer in Article II, this
amendment is hereby adopted by the prototype sponsor on behalf of all adopting
employers on

[Sponsor's signature and Adoption Date are on file with Sponsor]

NOTE: The employer only needs to execute this amendment if an election has been
made in Article II of this amendment.

This amendment has been executed this _________________ day of
______________________________, ________.

Name of Plan: Horizon Federal Savings Bank 401(k) Plan
              ----------------------------------------

Name of Employer: Horizon Federal Savings Bank
                 -------------------------------------

By:   ---------------------------------------------------
                        EMPLOYER

Name of Participating Employer:
                                ----------------------

By:
    ---------------------------------------------------
          PARTICIPATING EMPLOYERExhibit 10.12

                   BUSINESS LOAN AGREEMENT (ASSET BASED)
===========================================================================

Borrower:   Petmed Express Inc.        Lender: RBC CENTURA BANK
            1441 SW 29th Ave                   Boca Raton, FL
            Pompano Beach, FL 30369            Lending Service Center (FL)
                                               2801 PGA Blvd. Suite 280H
                                               Palm Beach Gardens, FL 33410

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

THIS BUSINESS LOAN AGREEMENT (ASSET BASED) dated November 2, 2004, is made
and executed between Petmed Express, Inc. ("Borrower") and RBC CENTURA
BANK ("lender") on the following terms and conditions. Borrower has
received prior commercial loans from lender or has applied to lender for a
commercial loan or loans or other financial accommodations, including
those which may be described on any exhibit or schedule attached to this
agreement ("loan"). Borrower understands and agrees that: (A) in the
granting, renewing, or extending any loan, lender is relying upon
Borrower's representations, warranties and agreements as set forth in this
Agreement; (B) the granting, renewing, or any Loan by Lender at all times
shall be subject to lender's sole judgment and discretion; and (C) all
such Loans shall be and remains subject to the terms and conditions of
this Agreement.

TERM.  This Agreement shall be affective as of November 2, 2004, and shall
continue in full force and effect until such time as all of borrower's
Loans in favor of lender have been paid in full, including principal,
interests, costs, expenses, attorney's fees, and other fees and charges,
or  until November 1 2005.

ADVANCED AUTHORITY.  The following person currently is authorized, except
as provided in this paragraph, to request advances and authorize payments
under the line of credit until lender receives from borrower, at lender's
address shown above, written notice of revocation of his or her authority:
Bruce Rosenbloom. Borrowing base advances:

Inventory advances shall be on 50 % of eligible inventory including a sub
limit, which limit reliance on prescription drug inventory to a maximum of
$2,000,000.00 ($4,000,000.00 prescription inventory at 50% advance rate).
The bank reserves the right to request an inventory audit at any time.
Stale dated inventory shall be excluded from the borrowing base. This will
be checked annually by the company's auditor.

LINE OF CREDIT.  Lender agrees to make Advances to borrower from time to
time from the date of this agreement to the Expiration Date, provided the
aggregate amount of such Advances outstanding at any time does not exceed
the Borrowing Base. Within the foregoing limits, Borrower may borrow,
partially or wholly prepay and reborrow under this Agreement as follows:

  Conditions Precedent to Each Advance. Lender's obligation to make
  any Advance to or for the account of borrower under this Agreement
  is subject to the following conditions precedent, with all
  documents, instruments, opinions, report, and other items required
  under this Agreement to be in form and substance satisfactory to
  Lender:

    (1)     Lender shall have received evidence that this Agreement
            and all Related Documents have been duly authorized,
            executed, and delivered by Borrower to Lender.
    (2)     Lender shall have received such opinions of counsel,
            supplemental opinion and documents that Lender may request.
    (3)     The security interests in the collateral shall have been
            duly authorized, created, and perfected with first lien
             priority and shall be in full force an effect
    (4)     All guaranties required by Lender for the credit
            facility (ies) shall have been executed by each Guarantor,
            delivered to Lender, and be in full force and effect.
    (5)     Lender, at this option and for its sole benefit, shall
            have conducted and audit of Borrower's Inventory, Books,
            records, and operations, and Lender shall be satisfied as
            to their condition.
    (6)     Borrower shall have paid to lender all fees, costs, and
            expenses specified in this Agreement and the related
            Documents as are then due and payable.
    (7)     There shall not exist at the time of any Advance a
            condition which would constitute an Event of Default under
            this agreement and Borrower shall have delivered to Lender
            the compliance certificate called for in the paragraph
            below title "Compliance Certificate".

  Making Loan Advances. Advances under this credit facility, as well
  as directions for payment from borrower's accounts, may be requested
  orally or writing by authorized persons. Lender may, but need not,
  require that oral requests be confirmed in writing. Each advance
  shall be conclusively deemed to have been made at the request of and
  for the benefits of Borrower  (1)  when credited to any deposit
  account of Borrower maintained with Lender or  (2)  when advanced in
  accordance with the instructions of an authorized person. Lender, at
  its option, may set a cutoff time, after which all requests for
  Advances will be treated as having been requested on the next
  succeeding Business Day.

  Mandatory Loan Repayments. If at any time the aggregate principal
  amount of the outstanding Advances shall exceed the applicable
  Borrowing Base, Borrower, immediately upon written or oral notice
  from Lender, shall pay to Lender an amount equal to the difference
  between the outstanding and all accrued unpaid interest, together
  with all other applicable fees, costs and charges, if any, not yet
  paid.

  Loan Account.  Lender shall maintain on its books a record of
  account in which Lender shall make entries for each Advance and such
  other debits and credits as shall be appropriate in connection with
  the credit facility. Lender shall provide Borrower periodic
  statements of Borrower's account, which statements shall be
  considered to be correct and conclusively binding on Borrower unless
  Borrower notifies Lender to the contrary within thirty (30) days
  after Borrower's receipt of any such statement which Borrower deems
  to be incorrect.

COLLATERAL.  To secure payment of the Primary Credit Facility and
performance of all other loan, obligations and duties owed by Borrower to
Lender, Borrower (and others, if required) shall grant to lender Security
Interests in such property and assets as lender may require. Lender's
Security Interests in the collateral shall be continuing liens and shall
include the proceeds and products of the collateral, including without
limitations the proceeds of any insurance. With respect to the collateral,
Borrower agrees and represents and warrants to Lender.

  Perfection of Security Interests. Borrower agrees to execute all
  documents perfecting Lender's Security Interests and to take
  whatever actions are requested by Lender to perfect and continue
  Lender's Security Interests in the collateral. Upon request of
  Lender, Borrower will deliver to lender any and all of the documents
  evidencing or constituting the Collateral and Borrower will note
  Lender's interests upon any and all chattel paper and instruments if
  not delivered to lender for possession by lender. Contemporaneous
  with the execution of this Agreement, Borrower will execute one or
  more UCC financing statements and any similar statements as may be
  required by applicable law, and lender will file such financing
  statements and all such similar statements as may be required in the
  appropriate location or locations Borrower hereby appoints Lender as
  its irrevocable attorney-in-fact for the purpose of executing any
  documents necessary to perfect or to continue any Security interest.
  Lender may at any time, and without further authorization from
  Borrower, file a carbon, photograph, facsimile, or other
  reproduction of any financing statement for use as a financing
  statement.  Borrower will reimburse Lender for all expenses for the
  perfection, termination, and the continuation of the perfection of
  Lender's security interest in the Collateral.  Borrower promptly
  will notify Lender before any change in Borrower's name including
  any change to the assumed business names of Borrower.  Borrower also
  promptly will notify before any change in Borrower's Social Security
  Number or Employer Identification Number.  Borrower further agrees
  to notify Lender in writing prior to any change in address or
  location of Borrower's principal governance office or should
  Borrower merge or consolidate with any other entity.

  Collateral Records.  Borrower does now, and at all times hereafter
  shall, keep correct and accurate records of the Collateral, all of
  which records shall be available to Lender or Lender's
  representative upon demand for inspection and copying at any
  reasonable time.  With respect to the inventory, Borrower agrees to
  keep and maintain such records as Lender may require, including
  without limitation information concerning Eligible Inventory and
  records itemizing and describing the kind, type, quality, and
  quantity of Inventory, Borrower's Inventory costs and selling
  prices, and the daily withdrawals and additions to Inventory.
  Records related to Inventory are or will be located at.  The above
  is an accurate and complete list of all locations at which Borrower
  keeps or maintains business records concerning Borrower's
  collateral.

  Collateral Schedules.  Concurrently with the execution and delivery
  of this Agreement, Borrower shall execute and deliver to Lender
  schedules of Inventory and schedules of Eligible Inventory in form
  and substance satisfactory to the Lender.  Thereafter supplemental
  schedules shall be delivered according to the following schedule:

  Representations and Warranties Concerning Inventory.  With respect
  to the Inventory, Borrower represents and warrants to Lender:  (1)
  All Inventory represented by Borrower to be Eligible Inventory for
  purposes of this Agreement conforms to the requirements of the
  definition of Eligible Inventory; (2) All Inventory values listed on
  schedules delivered to Lender will be true and correct, subject to
  immaterial variance; (3) The value of the Inventory will be
  determined on a consistent accounting basis; (4) Except as agreed to
  the contrary by Lender in writing, all Eligible Inventory is now and
  at all times hereafter will be in Borrower's physical possession and
  shall not be held by others on consignment, sale on approval, or
  sale or return; (5) Except as reflected in the Inventory schedules
  delivered to Lender, all Eligible Inventory is now and at all times
  hereafter will be of good and merchantable quality, free from
  defects; (6) Eligible Inventory is not now

                        Exhibit 10.12 Page 1 of 29

<PAGE>

                    BUSINESS LOAN AGREEMENT (ASSET BASED)
                                 (Continued)                         Page 2
===========================================================================

  and will not at any time hereafter be stored with a bailee,
  warehouseman, or similar party without Lender's prior written
  consent, and, in such event, Borrower will concurrently at the time
  of bailment cause any such bailee, warehouseman, or similar party to
  issue and deliver to Lender, in form acceptable to Lender, warehouse
  receipts in Lender name evidencing the storage of Inventory; and (7)
  Lender, its assigns, or agents shall have the right at any time and
  at Borrower's expense to inspect and examine the Inventory and to
  check and test the same as to quality, quantity, value, and
  condition.

CONDITIONS PRECENDENT TO EACH ADVANCE.  Lender's obligation to make the
initial Advance and each subsequent Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the
conditions set forth in this Agreement and in the Related Documents.

  Loan Documents.  Borrower shall provide to Lender the following
  documents for the Loan:  (1) the Note; (2) Security Agreements
  granting to Lender security interests in the Collateral; (3)
  financing statements and all other documents perfecting Lender's
  Security Interests; (4) evidence of insurance as required below; (5)
  guaranties; (6) together with all such Related Documents as Lender
  may require for the Loan; all in form and substance satisfactory to
  Lender and Lender's counsel.

  Borrower's Authorization.  Borrower shall have provided in form and
  substance satisfactory to Lender properly certified resolutions,
  duly authorizing the execution and delivery of this Agreement, the
  Note and the Related Documents.  In addition, Borrower shall have
  provided such other resolutions, authorizations, documents and
  instruments as Lender or its counsel, may require.

  Fees and Expenses Under This Agreement.  Borrower shall have paid to
  Lender all fees, costs, and expenses specified in this Agreement and
  Related Documents as are then due and payable.

  Representation and Warranties.  The representations and warranties
  set forth in this Agreement, in the Related Documents, and in any
  document or certificate delivered to Lender under this Agreement are
  true and correct.

  No Event of Default.  There shall not exist at the time of any
  Advance a condition which would constitute an Event of Default under
  this Agreement or under any Related Document.

REPRESENTATIONS AND WARRANTIES.  Borrower represents and warrants to
Lender, as of the date of this Agreement, as of the date of each
disbursement of loan proceeds, as of the date of any Loan, and at all
times any Indebtedness exists:

  Organization.  Borrower is a corporation for profit which is, and at
  all times shall be, duly organized, validly existing, and in good
  standing under and by virtue of the laws of the State of Florida.
  Borrower has the full power and authority to own its properties and
  to transact the business in which it is presently engaged or
  presently proposes to engage.  Borrower maintains an office at 1441
  SW 29th Ave., Pompano Beach, FL 33069.  Unless Borrower has
  designated otherwise in writing, the principal office is the office
  at which Borrower keeps its books and records including its records
  concerning the Collateral.  Borrower will notify Lender prior to any
  change in the location of Borrower's state of organization or any
  change in Borrower's name.  Borrower shall do all things necessary
  to preserve and to keep in full force and effect its existence,
  rights and privileges, and shall comply with all regulations, rules,
  ordinances, statutes, orders and decrees of any governmental or
  quasi-governmental authority or court applicable to Borrower and
  Borrower's business activities.

  Assumed Business Name.  Borrower has filed or recorded all documents
  or filings required by law relating to all assumed business names
  used by Borrower.  Excluding the name of Borrower, the following is
  a complete list of all assumed business names under which Borrower
  does business:  None.

  Authorization.  Borrower's execution, delivery, and performance of
  this Agreement and all the Related Documents have been duly
  authorized by all necessary action by Borrower and to not conflict
  with, result in a violation of, or constitute a default under (1)
  any provision of (a) Borrower's articles of incorporation or
  organization, or bylaws, or (b) any agreement or other instrument
  binding upon Borrower or (2) any law, governmental regulation, court
  decree, or order applicable to Borrower or to Borrower's properties.

  Financial Information.  Each of Borrower's financial statements
  supplied to Lender truly and completely disclosed Borrower's
  financial condition as of the date of the statement, and there has
  been no material adverse change in Borrower's financial condition
  subsequent to the date of the most recent financial statement
  supplied to Lender.  Borrower has no material contingent obligations
  except as disclosed in such financial statements.

  Legal Effect.  This Agreement constitutes, and any instrument or
  agreement Borrower is required to give under this Agreement when
  delivered will constitute legal, valid, and binding obligations of
  Borrower enforceable against Borrower in accordance with their
  respective terms.

  Properties.  Except as contemplated by this Agreement or as
  previously disclosed in Borrower's financial statements or in
  writing to Lender and as accepted by Lender, and except for property
  tax liens for taxes not presently due and payable, Borrower owns and
  has good title to all of Borrower's properties free and clear of all
  Security Interests, and has not executed any security documents or
  financing statements relating to such properties.  All of Borrower's
  properties are titled in Borrower's legal name, and Borrower has not
  used or filed a financing statement under any other name for at
  least the last five (5) years.
  Hazardous Substances.  Except as disclosed to and acknowledged by
  Lender in writing, Borrower represents and warrants that: (1) During
  the period of Borrower's ownership of Borrower's Collateral, there
  has been no use, generation, manufacture, storage, treatment,
  disposal, release or threatened release of any Hazardous Substance
  by any person on, under, about or from any of the Collateral.  (2)
  Borrower has no knowledge of, or reason to believe that there has
  been (a) any breach or violation of any Environment Laws; (b) any
  use, generation, manufacture, storage, treatment, disposal, release
  or threatened release of any Hazardous Substance on, under, about or
  from the Collateral by any prior owners or occupants of any of the
  Collateral; or (c) any actual or threatened litigation or claims of
  any kind by any person relating to such matters.  (3) Neither
  Borrower nor any tenant, contractor, agent or other authorized user
  of any of the Collateral shall use, generate, manufacture, store,
  treat, dispose of or release any Hazardous Substance on, under,
  about or from any of the Collateral; and any such activity shall be
  conducted in compliance with all applicable federal, state, and
  local laws, regulations, and ordinances, including without
  limitation all Environmental Laws.  Borrower authorizes Lender and
  its agents to enter upon the Collateral to make such inspections and
  tests as Lender may deem appropriate to determine compliance of the
  Collateral with this section of the Agreement.  Any inspections or
  tests made by Lender shall be at Borrower's expense and for Lender's
  purposes only and shall not be construed to create any
  responsibility or liability on the part of Lender to Borrower or to
  any other person.  The representations and warranties contained
  herein are based on Borrower's due diligence in investigating the
  Collateral for hazardous waste and Hazardous Substances.  Borrower
  hereby (1) releases and waives any future claims against Lender for
  indemnity or contribution in the event  Borrower becomes liable for
  cleanup or other costs under any such laws, and (2) agrees to
  indemnify and hold harmless Lender against any and all claims,
  losses, liabilities, damages, penalties, and expenses which Lender
  may directly or indirectly sustain or suffer resulting from a breach
  of this section of the Agreement or as a consequence of any use,
  generation, manufacture, storage, disposal, release or threatened
  release of a hazardous waste or substance on the Collateral.  The
  provisions of this section of the Agreement, including the
  obligation to indemnify, shall survive the payment of the
  Indebtedness and the termination, expiration or satisfaction of this
  Agreement and shall not be affected by Lender's acquisition of any
  interest in any of the Collateral, whether by foreclosure or
  otherwise.

  Litigation and Claims.  No litigation, claim, investigation,
  administrative proceeding or similar action (including those for
  unpaid taxes) against Borrower is pending or threatened, and no
  other event has occurred which may materially adversely affect
  Borrower's financial condition or properties , other than
  litigation, claims, or other events, if any, that have been
  disclosed to and acknowledged by Lender in writing.

  Taxes.  To the best of Borrower's knowledge, all of Borrower's tax
  returns and reports that are or were required to be filed, have been
  filed, and all taxes, assessments and other governmental charges
  have been paid in full, except those presently being or to be
  contested by Borrower in good faith in the ordinary course of
  business and for which adequate reserves have been provided.

  Lien Priority.  Unless otherwise previously disclosed to Lender in
  writing, Borrower has not entered into or granted any Security
  Agreements, or permitted the filing or attachment of any Security
  Interests on or affecting any of the Collateral directly or
  indirectly securing repayment of Borrower's Loan and Note, that
  would be prior or that may in any way be superior to Lender's
  Security Interests and rights in and to such Collateral.

  Binding Effect.  This Agreement, the Note, all Security Agreements
  (if any), and all Related Documents are binding upon the signers
  thereof, as well as upon their successors, representatives and
  assigns, and are legally enforceable in accordance with their
  respective terms.

AFFIRMATIVE COVENANTS.  Borrower covenants and agrees with Lender that, so
long as this Agreement remains in effect, Borrower will:

  Notices of Claims and Litigation.  Promptly inform Lender in writing
  of (1) all material adverse changes in Borrower's financial
  condition, and (2) all existing and all threatened litigation,
  claims, investigations, administrative proceedings or similar
  actions affecting Borrower or any Guarantor which could materially
  affect the financial condition of Borrower or the financial
  condition of any Guarantor.

  Financial Records.  Maintain its books and records in accordance
  with GAAP, applied on a consistent basis, and permit Lender to
  examine and audit Borrower's books and records at all reasonable
  times.

                        Exhibit 10.12 Page 2 of 29

<PAGE>

                    BUSINESS LOAN AGREEMENT (ASSET BASED)
                                 (Continued)                         Page 3
===========================================================================

Financial Statements.  Furnish Lender with the following:

    Annual Statements.  As soon as available, but in no event
    later than ninety (90) days after the end of each fiscal year,
    Borrower's balance sheet and income statement for the year
    ended, audited by a certified public accountant satisfactory
    to Lender.

    Interim Statements.  As soon as available, but in no event
    later than 15 days after the end of each month, Borrower's
    balance sheet and profit and loss statement for the period
    ended, prepared by Borrower.

    Tax Returns.  As soon as available, but in no event later than
    (30) days after the applicable filing date for the tax
    reporting period ended, Federal and other governmental tax
    returns, prepared by Borrower.

    Additional Requirements.  Corporate financial statements
    (unaudited) required monthly 15 days after each month.

    Borrowing base certificate required monthly 15 days after each
    month.

    Corporate financial statements (10-Q) required quarterly 45
    days after each quarter.

    Corporate financial statements, audited (10-K) required
    annually 90 days after each year.

    Business plan required annually 45 days after each year.

  All financial reports required to be provided under this Agreement
  shall be prepared in accordance with GAAP, applied on a consistent
  basis, and certified by Borrower as being true and correct.

  Additional Information.  Furnish such additional information and
  statements, as Lender may request from time to time.

  Financial Covenants and Ratios.  Comply with the following covenants
  and ratios:

    Tangible Net Worth Requirements.  Maintain a minimum Tangible
    net Worth of not less than:  $14,000,000.00.  Other Net Worth
    requirements are as follows:  Minimum tangible net worth of at
    least $14,000,000.00 (TNW means Shareholder equity minus all
    assets that would be classified as intangible under GAAP, net
    of amortization).

    Other Requirements.  Borrower not to incur additional
    indebtedness in excess of $500,000.00 (in aggregate) without
    prior written consent of the Bank.

    Borrower must maintain a minimum of $2,000,000.00 of product
    liability insurance at all times.

    Except as provided above, all computations made to determine
    compliance with the requirements contained in this paragraph
    shall be made in accordance with generally accepted accounting
    principles, applied on a consistent basis, and certified by
    Borrower as being true and correct.

  Insurance.  Maintain fire and other risk insurance, public liability
  insurance, and such other insurance as Lender may require with
  respect to Borrower's properties and operations, in form, amounts,
  coverages and with insurance companies acceptable to Lender.
  Borrower, upon request of Lender, will deliver to Lender from time
  to time the policies or certificates of insurance in form
  satisfactory to Lender, including stipulations that coverages will
  not be cancelled or diminished without at least ten (10) days prior
  written notice to Lender.  Each insurance policy also shall include
  an endorsement providing that coverage in favor of Lender will not
  be impaired in any way by any act, omission or default of Borrower
  or any other person.  In connection with all policies covering
  assets in which Lender holds or is offered a security interest for
  the Loans, Borrower will provide Lender with such lender's loss
  payable or other endorsements as Lender may require.

  Insurance Reports.  Furnish to Lender, upon request of Lender,
  reports on each existing insurance policy showing such information
  as Lender may reasonably request, including without limitation the
  following:  (1) the name of the insurer; (2) the risks insured; (3)
  the amount of the policy; (4) the properties insured;  (5) the then
  current property values on the basis of which insurance has been
  obtained, and the manner of determining those values;  and (6) the
  expiration date of the policy.  In addition, upon request of Lender
  (however not more often than annually), Borrower will have an
  independent appraiser satisfactory to Lender determine, as
  applicable, the actual cash value of replacement cost of any
  Collateral.  The cost of such appraisal shall be paid by Borrower.

  Guaranties.  Prior to disbursement of any Loan proceeds, furnish
  executed guaranties of the Loans in favor of Lender, executed by the
  guarantors named below, on Lender's forms, and in the amounts and
  under the conditions set forth in those guaranties.

	Names of Guarantors			Amounts
        -------------------                     -------
        Southeastern Veterinary Exports,        Unlimited
	Inc.
	First Image Marketing, Inc.		Unlimited

  Other Agreements.  Comply with all terms and conditions of all other
  agreements, whether now or hereafter existing, between Borrower and
  any other party and notify Lender immediately in writing of any
  default in connection with any other such agreements.

  Loan Proceeds.  Use all Loan proceeds solely for Borrower's business
  operations, unless specifically consented to the contrary by Lender
  in writing.

  Taxes, Charges and Liens.  Pay and discharge when due all of its
  indebtedness and obligations, including without limitations all
  assessments, taxes, governmental charges, levies and liens, of every
  kind and nature, imposed upon Borrower or its properties, income, or
  profits, prior to the date on which penalties would attach, and all
  lawful claims that, if unpaid, might become a lien or charge upon
  any of Borrower's properties, income, or profits.

  Performance.  Perform and comply, in a timely manner, with all
  terms, conditions, and provisions set forth in this Agreement, in
  the Related Documents, and in all other instruments and agreements
  between Borrower and Lender.  Borrower shall notify Lender
  immediately in writing of any default in connection with and
  agreement.

  Operations.  Maintain executive and management personnel with
  substantially the same qualifications and experience as the present
  executive and management personnel; provide written notice to Lender
  of any change in executive an management personnel; conduct its
  business affairs in a reasonable and prudent manner.

  Environmental Studies.  Promptly conduct and complete., at
  Borrower's expense, all such investigations, studies, samplings and
  testings as may be requested by Lender or any governmental authority
  relative to any substance, or any waste or by-product of any
  substance defined as toxic or a hazardous substance under applicable
  federal, state, or local law, rule, regulation, order or directive,
  at or affecting any property or any facility owned, leased or used
  by Borrower.

  Compliance with Governmental Requirements.  Comply with all laws,
  ordinance, and regulations, now or hereafter in effect, of all
  governmental authorities applicable to the conduct of Borrower's
  properties, businesses and operations, and to the use or occupancy
  of the Collateral, including without limitation, the Americans With
  Disabilities Act.  Borrower may contest in good faith any such law,
  ordinance, or regulation and withhold compliance during any
  proceeding, including appropriate appeals, so long as Borrower has
  notified Lender in writing prior to doing so and so long as, in
  Lender's sole opinion, Lender's interests in the Collateral are not
  jeopardized.  Lender may require Borrower to post adequate security
  or a surety bond, reasonably satisfactory to Lender, to protect
  Lender's interest.

  Inspection.  Permit employees or agents of Lender at any reasonable
  time to inspect any and all Collateral for the Loan or Loans and
  Borrower's other properties and to examine or audit Borrower's
  books, accounts, and records and to make copies and memoranda of
  Borrower's books, accounts, and records.  If Borrower now or at any
  time hereafter maintains any records (including without limitation
  computer generated records and computer software programs for the
  generation of such records) in the possession of a third party,
  Borrower, upon request of Lender, shall notify such party to permit
  Lender free access to such records at all reasonable times and to
  provide Lender with copies of any records it may request, all at
  Borrower's expense.

  Compliance Certificates.  Unless waived in writing by Lender,
  provide Lender at least annually, with a certificate executed by
  Borrower's chief financial officer, or other officer or person
  acceptable to Lender, certifying that the representations and
  warranties set forth in this Agreement are true and correct as of
  the date of the certificate and further certifying that, as of the
  date of the certificate, no Event of Default exists under this
  Agreement.

  Environmental Compliance and Reports.  Borrower shall comply in all
  respects with any and all Environmental Laws; not cause or permit to
  exist, as a result of an intentional or unintentional action or
  omission on Borrower's part or on the part of any third party, on
  property owned and/or occupied by Borrower, any environmental
  activity where damage may result to the environment, unless such
  environmental activity is pursuant to and in compliance with the
  conditions of a permit issued by the appropriate federal, state or
  local government authorities; shall furnish to Lender promptly and
  in any event within thirty (30) days after receipt thereof a copy of
  any notice, summons, lien, citation, directive, letter or other
  communication from any governmental agency or instrumentality
  concerning any intentional or unintentional action or omission on
  Borrower's part in connection with any environmental activity
  whether or not there is damage to the environment and/or other
  natural resources.

  Additional Assurances.  Make, execute and deliver to Lender such
  promissory notes, mortgages, deeds of trust, security agreements,

                        Exhibit 10.12 Page 3 of 29

<PAGE>

                    BUSINESS LOAN AGREEMENT (ASSET BASED)
                                 (Continued)                         Page 4
===========================================================================

  assignments, financing statements, instruments, documents and other
  agreements as Lender or its attorneys may reasonably request to
  evidence and secure the Loans and to perfect all Security Interests.

LENDER'S EXPENDITURES.  If any action or proceeding is commenced that
would materially affect Lender's interest in the Collateral of if Borrower
fails to comply with any provision of this Agreement or any Related
Documents, including but not limited to Borrower's failure to discharge or
pay when due any amounts Borrower is required to discharge or pay under
this Agreement or any Related Documents, Lender on Borrower's behalf may
(but shall not be obligated to ) take any action that Lender deems
appropriate, including but not limited to discharging or paying all taxes,
liens, security interests, encumbrances and other claims, at any time
levied or placed on any Collateral and paying all costs for insuring,
maintaining preserving any Collateral.  All such expenditures incurred or
paid by Lender for such purposes will then bear interest at the rate
charged under the Not from the date incurred or paid by Lender to the date
of repayment by Borrower.  All such expenses will become a part of the
indebtedness and, at Lender's option, will (A) be payable on demand; (B)
be added the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of
any applicable insurance policy; or (2) the remaining term of the Note; or
(C) be treated as a balloon payment which will be die and payable at the
Note's maturity.

NEGATIVE COVENANTS.  Borrower covenants and agrees with Lender that while
this Agreement is in effect, Borrower shall not, without the prior written
consent of Lender:

  Indebtedness and Liens.  (1) Except for trade debt incurred in the
  normal course of business and indebtedness to Lender contemplated by
  this Agreement, create, incur or assume indebtedness for borrowed
  money, including capital leases, (2) sell, transfer, mortgage,
  assign, pledge, lease, grant a security interest in, or encumber any
  of Borrower's assets (except as allowed as Permitted Liens), or (3)
  sell with recourse any of Borrower's accounts, except to Lender.

  Continuity of Operations.  (1) Engage in any business activities
  substantially different than those in which Borrower is presently
  engaged, (2) cease operations, liquidate, merge, transfer, acquire
  or consolidate with any other entity, change its name, dissolve or
  transfer or sell Collateral out of the ordinary course of business,
  or (3) pay any dividends on Borrower's stock (other than dividends
  payable in its stock), provided, however that notwithstanding the
  foregoing, but only so long as no Event of Default has occurred and
  is continuing or would result from the payment of dividends, if
  Borrower is a "Subchapter S Corporation" (as defined in the Internal
  Revenue Code of 1986, as amended), Borrower may pay cash dividends
  on its stock to its shareholders from time to time in amounts
  necessary to enable the shareholders to pay income taxes and make
  estimated income tax payments to satisfy their liabilities under
  federal and state law which arise solely from their status as
  Shareholders of a Subchapter S Corporation because of their
  ownership of shares of Borrower's stock, or purchase or retire any
  of Borrower's outstanding shares or alter or amend Borrower's
  capital structure.

  Loans, Acquisitions and Guaranties.   (1) Loan, invest in or advance
  money or assets to any other person, enterprise or entity, (2)
  purchase, create or acquire any interest in any other enterprise or
  entity, or (3) incur any obligation as surety or guarantor other
  than in the ordinary course of business.

  Agreements.  Borrower will not enter into any agreement containing
  any provisions which would be violated or breached by the
  performance of Borrower's obligations under this Agreement or in
  connection herewith.

CESSATION OF ADVANCES.  If Lender has made any commitment to make any Loan
to Borrower, where under this Agreement or under any other agreement,
Lender shall have no obligation to make Loan Advances or to disburse Loan
proceeds if:  (A) Borrower or any Guarantor is in default under the terms
of this Agreement or any of the Related Documents or any other agreement
that Borrower or any Guarantor has with Lender:  (B) Borrower or any
Guarantor dies, becomes incompetent or becomes insolvent, files a petition
in bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there
occurs a material adverse change in Borrower's financial condition, in the
financial condition of any Guarantor, or in the value of any collateral
securing any Loan; or (D) any Guarantor seeks, claims or otherwise
attempts to limit, modify of revoke such Guarantor's guaranty of the Loan
or any other loan with Lender; or (E) Lender in good faith deems itself
insecure, even though no Event of Default shall have occurred.

RIGHT OF SETOFF.  To the extent permitted by applicable law, Lender
reserves a right of setoff in all Borrower's accounts with Lender (whether
checking, savings, or some other account).  This includes all accounts
Borrower holds jointly with someone else and all accounts Borrower may
open in the future.  However, this does not include any IRA or Keogh
accounts, or any trust accounts for which setoff would be prohibited by
law.  Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on the Indebtedness against any
and all such accounts, and, at Lender's option, to administratively freeze
all such accounts to allow Lender to protect Lender's charge and setoff
rights provided in this paragraph.

DEFAULT.  Each of the following shall constitute an Event of Default under
this Agreement:

  Payment Default.  Borrower fails to make any payment when due under
  the Loan.

  Other Defaults.  Borrower fails to comply with or to perform any
  other term, obligation, covenant or condition contained in this
  Agreement or in any of the Related Documents or to comply with or to
  perform any term, obligation, covenant or condition contained in any
  other agreement between Lender and Borrower.

  Default in Favor of Third Parties.  Borrower or any Grantor defaults
  under any loan, extension of credit, security agreement, purchase or
  sales agreement, or any other agreement, in favor of any other
  creditor or person that may materially affect any of Borrower's or
  any Grantor's property or Borrower's or any Grantor's ability to
  repay the Loans or perform their respective obligations under this
  Agreement or any of the Related Documents.

  False Statements.  Any warranty, representation or statement made or
  furnished to Lender by Borrower or on Borrower's behalf under this
  Agreement or the Related Documents is false of misleading in any
  material respect, either now or at the time made or furnished or
  becomes false of misleading at any time thereafter.

  Insolvency.  The dissolution or termination of Borrower's existence
  as a going business, the insolvency of Borrower, the appointment of
  a receiver for any part of Borrower's property, any assignment for
  the benefit of creditors, any type of creditor workout, or the
  commencement of any proceeding under any bankruptcy or insolvency
  laws by or against Borrower.

  Defective Collateralization.  This Agreement or any of the Related
  Documents ceases to be in full force and effect (including failure
  of any collateral document to create a valid and perfected security
  interest or lien) at any time and for any reason.

  Creditor or Forfeiture Proceedings.  Commencement of foreclosure or
  forfeiture proceedings, whether by judicial proceedings, self-help,
  repossession or any other method, by any creditor of Borrower or by
  any governmental agency against any collateral securing the Loan.
  This includes a garnishment of any of Borrower's accounts, including
  deposit accounts, with Lender.  However, this Event of Default shall
  not apply if there is a good faith dispute by Borrower as to the
  validity or reasonableness of the claim which is the basis of the
  creditor of forfeiture proceeding and if Borrower gives Lender
  written notice of the creditor or forfeiture proceeding and deposits
  with Lender monies or a surety bond for the creditor or forfeiture
  proceeding, in an amount determined by Lender, in its sole
  discretion, as being an adequate reserve or bond for the dispute.

  Events Affecting Guarantor.  Any of the preceding events occurs with
  respect to any Guarantor of any of the indebtedness or any Guarantor
  dies or becomes incompetent, or revokes or disputes the validity of,
  or liability under, any Guaranty of the Indebtedness.  In the event
  of a death, Lender, at its option, may, but shall not be required
  to, permit the Guarantor's estate to assume unconditionally the
  obligations arising under the guaranty in a manner satisfactory to
  Lender, and, in doing so, cure any Event of Default.

 Change in Ownership.  Any change in ownership of twenty-five percent
  (25%) or more of the common stock of Borrower.

  Adverse Change.  A material adverse change occurs in Borrower's
  financial condition, or Lender believes the prospect of payment or
  performance of the loan is impaired.

  Insecurity.  Lender in good faith believes itself insecure.

  Right to Cure.  If any default, other than a default on
  Indebtedness, is curable and if Borrower or Grantor, as the case may
  be, has not been given a notice of a similar default within the
  preceding twelve (12) months, it may be cured if Borrower or
  Grantor, as the case may be, after receiving written notice from
  Lender demanding cure of such default:  (1) cure the default within
  fifteen (15) days; or (2) if the cure requires more than fifteen
  (15) days, immediately initiate steps which Lender deems in Lender's
  sole discretion to be sufficient to cure the default and thereafter
  continue and complete all reasonable and necessary steps sufficient
  to produce compliance as soon as reasonable practical.

EFFECT OF AN EVENT OF DEFAULT.  If any Event of Default shall occur,
except where otherwise provided in this Agreement or the Related
Documents, all commitments and obligations of Lender under this Agreement
or the Related Documents or any other agreement immediately will terminate
(including and obligation to make further Loan Advances or disbursements),
and, at Lender's option, all indebtedness immediately will become due and
payable, all without notice of any kind to Borrower, except that in the
case of an Event of Default of the type described in the "Insolvency"
subsection above, such acceleration shall be automatic and not optional.
In addition, Lender shall have all the rights and remedies provided in the
Related Documents or available at law, in equity, or otherwise.  Except as
may be prohibited by applicable law, all of Lender's rights and remedies
shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not

                        Exhibit 10.12 Page 4 of 29

<PAGE>

                    BUSINESS LOAN AGREEMENT (ASSET BASED)
                                 (Continued)                         Page 5
===========================================================================

exclude pursuit of any other remedy, and an election to make expenditures
or to take action to perform an obligation of Borrower or of any Grantor
shall not affect Lender's right to declare default and to exercise its
rights and remedies.

MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions are a
part of this Agreement

  Amendments.  This Agreement, together with any Related Documents,
  constitutes the entire understanding and agreement of the parties as
  to the matters set forth in this Agreement.  No alteration of or
  amendment to this Agreement shall be effective unless given in
  writing and signed by the party or parties sought to be charged or
  bound by the alteration or amendment.

  Attorneys' Fees; Expenses.  Borrower agrees to pay upon demand all
  of Lender's costs and expenses, including Lender's reasonable
  attorneys' fees and Lender's legal expenses, incurred in connection
  with the enforcement of this Agreement.  Lender may hire or pay
  someone else to help enforce this Agreement, and Borrower shall pay
  the costs and expenses of such enforcement.  Costs and expenses
  include Lender's reasonable attorney's fees and legal expenses
  whether or not there is a lawsuit, including reasonable attorneys'
  fees and legal expenses for bankruptcy proceedings (including
  efforts to modify or vacate any automatic stay or injunction),
  appeals, and any anticipated post-judgment collection services.
  Borrower also shall pay all court costs and such additional fees as
  may be directed by the court.

  Caption Headings.  Caption headings in this Agreement are for
  convenience purposes only and are not to be used to interpret or
  define the provisions of this Agreement.

  Consent to Loan Participation.  Borrower agrees and consents to
  Lender's sale or transfer, whether now or later, or one or more
  participation interests in the Loan to one or more purchasers,
  whether related or unrelated to Lender.  Lender may provide, without
  any limitation whatsoever, to any one or more purchasers, or
  potential purchases, any information or knowledge Lender may have
  about Borrower or about any other matter relating to the Loan, and
  Borrower hereby waives any rights to privacy Borrower may have with
  respect to such matters.  Borrower additionally waives any and all
  notices of sale of participation interests, as well as all notices
  of any repurchase of such participation interests.  Borrower also
  agrees that the purchasers of any such participation interests will
  be considered as the absolute owners of such interests in the Loan
  and will have all the rights granted under the participation
  agreement or agreements governing the sale of such participation
  interests.  Borrower further waives all rights of offset or
  counterclaim that it may have now or later against Lender or against
  any purchases of such a participation interest and unconditionally
  agrees that either Lender or such purchaser may enforce Borrower's
  obligation under the Loan irrespective of the failure or insolvency
  of any holder of any interest in the Loan.  Borrower further agrees
  that the purchaser of any such participation interests may enforce
  its interests irrespective of any personal claims or defenses that
  Borrower may have against Lender.

  Governing Law.  This Agreement will be governed by, construed and
  enforced in accordance with federal law and laws of the State of
  Florida.  This Agreement has been accepted by Lender in the State of
  Florida.

  Chose of Venue.  If there is a lawsuit, Borrower agrees upon
  Lender's request to submit to the jurisdiction of the courts of Palm
  Beach County, State of Florida.

  No Waiver by Lender.  Lender shall not be deemed to have waived any
  rights under this Agreement unless such waiver is given in writing
  and signed by Lender.  No delay or omission on the part of Lender in
  exercising any right shall operate as a waiver of such right or any
  other right.  A waiver by Lender of a provision of this Agreement
  shall not prejudice or constitute a waiver of Lender's right
  otherwise to demand strict compliance with that provision or any
  other provision of this Agreement.  No prior waiver by Lender, nor
  any course of dealing between Lender and Borrower, or between Lender
  and any Grantor, shall constitute a waiver of any of Lender's rights
  or of any of Borrower's or any Grantor's obligations as to any
  future transaction.  Whenever the consent of Lender is required
  under this Agreement, the granting of such consent by Lender in any
  instance shall not constitute continuing consent to subsequent
  instances where such consent is required and in all cases such
  consent may be granted or withheld in the sole discretion of Lender.

  Notices.  Any notice required to be given under this Agreement shall
  be given in writing, and shall be effective when actually delivered,
  when actually received by telefacsimile (unless otherwise required
  by law), when deposited with a nationally recognized overnight
  courier, or, if mailed, when deposited in the United States mail, as
  first class, certified or registered mail postage prepaid, directed
  to the addresses shown near the beginning of this Agreement.  Any
  party may change its address for notices under this Agreement by
  giving written notice to the other parties, specifying that the
  purpose of the notice is to change the party's address.  For notice
  purposes, Borrower agrees to keep Lender informed at all times of
  Borrower's current address.  Unless otherwise provided or required
  by law, if there is more than one Borrower, any notice given by
  Lender to any Borrower is deemed to be notice given to all
  Borrowers.

  Severability.  If a court of competent jurisdiction finds any
  provision of this Agreement to be illegal, invalid, or unenforceable
  as to any circumstance, that finding shall not make the offending
  provision illegal, or unenforceable as to any other circumstance.
  If feasible, the offending provision shall be considered modified so
  that is becomes legal, valid and enforceable.  If the offending
  provision cannot be so modified, it shall be considered deleted from
  this Agreement.  Unless otherwise required by law, the illegality,
  invalidity, or unenforceability of any provision of this Agreement
  shall not affect the legality, validity of enforceability of any
  other provision of this Agreement.

  Subsidiaries and Affiliates of Borrower.  To the extent the context
  of any provisions of this Agreement makes it appropriate, including
  without limitation any representation, warranty or covenant, the
  word "Borrower" as used in this Agreement shall include all of
  Borrower's subsidiaries and affiliates.  Notwithstanding the
  foregoing however, under no circumstances shall this Agreement be
  construed to require Lender to make any Loan or other financial
  accommodation to any of Borrower's subsidiaries or affiliates.

  Successors and Assigns.  All covenants and agreements by or on
  behalf of Borrower contained in this Agreement or any Related
  Documents shall bind Borrower's successors and assigns and shall
  inure to the benefit of Lender and its successors and assigns.
  Borrower shall not, however, have the right to assign Borrower's
  rights under this Agreement or any interest therein, without the
  prior written consent of Lender.

  Survival of Representations and Warranties.  Borrower understands
  and agrees that in extending Loan Advances, Lender is relying on all
  representations, warranties, and covenants made by Borrower in this
  Agreement or in any certificate or other instrument delivered by
  Borrower to Lender under this Agreement or the Related Documents.
  Borrower further agrees that regardless of any investigation made by
  Lender, all such representations, warranties and covenants will
  survive the extension of Loan Advances and delivery to Lender of the
  Related Documents, shall be continuing in nature, shall be deemed
  made and redated by Borrower at the time each Loan Advance is made,
  and shall remain in full force and effect until such time as
  Borrower's indebtedness shall be paid in full, or until this
  Agreement shall be terminated in the manner provided above,
  whichever is the last to occur.

  Time is of the Essence.  Time is of the essence in the performance
  of this Agreement.

DEFINITIONS.  The following capitalized words and terms shall have the
following meanings when used in this Agreement.  Unless specifically
stated to the contrary, all references to dollar amounts shall mean
amounts in lawful money of the United States of America.  Words and terms
used in the singular shall include the plural, and the plural shall
include the singular, as the context may require.  Words and terms not
otherwise defined in this Agreement shall have the meanings attributed to
such terms in the Uniform Commercial Code.  Accounting words and terms not
otherwise defined in this Agreement shall have the meanings assigned to
them in accordance with generally accepted accounting principles as in
effect on the date of this Agreement:

  Advance.  The word "Advance" means a disbursement of Loan funds
  made, or to be made, to Borrower or on Borrower's behalf under the
  terms and conditions of this Agreement.

  Agreement.  The word "Agreement" means this Business Loan Agreement
  (Asset Based), as this Business Loan Agreement (Asset Based) may be
  amended or modified from time to time, together with all exhibits
  and schedules attached to this Business Loan Agreement (Asset Based)
  from time to time.

  Borrower.  The word "Borrower" means Petmed Express, Inc. and
  includes all co-signers and co-makers signing the Note.

  Borrowing Base.  The words "Borrowing Base" mean, as determined by
  Lender from time to time, the lesser of (1) $6,000,000.00 or (2)
  50.000% of the aggregate amount of Eligible Inventory.

  Business Day.  The words "Business Day" mean a day on which
  commercial banks are open in the State of Florida.

  Collateral  The word "Collateral" means all property and assets
  granted as collateral security for a Loan, whether real or personal
  property, whether granted directly or indirectly, whether granted
  now or in the future, and whether granted in the form of a security
  interest, mortgage, collateral mortgage, deed of trust, assignment,
  pledge, crop pledge, chattel mortgage, collateral chattel mortgage,
  chattel trust, factor's lien, equipment trust, conditional sale,
  trust receipt, lien or title retention contract, lease or
  consignment intended as a security device, or any other security or
  lien interest whatsoever, whether created by law, contract, or
  otherwise.  The word Collateral also includes without limitation all
  collateral described in the Collateral section of this Agreement.

  Eligible Inventory.  The words "Eligible Inventory" mean at any
  time, all of Borrower's Inventory as defined below except:

    (1)     Inventory which is not owned by Borrower free and clear
            of all security interests, liens, encumbrances, and claims
            of third parties.

                        Exhibit 10.12 Page 5 of 29

<PAGE>

                    BUSINESS LOAN AGREEMENT (ASSET BASED)
                                 (Continued)                         Page 6
===========================================================================

    (2)     Inventory which Lender, in its sole discretion, deems to
            be obsolete, unsalable, damaged, defective, or unfit for
            further processing.

    (3)     Inventory advances shall be based on 50% of eligible
            inventory including a sub limit, which will limit reliance
            on prescription drug inventory to a maximum of
            $2,000,000.00 ($4,000,000.00 prescription inventory at 50%
            advance rate).  The Bank reserves the right to request an
            inventory audit at any time.

    Stale dated inventory shall be excluded from the borrowing
    base.  This will be checked annually by the company auditor.

  Environmental Laws.  The words "Environmental Laws" mean any and all
  state, federal and local statutes, regulations and ordinances
  relating to the protection of human health or the environment,
  including without limitation the Comprehensive Environmental
  Response, Compensation, and Liability Act of 1980, as amended, 42
  U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments
  and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the
  Hazardous Materials Transportation Act, 49 U.S.C Section 1801, et
  seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section
  6901, et seq., or other applicable state or federal laws, rules, or
  regulations adopted pursuant thereto.

  Event of Default.  The words "Event of Default" mean any of the
  events of default set forth in this Agreement in the default section
  of this Agreement.

  Expiration Date.  The words "Expiration Date" mean the date of
  termination of Lender's commitment to lend under this Agreement.

  GAAP.  The word "GAAP" means generally accepted accounting
  principles.

  Grantor.  The word "Grantor" means each and all of the persons or
  entities granting a Security Interest in any Collateral for the
  Loan, including without limitation all Borrowers granting such a
  Security Interest.

  Guarantor.  The word "Guarantor" means any guarantor, surety, or
  accommodation party of any or all of the Loan.

  Guaranty.  The word "Guaranty" means the guaranty from Guarantor to
  Lender, including without limitation a guaranty of all or part of
  the Note.

  Hazardous Substances.  The words "Hazardous Substances" mean
  materials that, because of their quantity, concentration or
  physical, chemical or infectious characteristics, may cause or pose
  a present or potential hazard to human health or the environment
  when improperly used, treated, stored, disposes of, generated,
  manufactured, transported or otherwise handled.  The words
  "Hazardous Substances" are used in their very broadest sense and
  include without limitation any and all hazardous or toxic
  substances, materials or waste as defined by or listed under the
  Environmental Laws.  The term "Hazardous Substances" also includes,
  without limitation, petroleum and petroleum by-products or any
  fraction thereof and asbestos.

  Indebtedness. The word "Indebtedness" means the indebtedness
  evidence by the Note or Related Documents, including all principal
  and interest together with all other indebtedness and costs and
  expenses for which Borrower is responsible under this Agreement or
  under any of the Related Documents.

  Inventory. The word "Inventory" means all of Borrower's raw
  materials, work in process, finished goods, merchandise, parts and
  supplies, of every kind and description, and goods held for sale or
  lease or furnished under contracts of service in which Borrower now
  has or hereafter acquires any right, whether held by Borrower or
  others, and all documents of title, warehouse receipts, bills of
  lading, and all other documents of every type covering all or any
  part of the foregoing.  Inventory includes inventory temporarily out
  of Borrower's custody or possession and all returns on Accounts.

  Lender.  The word "Lender" means RBC CENTURA BANK, its successors
  and assigns,

  Loan.  The word "Loan" means any and all loans and financial
  accommodations from Lender to Borrower whether now or hereafter
  existing, and however evidenced, including without limitation those
  loans and financial accommodations described herein or described on
  any exhibit or schedule attached to this Agreement from time to
  time.

  Note.  The word "Note" means the Note executed by Petmed Express,
  Inc.  in the principle amount of $6,000,000.00 dated November 2,
  2004, together with all renewals of, extensions of, modifications
  of, refinancings of, consolidations of, and substitutions for the
  note or credit agreement.

  Permitted Liens.  The words "Permitted Liens" mean (1) liens and
  security interests securing Indebtedness owed by Borrower to Lender;
  (2) liens for taxes, assessments, or similar charges either not yet
  due or being contested in good faith; (3) liens of materialmen,
  mechanics, warehousemen, or carriers, or other like liens arising in
  the ordinary course of business and securing obligations which are
  not yet delinquent; (4) purchase money liens or purchase money
  security interests upon or in any property acquired or held by
  Borrower in the ordinary course of business to secure indebtedness
  outstanding on the date of this Agreement or permitted to be
  incurred under the paragraph of this Agreement titled "Indebtedness
  and Liens"; (5) liens and security interests which, as of the date
  of this Agreement, have been disclosed to and approved by the Lender
  in writing; and (6) those liens and security interests which in the
  aggregate constitute an immaterial and insignificant monetary amount
  with respect to the net value of the Borrower's assets.

  Primary Credit Facility.  The words "Primary Credit Facility" mean
  the credit facility described in the Line of Credit section of this
  Agreement.

  Related Documents.  The words "Related Documents" mean all
  promissory notes, credit agreements, loan agreements, environmental
  agreements, guaranties, security agreements, mortgages, deeds of
  trust, security deeds, collateral mortgages, and all other
  instruments, agreements and documents, whether now or hereafter
  existing, executed in connection with the Loan.

  Security Agreement.  The words "Security Agreement" mean and include
  without limitation any agreements, promises, covenants,
  arrangements, understandings or other agreements, whether created by
  law, contract, or otherwise, evidencing, governing, representing, or
  creating a Security Interest.

  Security Interest.  The word "Security Interest" mean, without
  limitation, any and all types of collateral security, present and
  future, whether in the form of alien, charge, encumbrance, mortgage,
  deed of trust, security deed, assignment, pledge, crop pledge,
  chattel mortgage, collateral chattel mortgage, chattel trust,
  factor's lien, equipment trust, conditional sale, trust receipt,
  lien or title retention contract, lease or consignment intended as a
  security device, or any other security or lien interest whatsoever
  whether created by law, contract, or otherwise.

  Tangible Net Worth.  The words "Tangible Net Worth" mean Borrower's
  total assets excluding all intangible assets (i.e., goodwill,
  trademarks, patents, Copyrights, organizational expenses, and
  similar intangible items, but including leaseholds and leasehold
  improvements) less total debt.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT (ASSET BASED) AND BORROWER AGREES TO ITS TERMS.  THIS BUSINESS
LOAN AGREEMENT (ASSET BASED) IS DATED NOVEMBER 2, 2004.

BORROWER:

PETMED EXPRESS, INC.

By: /s/ Bruce S. Rosenbloom
   --------------------------
   Bruce Rosenbloom, Treasurer
   of Petmed Express, Inc.

LENDER:

RBC CENTURA BANK

By: /s/ Clinton H. Park
   ---------------------
    Authorized Signer

                        Exhibit 10.12 Page 6 of 29

<PAGE>

               CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL
===========================================================================

Corporation:   Petmed Express Inc.       Lender:  RBC CENTURA BANK
               1441 SW 29th Ave                   Boca Raton, FL
               Pompano Beach, FL 30369            Lending Service Center (FL)
                                                  2801 PGA Blvd. Suite 280H
                                                  Palm Beach Gardens, FL 33410

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

THE CORPORATION'S EXISTENCE.  The complete and correct name of the
Corporation is Petmed Express, Inc. ("Corporation").  The Corporation is a
corporation for profit which is, and at all times shall be, duly
organized, validly existing, and in good standing under and by virtue of
the laws of the State of Florida.  The Corporation has the full power and
authority to own its properties and to transact the business in which it
is presently engaged or presently proposes to engage. The Corporation
maintains an office at 1441 SW 29th Ave, Pompano Beach, FL 33069.  Unless
the Corporation has designated otherwise in writing, the principal office
is the office at which the Corporation keeps its books and records.  The
Corporation will notify Lender prior to any change in the location of The
Corporation's state of organization or any change in The Corporation's
name. The Corporation shall do all things necessary to preserve and to
keep in full force and effect its existence, rights and privileges, and
shall comply will all regulations, rules, ordinances, statutes, orders and
decrees of any governmental or quasi-governmental authority or court
applicable to the Corporation and The Corporation's business activities.

RESOLUTIONS ADOPTED.  At a meeting of the Directors of the Corporation, or
if the Corporation is a close cooperation having no Board of Directors
then at a meeting of the Corporation's shareholders, duly called and held
on May 31, 2001, at which a quorum was present and voting, or by other
duly authorized action in lieu of a meeting, the resolutions set forth in
this Resolution were adopted.

OFFICER.  The following named person is an officer of Petmed Express, Inc.:

NAMES                 TITLES      AUTHORIZED   ACTUAL SIGNATURE
-----                 ------      ----------   ----------------

Bruce Rosenbloom     Treasurer        Y         \s\ Bruce S. Rosenbloom

ACTIONS AUTHORIZED.  The authorized person listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Corporation.  Specifically, but without limitation, the authorized,
empowered, and directed to do the following for and behalf of the
Corporation:

  Borrow Money:  To borrow, as a cosigner or otherwise, from time to
  time from Lender, on such terms as may be agreed upon between the
  Corporation and Lender, such sum or sums of money as his or her
  judgment should be borrowed, without limitation.

  Execute Notes:  To execute and deliver to Lender the promissory note
  or notes, or other evidence of the Corporation's credit
  accommodations, on Lender's forms, at such rates of interest and on
  such terms as may be agreed upon, evidencing the sums of money so
  borrowed or any of the Corporation's indebtedness to Lender, and
  also to execute and deliver to Lender one or more renewals,
  extensions, modifications, refinancings, consolidations, or
  substitutions for one or more of the notes, or any other evidence of
  credit accommodations.

  Grant Security.  To mortgage, pledge, transfer, endorse,
  hypothecate, or otherwise encumber and deliver to Lender any
  property now or hereafter belonging to the Corporation or in which
  the Corporation now or hereafter may have an interest, including
  without limitation all of the Corporation's real property and all of
  the Corporation's personal property (tangible or intangible), as
  security for the payment of any loans or credit accommodations so
  obtained, any promissory notes so executed (including any amendments
  to or modifications, renewals, and extensions, of such promissory
  notes), or any other or further indebtedness of the Corporation to
  Lender at any time owing, however the same may be evidenced. Such
  property may be mortgaged, pledged, transferred, endorsed,
  hypothecated or encumbered at the time such loans are obtained or
  such indebtedness is incurred, or at any other time or times, and
  may in addition to or in lieu of any property theretofore mortgaged,
  pledged, transferred, endorsed, hypothecated or encumbered.

  Execute Security Documents.  To execute and deliver to Lender the
  forms of mortgage, deed of trust, pledge agreement, hypothecation
  agreement, and other security agreements and financing statements
  which Lender may require and which shall evidence terms and
  conditions under and pursuant to which such liens and encumbrances,
  or any of them, are given; and also to execute and deliver to Lender
  any other written instruments, any chattel paper, or any kind of
  nature, which Lender may deem necessary or proper in connection with
  or pertaining to the giving of the liens and encumbrances.

  Negotiate Items.  To draw, endorse, and discount with Lender all
  drafts, trade acceptances, promissory notes, or other evidences of
  indebtedness payable to or belonging to the Corporation or in which
  the Corporation may have an interest, and either to receive cash for
  the same or to cause such proceeds to be credited to the
  Corporations' account with Lender, or to cause such other
  disposition of the proceeds derived therefrom as he or she may deem
  advisable.

  Further Acts.  In the case of lines of credit, to designate
  additional or alternate individuals as being authorized to request
  advances under such liens, and in all cases, to do and perform such
  other acts and things, to pay any and all fees and costs, and to
  execute and deliver such other documents and agreements as the
  officer may in his or her discretion deem reasonably necessary or
  proper in order to carry into effect the provisions of this
  Resolution. The following person currently is authorized, except as
  provided in this paragraph, to request advances and authorize
  payments under the line of credit until Lender receives from the
  Corporation, at Lender's address shown above, written notice of
  revocation of his or her authority: Bruce Rosenbloom.  Borrowing
  Base Advances:

  Inventory advances shall be based on 50% of eligible inventory
  including a sub limit, which will limit reliance on prescription
  drug inventory to a maximum of $2,000,000.00 ($4,000,000.00
  prescription inventory at 50% advance rate).  The Bank reserves the
  right to request an inventory audit at any time. Stale dated
  inventory shall be excluded from borrowing base. This will be
  checked annually by the company's auditor.

ASSUMED BUSINESS NAMES.  The Corporation has filed or recorded all
documents or filings required by law to all assumed business names used by
the Corporation.  Excluding the name of the Corporation, the following is
a complete list of all assumed business names under which the Corporation
does business:  None.

NOTICES TO LENDER.  The Corporation will promptly notify Lender in writing
at Lender's address shown above (or such other addresses as Lender may
designate from time to time) prior to any (A) change in the Corporation's
name; (B) change in the Corporation's assumed business name(s); (C) change
in the management of the Corporation; (D) change in the authorized
signer(s); (E) change in the Corporation's principal office address; (F)
change in the Corporation's state or organization; (G) conversion of the
Corporation to a new or different type of business entity; or (H) change
in any other aspect of the Corporation that directly or indirectly relates
to any agreements between the Corporation and Lender. No change in the
Corporation's name or state of organization will take effect until after
the Lender has received notice.

                        Exhibit 10.12 Page 7 of 29

<PAGE>

              CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL
                                  (Continued)                        Page 2
===========================================================================

ADDITIONAL RESOLUTION PROVISION.  Signatures showing participation in the
request and processing of any matter covered by this resolution by any two
of the designated officers in any role, including without limitation
attestation of signatures by the Secretary, shall be sufficient to satisfy
the requirements of this resolution.

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS.  The officer named
above is duly elected, appointed, or employed by or for the Corporation,
as the case may be, and occupies the position set opposite his or her
respective name. This Resolution now stands of record on the books of the
Corporation, is in full force and effect, and has not been modified or
revoked in any manner whatsoever.

NO CORPORATE SEAL.  The Corporation has no corporate seal, and therefore,
no seal is affixed to this Resolution.

CONTINUING VALIDITY.  Any and all acts authorized pursuant to this
Resolution and performed prior to the passage of this Resolution are
hereby ratified and approved. This Resolution shall be continuing, shall
remain in full force and effect and Lender may rely on it until written
notice of its revocation shall have been delivered to and received by
Lender at Lender's address shown above (or such addresses as Lender may
designate from time to time). Any such notice shall not affect any of the
Corporation's agreements or commitments in effect at the time notice is
give.

IN TESTIMONY WHEREOF, I have hereunto set my hand and attest that the
signature set opposite the name listed above is his or her genuine
signature.

I have read all the provisions of this Resolution, and I personally and on
behalf of the Corporation certify that all statements and representations
made in this Resolution are true and correct. This Corporate Resolution to
Borrow / Grant Collateral is dated November 2, 2004.
                                   ----------------

                          CERTIFIED TO AND ATTESTED BY:

                          /s/ Bruce S. Rosenbloom
                          --------------------------------
                          Bruce Rosenbloom, Treasurer of Petmed Express, Inc.

Note: If the officer signing this Resolution is designated by the
foregoing document as one of the officers authorized to act on the
Corporations' behalf, it is advisable to have this Resolution signed by at
least one non-authorized officer of the Corporation.

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

                        Exhibit 10.12 Page 8 of 29

<PAGE>

           CORPORATE RESOLUTION TO GRANT COLLATERAL / GUARANTEE
===========================================================================

Borrower:     Petmed Express Inc.      Lender: RBC CENTURA BANK
              1441 SW 29th Ave                 Boca Raton, FL
              Pompano Beach, FL 30369          Lending Service Center (FL)
                                               2801 PGA Blvd. Suite 280H
                                               Palm Beach Gardens, FL 33410
Corporation:  First Image Marketing, Inc.
              1441 SW 29th Ave
              Pompano Beach, FL 30369

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

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

THE CORPORATION'S EXISTENCE.  The complete and correct name of the
Corporation is First Image Marketing, Inc. ("Corporation"). The
Corporation is a corporation for profit which is, and at all times shall
be, duly organized validly existing, and in good standing under by virtue
of the laws of the State of Florida.  The Corporation has the full power
and authority to own its properties and to transact the business in which
it is presently engaged or presently proposes to engage. The Corporation
maintains an office at 1441 SW 29th Ave, Pompano Beach, FL 33069. Unless
the Corporation has designated otherwise in writing, the principal office
is the office at which the Corporation keeps its nooks and records. The
Corporation will notify Lender prior to any change in location of the
Corporation's state of organization or any change in privileges, and shall
comply with all regulations, rules, ordinances, statutes, orders and
decrees of any governmental or quasi-governmental authority or court
applicable to the Corporation and The Corporation's business activities.

RESOLUTIONS ADOPTED.  At a meeting of the Directors of the Corporation, or
if the Corporation is a close cooperation having no Board of Directors
then at a meeting of the Corporation's shareholders, duly called and held
on January 29, 1996, at which a quorum was present and voting, or by other
duly authorized action in lieu of a meeting, the resolutions set forth in
this Resolution were adopted.

OFFICER.  The following named person is an officer of Petmed Express, Inc.:

NAMES               TITLES        AUTHORIZED     ACTUAL SIGNATURE
-----               ------        ----------     ----------------

Marc Puleo          Director        Y            \s\ Marc Puleo

ACTIONS AUTHORIZED.  The authorized person listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Corporation.  Specifically, but without limitation, the authorized,
empowered, and directed to do the following for and behalf of the
Corporation:

  Guaranty.  To guarantee or act as surety for loans or other
  financial accommodations to Borrower from Lender on such guarantee
  or surety terms as may be agreed upon between the officer of the
  Corporation and Lender and in such sum or sums of money as in his or
  her judgment should be guaranteed or assured, (the "Guaranty").

  Grant Security. To mortgage, pledge, transfer, endorse, hypothecate,
  or otherwise encumber and deliver to Lender any property now or
  hereafter belonging to the Corporation or in which the Corporation
  now or hereafter may have an interest, including without limitation
  all of the Corporations' real property and all of the Corporation's
  personal property (tangible or intangible), as security for the
  Guaranty, and as a security for the payment of any loans, any
  promissory notes, or any other or further indebtedness of Petmed
  Express, Inc. to Lender at any time owing, however the same may be
  evidenced. Such property may be mortgaged, pledged, transferred,
  endorsed, hypothecated or encumbered at the time such loans are
  obtained or such indebtedness is incurred, or at any other time or
  times, and may be either in addition to or in lieu of any property
  theretofore mortgaged, pledged, transferred, endorsed, hypothecated
  or encumbered. The provisions of this Resolution authorizing or
  relating to the pledge, mortgage, transfer, endorsement,
  hypothecation, granting of a security interest in, or in any way
  encumbering, the assets of the Corporation shall include, without
  limitation, doing so in order to lend collateral security for the
  indebtedness, now or hereafter existing, and of any nature
  whatsoever, of Petmed Express, Inc. to Lender. The Corporation has
  considered the value to itself of lending collateral in support of
  such indebtedness, and the Corporation represents to Lender that the
  Corporation is benefited by doing so.

  Execute Security Documents.  To execute and deliver to Lender the
  forms of mortgage, deed of trust, pledge agreement, hypothecation
  agreement, and other security agreements and financing statements
  which Lender may require and which shall evidence the terms and
  conditions under and pursuant to which such liens and encumbrances,
  or any of them, are given; and also to execute and deliver to Lender
  any other written instruments, any chattel paper, or any other
  collateral, or any kind of nature, which Lender may deem necessary
  or proper in connection with or pertaining to the giving of the
  liens and encumbrances.

  Further Acts.  To do and perform such other acts and things and to
  execute and deliver such other documents and agreements as the
  officer may in his or her discretion deem reasonably necessary or
  proper in order to carry into effect the provisions of this
  Resolution.

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all
documents or filings required by law relating to all assumed business
names used by the Corporation.  Excluding the name of the Corporation, the
following is a complete list of all assumed business names under which the
Corporation does business: None.

NOTICES TO LENDER.  The Corporation will promptly notify Lender in writing
at Lender's address shown above (or such other addresses as Lender may
designate from time to time) prior to any (A) change in the Corporation's
name; (B) change in the Corporation's assumed business name(s); (C) change
in the management of the Corporation; (D) change in the authorized
signer(s); (E) change in the Corporation's principal office address; (F)
change in the Corporation's state or organization; (G) conversion of the
Corporation to a new or different type of business entity; or (H) change
in any other aspect of the Corporation that directly or indirectly relates
to any agreements between the Corporation and Lender. No change in the
Corporation's name or state of organization will take effect until after
the Lender has received notice.

ADDITIONAL RESOLUTION PROVISION.  Signatures showing participation in the
request and processing of any matter covered by this resolution by any two
of the designated officers in any role, including without limitation
attestation of signatures by the Secretary, shall be sufficient to satisfy
the requirements of this resolution.

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS.  The officer named
above is duly elected, appointed, or employed by or for the Corporation,
as the case may be, and occupies the position set opposite his or her
respective name. This Resolution now stands of record on the books of the
Corporation, is in full force and effect, and has not been modified or
revoked in any manner whatsoever.

NO CORPORATE SEAL.  The Corporation has no corporate seal, and therefore,
no seal is affixed to this Resolution.

CONTINUING VALIDITY.  Any and all acts authorized pursuant to this
Resolution and performed prior to the passage of this Resolution are

                        Exhibit 10.12 Page 9 of 29

<PAGE>

             CORPORATE RESOLUTION TO GRANT COLLATERAL / GUARANTEE
                               (Continued)                           Page 2
===========================================================================

hereby ratified and approved. This Resolution shall be continuing, shall
remain in full force and effect and Lender may rely on it until written
notice of its revocation shall have been delivered to and received by
Lender at Lender's address shown above (or such addresses as Lender may
designate from time to time). Any such notice shall not affect any of the
Corporation's agreements or commitments in effect at the time notice is
give.

IN TESTIMONY WHEREOF, I have hereunto set my hand and attest that the
signature set opposite the name listed above is his or her genuine
signature.

I have read all the provisions of this Resolution, and I personally and on
behalf of the Corporation certify that all statements and representations
made in this Resolution are true and correct. This Corporate Resolution to
Grant Collateral / Guarantee is dated November 2, 2004.
                                      ----------------

                         CERTIFIED TO AND ATTESTED BY:

                         /s/ Marc Puleo
                         ---------------------
                         Marc Puleo, President of First Image Marketing, Inc.

Note: If the officer signing this Resolution is designated by the
foregoing document as one of the officers authorized to act on the
Corporations' behalf, it is advisable to have this Resolution signed by at
least one non-authorized officer of the Corporation.

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

                        Exhibit 10.12 Page 10 of 29

<PAGE>

            CORPORATE RESOLUTION TO GRANT COLLATERAL / GUARANTEE
===========================================================================

Borrower:     Petmed Express Inc.        Lender: RBC CENTURA BANK
              1441 SW 29th Ave                   Boca Raton, FL
              Pompano Beach, FL 30369            Lending Service Center (FL)
                                                 2801 PGA Blvd. Suite 280H
                                                 Palm Beach Gardens, FL 33410
Corporation:  Southeastern Veterinary Exports, Inc.
              1441 SW 29th Ave
              Pompano Beach, FL 30369
===========================================================================

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

THE CORPORATION'S EXISTENCE.  The complete and correct name of the
Corporation is Southeastern Veterinary Exports, Inc. ("Corporation"). The
Corporation is a corporation for profit which is, and at all times shall
be, duly organized validly existing, and in good standing under by virtue
of the laws of the State of Florida.  The Corporation has the full power
and authority to own its properties and to transact the business in which
it is presently engaged or presently proposes to engage. The Corporation
maintains an office at 1441 SW 29th Ave, Pompano Beach, FL 33069. Unless
the Corporation has designated otherwise in writing, the principal office
is the office at which the Corporation keeps its nooks and records. The
Corporation will notify Lender prior to any change in location of the
Corporation's state of organization or any change in privileges, and shall
comply with all regulations, rules, ordinances, statutes, orders and
decrees of any governmental or quasi-governmental authority or court
applicable to the Corporation and The Corporation's business activities.

RESOLUTIONS ADOPTED.  At a meeting of the Directors of the Corporation, or
if the Corporation is a close cooperation having no Board of Directors
then at a meeting of the Corporation's shareholders, duly called and held
on May 31, 2001, at which a quorum was present and voting, or by other
duly authorized action in lieu of a meeting, the resolutions set forth in
this Resolution were adopted.

OFFICER. The following named person is an officer of Southeastern
Veterinary Exports, Inc.:

NAMES                TITLES     AUTHORIZED    ACTUAL SIGNATURE
-----                ------     ----------    ----------------
Bruce Rosenbloom    President        Y        \s\ Bruce S. Rosenbloom

ACTIONS AUTHORIZED.  The authorized person listed above may enter into any
agreements of any nature with Lender, and those agreements will bind the
Corporation.  Specifically, but without limitation, the authorized,
empowered, and directed to do the following for and behalf of the
Corporation:

  Guaranty. To guarantee or act as surety for loans or other financial
  accommodations to Borrower from Lender on such guarantee or surety
  terms as may be agreed upon between the officer of the Corporation
  and Lender and in such sum or sums of money as in his or her
  judgment should be guaranteed or assured, (the "Guaranty").

  Grant Security. To mortgage, pledge, transfer, endorse, hypothecate,
  or otherwise encumber and deliver to Lender any property now or
  hereafter belonging to the Corporation or in which the Corporation
  now or hereafter may have an interest, including without limitation
  all of the Corporations' real property and all of the Corporation's
  personal property (tangible or intangible), as security for the
  Guaranty, and as a security for the payment of any loans, any
  promissory notes, or any other or further indebtedness of Petmed
  Express, Inc. to Lender at any time owing, however the same may be
  evidenced. Such property may be mortgaged, pledged, transferred,
  endorsed, hypothecated or encumbered at the time such loans are
  obtained or such indebtedness is incurred, or at any other time or
  times, and may be either in addition to or in lieu of any property
  theretofore mortgaged, pledged, transferred, endorsed, hypothecated
  or encumbered. The provisions of this Resolution authorizing or
  relating to the pledge, mortgage, transfer, endorsement,
  hypothecation, granting of a security interest in, or in any way
  encumbering, the assets of the Corporation shall include, without
  limitation, doing so in order to lend collateral security for the
  indebtedness, now or hereafter existing, and of any nature
  whatsoever, of Petmed Express, Inc. to Lender. The Corporation has
  considered the value to itself of lending collateral in support of
  such indebtedness, and the Corporation represents to Lender that the
  Corporation is benefited by doing so.

  Execute Security Documents.  To execute and deliver to Lender the
  forms of mortgage, deed of trust, pledge agreement, hypothecation
  agreement, and other security agreements and financing statements
  which Lender may require and which shall evidence the terms and
  conditions under and pursuant to which such liens and encumbrances,
  or any of them, are given; and also to execute and deliver to Lender
  any other written instruments, any chattel paper, or any other
  collateral, or any kind of nature, which Lender may deem necessary
  or proper in connection with or pertaining to the giving of the
  liens and encumbrances.

  Further Acts.  To do and perform such other acts and things and to
  execute and deliver such other documents and agreements as the
  officer may in his or her discretion deem reasonably necessary or
  proper in order to carry into effect the provisions of this
  Resolution.

ASSUMED BUSINESS NAME.  The Corporation has filed or recorded all
documents or filings required by law relating to all assumed business
names used by the Corporation.  Excluding the name of the Corporation, the
following is a complete list of all assumed business names under which the
Corporation does business: None.

NOTICES TO LENDER.  The Corporation will promptly notify Lender in writing
at Lender's address shown above (or such other addresses as Lender may
designate from time to time) prior to any (A) change in the Corporation's
name; (B) change in the Corporation's assumed business name(s); (C) change
in the management of the Corporation; (D) change in the authorized
signer(s); (E) change in the Corporation's principal office address; (F)
change in the Corporation's state or organization; (G) conversion of the
Corporation to a new or different type of business entity; or (H) change
in any other aspect of the Corporation that directly or indirectly relates
to any agreements between the Corporation and Lender. No change in the
Corporation's name or state of organization will take effect until after
the Lender has received notice.

ADDITIONAL RESOLUTION PROVISION.  Signatures showing participation in the
request and processing of any matter covered by this resolution by any two
of the designated officers in any role, including without limitation
attestation of signatures by the Secretary, shall be sufficient to satisfy
the requirements of this resolution.

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS.  The officer named
above is duly elected, appointed, or employed by or for the Corporation,
as the case may be, and occupies the position set opposite his or her
respective name. This Resolution now stands of record on the books of the
Corporation, is in full force and effect, and has not been modified or
revoked in any manner whatsoever.

NO CORPORATE SEAL.  The Corporation has no corporate seal, and therefore,
no seal is affixed to this Resolution.

CONTINUING VALIDITY.  Any and all acts authorized pursuant to this
Resolution and performed prior to the passage of this Resolution are

                        Exhibit 10.12 Page 11 of 29

<PAGE>

           CORPORATE RESOLUTION TO GRANT COLLATERAL / GUARANTEE
                               (Continued)                           Page 2
===========================================================================

hereby ratified and approved. This Resolution shall be continuing, shall
remain in full force and effect and Lender may rely on it until written
notice of its revocation shall have been delivered to and received by
Lender at Lender's address shown above (or such addresses as Lender may
designate from time to time). Any such notice shall not affect any of the
Corporation's agreements or commitments in effect at the time notice is
give.

IN TESTIMONY WHEREOF, I have hereunto set my hand and attest that the
signature set opposite the name listed above is his or her genuine
signature.

I have read all the provisions of this Resolution, and I personally and on
behalf of the Corporation certify that all statements and representations
made in this Resolution are true and correct. This Corporate Resolution to
Grant Collateral / Guarantee is dated November 2, 2004.
                                      ----------------

                                  CERTIFIED TO AND ATTESTED BY:

                                  /s/ Bruce S. Rosenbloom
                                  ------------------------
                                  Bruce Rosenbloom, President of
                                  Southeastern Veterinary Exports, Inc.

Note: If the officer signing this Resolution is designated by the
foregoing document as one of the officers authorized to act on the
Corporations' behalf, it is advisable to have this Resolution signed by at
least one non-authorized officer of the Corporation.

                        Exhibit 10.12 Page 12 of 29

<PAGE>

                       COMMERCIAL SECURITY AGREEMENT
===========================================================================

Grantor:    Petmed Express Inc.     Lender: RBC CENTURA BANK
            1441 SW 29th Ave                Boca Raton, FL
            Pompano Beach, FL 30369         Lending Service Center (FL)
                                            2801 PGA Blvd. Suite 280H
                                            Palm Beach Gardens, FL 33410
===========================================================================

THIS COMMERCIAL SECURITY AGREEMENT dated November 2, 2004, is made and
executed between Petmed Express, Inc. ("Grantor") and RBC CENTURA BANK
("Lender").

GRANT OF SECURITY INTEREST. The valuable consideration, Grantor grants to
Lender a security interest in the Collateral to secure the Indebtedness
and agrees that Lender shall have the rights stated in this Agreement with
respect to the Collateral, in addition to all other rights which Lender
may have by law.

COLLATERAL DESCRIPTION. The word "Collateral" as used in this agreement
means the following described property, whether now owned or hereafter
acquired, whether now existing or hereafter arising, and wherever located,
in which Grantor is giving to Lender a security interest for the payment
of the Indebtedness and performance of all other obligations under the
Note and this Agreement:

  All inventory, Chattel Paper, Accounts, Equipment, Furniture,
  Fixtures, Machinery, Receivables, Patents, Licenses, and General
  Intangibles

In addition, the word "collateral" also includes all the following,
whether now owned or hereafter acquired, whether now existing or hereafter
acquired, whether now existing or hereafter arising, and wherever located:

    (A)     All accessions, attachments, accessories, tools, parts,
            supplies, replacements of and additions to any of the collateral
            described herein, whether added now or later.
    (B)     All products and produce of any of the property described in
            this Collateral section.
    (C)     All accounts, general intangible, instruments, rents, monies,
            payments, and all other rights, arising out of a sale, lease,
            consignment or other disposition of any of the property described
            in this Collateral section.
    (D)     All proceeds (including insurance proceeds) from the sale,
            destruction, loss, or other disposition of any of the property
            described in this Collateral section, and sums due from a third
            party who has damaged or destroyed the Collateral or from that
            party's insurer, whether due to judgment, settlement or other
            process.
    (E)     All records and data relation to any of the property described
            in this Collateral section, whether in the form of writing,
            photograph, microfilm, microfiche, or electronic media, together
            with all of Grantor's right, title, and interest in and to all
            computer software required to utilize, create, maintain, and
            process any such records or data on electronic media.

Despite any other provision of this Agreement, Lender is not granted, and
will not have, a nonpurchase money security interest in household good, to
the extent such a security interest would be prohibited by applicable law.
In addition, if because of the type of any Property, Lender is required to
give a notice of the right to cancel under Truth in Lending for the
Indebtedness, then Lender will not have a security interest in such
Collateral unless and until such a notice is given.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender
reserves a right of setoff in all Grantor's accounts with Lender (whether
checking, saving, or some other account). This includes all accounts
Grantor holds jointly with someone else and all accounts Grantor may open
in the future. However, this does not include any IRA or Keogh accounts,
or any trust accounts for which setoff would be prohibited by law. Grantor
authorizes Lender, to extent permitted by applicable law, to charge or
setoff all sums owing on the Indebtedness against any and all such
accounts, and, at Lender's option, to administratively freeze all such
accounts to allow Lender to protect Lender's charge and setoff rights
provided in this paragraph.

GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL.
With respect to the Collateral, Grantor represents and promises to Lender
that:

  Perfection of Security Interest. Grantor agrees to take whatever
  actions are requested by Lender to perfect and continue Lender's
  security interest in the Collateral. Upon request of Lender, Grantor
  will deliver to Lender any and all of the documents evidencing or
  constituting the Collateral, and Grantor will note Lender's interest
  upon any and all chattel paper and instruments if not delivered to
  Lender for possession by Lender. This is a continuing Security
  Agreement and will continue in effect even though all or any part of
  the indebtedness is paid in full and even though for a period of
  time Grantor may not be indebted to Lender.

  Notices to Lender. Grantor will promptly notify Lender in writing at
  Lender's address shown above (or such other addresses as Lender may
  designate from time to time) prior to any (1) change in Grantor's
  name; (2) change in Grantor's assumed business name(s); (3) change
  in the management of the Corporation Grantor; (4) change in the
  authorized signer(s); (5) change in Grantor's principal office
  address; (6) change in Grantor's state of organization; (7)
  conversion of Grantor to a new or different type of business entity;
  or (8) change in any other aspect of Grantor that directly or
  indirectly relates to any agreements between Grantor and Lender. No
  change in Grantor's name or state of organization will take effect
  until after Lender has received notice.

  No Violation. The execution and delivery of this Agreement will not
  violate any law or agreement governing Grantor or to which Grantor
  is a party, and this certificate or articles of incorporation and
  bylaws do not prohibit any term or condition of this Agreement.

  Enforceability of Collateral. To the extent the Collateral consists
  of accounts, chattel paper, or general intangibles, as defined by
  the Uniform Commercial Code, the Collateral is enforceable in
  accordance with its terms, is genuine, and fully complies with all
  applicable laws and regulations concerning form, content and manner
  of preparation and execution, and all persons appearing to be
  obligated as they appear to be on the Collateral. At the time any
  account becomes subject to a security interest in favor of Lender,
  the account shall be a good and valid account representing an
  undisputed, bona fide indebtedness incurred by the account debtor,
  for merchandise held subject to delivery instructions or previously
  shipped or delivered pursuant to a contract of sale, or for services
  previously performed by Grantor with or for account debtor. So long
  as this Agreement remains in effect, Grantor shall not, without
  Lender's prior written consent, compromise, settle, adjust, or
  extend payment under or with regard to any such Accounts. There
  shall be setoffs or counterclaims against any of the Collateral, and
  no agreement shall have been made under which any deductions or
  discounts may be claimed concerning the Collateral except those
  disclosed to Lender in writing.

  Location of the Collateral. Except in the ordinary course of
  Grantor's business, grantor agrees to keep the Collateral (or to the
  extent the Collateral consists of intangible property such as
  account or general intangibles, the records concerning the
  Collateral) at Grantor's address shown above or at such other
  locations as are acceptable to Lender. Upon Lenders request, Grantor
  will deliver to Lender in form satisfactory to Lender a schedule of
  real properties and Collateral locations relating to Grantor's
  operations, including without limitation the following: (1) all real
  property Grantor owns or is purchasing; (2) all real property
  Grantor is renting or leasing; (3) all storage facilities Grantor
  owns, rents, leases, or uses; and (4) all other properties where
  Collateral is or may be located.

  Removal of the Collateral. Except in the ordinary course of
  Grantor's business, including the sales of inventory, Grantor shall
  not remove the Collateral from it's existing location without
  Lender's prior written consent. To the extent that the Collateral
  consists of vehicles, or other titled property, Grantor shall not
  take or permit any action which would require application for
  certificates of title for the vehicles outside the State of Florida,
  with Lender's prior written consent. Grantor shall, whenever
  requested, advise Lender of the exact location of the Collateral.

  Transactions Involving Collateral. Except for inventory sold or
  accounts collected in the ordinary course of Grantor's business, or
  as otherwise provided for in this Agreement, Grantor shall not sell,
  offer to sale or otherwise transfer or dispose of the Collateral.
  While Grantor is not in default under this Agreement, Grantor may
  sell inventory, but only in the ordinary course of its business and
  only to buyers who qualify as a buyer in the ordinary course of
  business. A sale in the ordinary course of Grantor's business does
  not include a transfer in partial or total satisfaction of a debt or
  any bulk sale. Grantor shall not pledge, mortgage, encumber or
  otherwise permit the Collateral to be subject to any lien, security
  interest, encumbrance, or charge, other than the security interest
  provided for in this Agreement, without the prior written consent of
  Lender.  This includes security interests even if junior in right to
  the security interests granted under this Agreement. Unless waived
  by Lender, all proceeds from any disposition of the Collateral (for
  whatever reason) shall be held in trust for Lender and shall not be
  commingled with any other funds; provided however, this requirement
  shall not constitute consent  by Lender to any sale or other
  disposition. Upon receipt, Grantor shall immediately deliver any
  such proceeds to Lender.

  Title. Grantor represents and warrants to Lender that Grantor holds
  good and marketable title to the Collateral, free and clear of all
  liens and encumbrances except for the lien of this Agreement. No
  financing statement covering any of the collateral is on file in any
  public office other than those which reflect the security interest
  created by this Agreement or to which Lender has specifically
  consented. Grantor shall defend Lender's rights in the Collateral
  against the claims and demands of all other persons.

  Repairs and Maintenance. Grantor agrees to keep and maintain, and to
  cause others to keep and maintain, the Collateral in good order,
  repaid and condition at all times while this Agreement remains in
  effect. Grantor further agrees to pay when due all claims for work
  done

                        Exhibit 10.12 Page 13 of 29

<PAGE>

                       COMMERCIAL SECURITY AGREEMENT
                                (Continued)                          Page 2
===========================================================================

  on or services rendered or material furnished in connection with the
  Collateral so that no lien or encumbrance may ever attach to or be
  filed against the Collateral.

  Inspection or Collateral. Lender and Lender's designated
  representatives and agents shall have the right at all reasonable
  times to examine and inspect the Collateral wherever located.

  Taxes, Assessments and Liens. Grantor will pay when due all taxes,
  assessments and liens upon the Collateral, its used or operation,
  upon this Agreement, upon any promissory note or notes evidencing
  the Indebtedness, or upon any of the other Related Documents.
  Grantor may withhold any such payment or may elect to contest any
  lien if Grantor is in good faith conducting an appropriate
  proceeding to contest the obligation to pay and so long as Lender's
  interest in the Collateral is not jeopardized in Lender's sole
  opinion. If the Collateral is subjected to a lien which is not
  discharged within fifteen (15) days, Grantor shall deposit with
  Lender Cash, a sufficient corporate surety bond or other security
  satisfactory  to Lender in an amount adequate to provide for the
  discharge of the lien plus any interest, costs, reasonable
  attorneys' fees or other charges accrued as a result of foreclosure
  or sale of the Collateral. In any contest Grantor shall defend
  itself and Lender and shall satisfy any final adverse judgment
  before enforcement against the Collateral. Grantor shall name Lender
  as an additional obligee under any surety bond furnished in the
  contest proceedings. Grantor further agrees to furnish Lender with
  evidence that such taxes, assessments and governmental and other
  charges have been paid in full and in a timely manner. Grantor may
  withhold any such payments or may elect to contest any lien if
  Grantor is in good faith conducting an appropriate proceeding to
  contest the obligation to pay and so long as Lender's interest in
  the Collateral is not jeopardized.

  Compliance with Governmental Requirements. Grantor shall comply
  promptly with all laws, ordinances, rules and regulations of all
  governmental authorities now or hereafter in effect, applicable to
  the ownership, production, disposition, or use of the Collateral,
  including all laws or regulations relating to the undue erosion of
  highly-erodible land or relating to the conversion of wetlands for
  the production of an agricultural product or commodity. Grantor may
  contest in good faith any such law, ordinance or regulation and
  withhold compliance during any proceeding, including appropriate
  appeals, so long as Lender's interest in the Collateral, in Lender's
  opinion, is not jeopardized.

  Hazardous Substances. Grantor represents and warrants that the
  Collateral never has been, and never will be so long as this
  Agreement remains a lien on the Collateral, used in violation of any
  Environmental Laws or for the generation, manufacture, storage,
  transportation, treatment, disposal, release or threatened release
  Hazardous Substance. The representations and warranties contained
  herein are based on Grantor's due diligence in investigating the
  Collateral for Hazardous Substances. Grantor hereby (1) releases and
  waives any future claims against Lender for indemnity or
  contribution in the event Grantor becomes liable for cleanup or
  other costs under any future Environmental Laws, and (2) agrees to
  indemnity and holds harmless Lender against any and all claims and
  losses resulting from a breach of this provision of this Agreement.
  This obligation to indemnity shall survive the payment of the
  Indebtedness and the satisfaction of this Agreement.

  Maintenance of Casualty Insurance. Grantor shall procure and
  maintain all risks insurance, including without limitation fire,
  theft, and liability coverage together with such other insurance as
  Lender may require with respect to the Collateral, in form, amounts,
  coverages and basis reasonably acceptable to Lender and issued by a
  company or companies reasonably acceptable to Lender. Grantor, upon
  request of Lender, will deliver to Lender from time to time the
  policies or certificates of insurance in form satisfactory to
  Lender, including stipulations that coverages will not be cancelled
  or diminished without at least ten (10) days' prior written notice
  to Lender and not including any disclaimer of the insurer's
  liability for failure to give such a notice. Each insurance policy
  also shall include an endorsement providing that coverage in favor
  of Lender will not be impaired in any way by any act, omission or
  default of Grantor or any other person. In connection with all
  policies covering assets in which Lender holds or is offered a
  security interest, Grantor will provide Lender with such loss
  payable or other endorsements as Lender may require. If Grantor at
  any time fails to obtain or maintain any insurance as required under
  this agreement, Lender may (but shall not be obligated) obtain such
  insurance as Lender deems appropriate, including if Lender so
  chooses "single interest insurance," which will cover only Lender's
  interest in the Collateral.

  Application of Insurance Proceeds. Grantor shall promptly notify
  Lender of any loss or damage to the Collateral. Lender may make
  proof of loss if Grantor fails to do so within fifteen (15) days of
  the casualty. All proceeds of any insurance on the Collateral,
  including accrued proceeds thereon, shall be held by Lender as part
  of the Collateral. If Lender consents to repair or replacement of
  the damaged or destroyed Collateral, Lender shall, upon satisfactory
  proof of expenditure, pay or reimburse Grantor from the proceeds for
  the reasonable cost of repair or restoration. If Lender does not
  consent to repair or replacement of the Collateral, Lender shall
  retain a sufficient amount of the proceeds to pay all the
  Indebtedness, and shall pay the balance to Grantor. Any proceeds
  which have not been disbursed within six (6) months after their
  receipt and which Grantor has not committed to the repair or
  restoration of the Collateral shall be used to prepay the
  Indebtedness.

  Insurance Reserves. Lender may require Grantor to maintain with
  Lender reserves for payment of insurance premiums, which reserves
  shall be created by monthly payments from Grantor of the sum
  estimated by Lender to be sufficient to produce, at least fifteen
  (15) days before the premium due date, amounts at least equal to the
  insurance premiums to be paid. If fifteen (15) days before payment
  is due, the reserve funds are insufficient, Grantor shall upon
  demand pay nay deficiency to Lender. The reserve funds shall be held
  by Lender as a general deposit and shall constitute a non-interest-
  bearing account which Lender may satisfy by payment of the insurance
  premiums required to be paid by Grantor as they become due. Lender
  does not hold the reserve funds in trust for Grantor, and Lender is
  not the agent of Grantor for payment of the insurance premiums
 required to be paid by Grantor. The responsibility for the payment
  of the premiums shall remain Grantor's sole responsibility.

  Insurance Reports. Grantor, upon request of Lender, shall furnish to
  Lender report on each existing policy of insurance showing such
  information as Lender may reasonably request including the
  following: (1) the name of insurer; (2) the risks insured; (3) the
  amount of the policy; (4) the property insured; (5) the then current
  value on the basis of which insurance has been obtained and the
  manner of determining that value; and (6) the expiration date of the
  policy. In addition, grantor shall upon request by Lender (however
  not more often than annually) have an independent appraiser
  satisfactory to Lender determine, as applicable, the cash value or
  replacement cost of the Collateral.

  Financing Statements. Grantor authorizes Lender to file a UCC
  financing statement, or alternatively, a copy of this Agreement to
  perfect Lender's request, Grantor additionally agrees to sign all
  other documents that are necessary to perfect, protect, and continue
  Lender's security interest in the Property. Grantor will pay all
  filing fees, title transfer fees, and other fees and costs involved
  unless prohibited by law or unless Lender is required by law to pay
  such fees and costs. Grantor irrevocably appoints Lender to execute
  documents necessary to transfer title if there is a default. Lender
  may file a copy of this Agreement as a financing statement. If
  Grantor changes Grantor's name or address, or the name or address of
  any person granting a security interest under this Agreement
  changes, Grantor will promptly notify the Lender of such change.

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts, Grantor may
have possession of the tangible personal property and beneficial use of
all the Collateral and may use it in any lawful manner not inconsistent
with this Agreement or the Related Documents, provided that Grantor's
right to possession and beneficial use shall not apply to any Collateral
where possession of the Collateral by Lender is required by law to perfect
Lender's security interest in such Collateral. Until otherwise notified by
Lender, Grantor may collect any of the Collateral consisting of accounts.
At any time and even though no Event of Default exists, Lender may
exercise its rights to collect the account and to notify account debtors
to make payments directly to Lender for application to the Indebtedness.
If Lender at any time has possession of any Collateral, whether before or
after an Event or Default, Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as
Lender, in Lender's sole discretion, shall deem appropriate under the
circumstances, by failure to honor any request by Grantor shall not of
itself be deemed to be a failure to exercise reasonable care. Lender shall
not be required to take any steps necessary to preserve any rights in the
Collateral against prior parties, nor to protect, preserve or maintain any
security interest given to secure the Indebtedness.

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails
to comply with any provision of this Agreement or any Related Document,
including but not limited to Grantor's failure to discharge or pay when
due any amounts Grantor is required to discharge or pay under this
Agreement or any Related Document, Lender on Grantor's behalf may (but
shall not be obligated to) take any action that Lender deems appropriate,
including but not limited to discharging or paying all taxes, liens,
security interest, encumbrances and other claims, at any time levied or
placed on the Collateral and paying all costs for during, maintaining and
preserving the Collateral. All such expenditures incurred or paid by
Lender for such purposes will then bear interest at the rate charged under
the Note from the date incurred or paid by Lender to the date of repayment
by Grantor. All such expenses will a part of the Indebtedness and, at
Lender's option, will (A) be payable on demand; (B) be added to the
balance of the Note and be apportioned and be payable with any installment
payments to become due during either (1) the term of any applicable
insurance policy; or (2) the remaining term of the Note; or (C) be treated
as a balloon payment which will be due and payable at the Note's maturity.
The Agreement also will secure payment of these amounts. Such right shall
be in addition to all other rights and remedies to which Lender may be
entitled upon Default.

DEFAULT. Each of the following shall constitute an Event of Default under
this Agreement:

Payment Default. Grantor fails to make any payment when due under the
Indebtedness.

                        Exhibit 10.12 Page 14 of 29

<PAGE>

                       COMMERCIAL SECURITY AGREEMENT
                                 (Continued)                         Page 3
===========================================================================

  Other Defaults. Grantor fails to comply with or to perform any other
  term, obligation, covenant or condition contained in this Agreement
  or in any of the Related Documents or to comply with or to perform
  any term, obligation. Covenant or condition contained in any other
  agreement between Lender and Grantor.

  Default in Favor of Third Parties. Should Borrower or any Grantor
  default under any loan, extension of credit, security agreement,
  purchase or sales agreement, or any other agreement, in favor of any
  other creditor or person that may materially affect any of Grantor's
  property or Grantor's or any Grantor's ability to repay the
  Indebtedness or perform their respective obligations under this
  Agreement or any of the Related Documents.

  False Statements. Any warranty, representation or statement made or
  furnished to Lender by Grantor or on Grantor's behalf under this
  Agreement or the Related Documents is false or misleading in any
  material respect, either now or at the time made or furnished or
  becomes false or misleading at any time thereafter.

  Defective Collateralization. This Agreement or any of the Related
  Documents ceased to be in full force and effect (including failure
  of any collateral documents to create a valid and perfected security
  interest or lien) at any time and for any reason.

  Insolvency. The dissolution or termination of Grantor's existence as
  a going business, the insolvency of Grantor, the appointment of a
  receiver for any part of Grantor's property, any assignment  for the
  benefit of creditors, any type of creditor workout, or the
  commencement of any proceeding under any bankruptcy or insolvency
  laws by or against Grantor.

  Creditor or Forfeiture Proceeding. Commencement of foreclosure or
  forfeiture proceedings, whether by judicial proceeding, self help,
  repossession, or any other method, by any creditor of Grantor or by
  any governmental agency against any collateral securing the
  Indebtedness. This includes a garnishment on any of the Grantor's
  accounts, including deposit accounts, with Lender. However, this
  Event of Default shall not apply if there is a good faith dispute by
  Grantor as to the validity or reasonableness of the claim which is
  the basis of the creditor or forfeiture proceeding and if Grantor
  gives Lender written notice of the creditor or forfeiture proceeding
  and deposits with Lender monies or a surety bond for the creditor or
  forfeiture proceeding, in an amount determined by Lender, in its
  sole discretion, as being an adequate reserve or bond for the
  dispute.

  Events Affecting Guarantor. Any of the preceding events occurs with
  respect to any Guarantor of any of the Indebtedness or Guarantor
  dies or becomes incompetent or revokes or disputes the validity of,
  or liability under, any Guaranty of the Indebtedness.

  Adverse Change. A material adverse change occurs in Grantor's
  financial condition, or Lender believes the prospect of payment or
  performance of the Indebtedness.

  Insecurity.  Lender in good faith believes itself insecure.

  Cure Provisions. If any default, other than a default in payment is
  curable and if Grantor has not been given a notice of a breach of
  the same provision of this Agreement within the preceding twelve
  (12) months, it may be cured if Grantor, after receiving written
  notice from Lender demanding cure of such default: (1) cures the
  default within fifteen (15) days; or (2) if the cure requires more
  than fifteen (15) days, immediately initiates steps which Lender
  deems in Lender's sole discretion to be sufficient to cure the
  default and thereafter continues and completes all reasonable and
  necessary steps sufficient to produce compliance as soon as
  reasonably practical.

RIGHTS AND REMEDIES ON DEFAULT. If an Even of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the Florida Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following
remedies:

  Accelerate Indebtedness. Lender may declare the entire Indebtedness,
  including any prepayment penalty which Grantor would be required to
  pay, immediately due and payable, without notice of any kind to
  Grantor.

  Assemble Collateral. Lender may require Grantor to Deliver to Lender
  all or any portion of the Collateral and any and all certificates of
  title and other documents relating to the Collateral. Lender may
  require Grantor to assemble the Collateral and make it available to
  Lender at a place to be designated by Lender. Lender also shall have
  full power to enter upon the property or Grantor to take possession
  of and remove the Collateral. If the Collateral contains other goods
  not covered by this Agreement at the time of repossession, Grantor
  agrees Lender may take such other goods, provided that Lender makes
  reasonable efforts to return them to Grantor after repossession.

  Sell the Collateral. Lender shall have full power to sell, lease,
  transfer, or otherwise deal with the Collateral or proceeds thereof
  in Lender's own name or that of the Grantor. Lender may sell the
  Collateral at public auction or private sale. Unless the Collateral
  threatens to decline speedily in value or is of a type customarily
  sold on a recognized market, Lender will give Grantor, and other
  persons as required by law, reasonable notice of the time and place
  of the public sale, or the time after which any private sale or any
  other disposition of the Collateral is to be made. However, no
  notice need be provided to any person who, after Event of Default
  occurs, enters into and authenticates an agreement waiving that
  person's right to notification of sale. The requirements of
  reasonable notice shall be met if such notice is given at least ten
  (10) days before the time of the sale or disposition. All expenses
  relation to the disposition of the Collateral, including without
  limitation the expenses of retaking, holding, insuring, preparing
  for sale and selling the Collateral, shall become a part of the
  Indebtedness secured by this Agreement and shall be payable on
  demand, with interest  at the Note rate from date of expenditure
  until repaid.

  Appoint Receiver. In the event of a suit being instituted to
  foreclose this Agreement, Lender shall be entitled to apply at any
  time pending such foreclosure suit to the court having jurisdiction
  thereof for the appointment of a receiver of any or all of the
  Collateral, and of all rents incomes, profits, issues and revenues
  thereof, from whatsoever source. The parties agree that the court
  shall forthwith appoint such receiver with the usual powers and
  duties of receivers in like cases. Such appointment shall be made by
  the court as a matter of strict right to Lender and without notice
  to Grantor, and without reference to the adequacy or inadequacy of
  the value of the Collateral, or to Grantor's solvency or any other
  party defendant to such suit. Grantor hereby specifically waives the
  right to object to the appointment of a receiver and agrees that
  such appointment shall be made as an admitted equity and as a matter
  of absolute right to Lender, and consents to the appointment of any
  officer or employee of Lender as receiver. Lender shall have the
  right to have a receiver appointed to take possession of all or any
  part of the Collateral, with the power to protect and preserve the
  Collateral, to operate the Collateral preceding foreclosure or sale,
  and to collect the Rents from the Collateral and apply the proceeds,
  over and above the cost of the receivership, against the
  Indebtedness. The receiver may serve without bond if permitted by
  law. Lender's right to the appointment of a receiver shall exist
  whether or not the apparent value of the Collateral exceeds the
  Indebtedness by substantial amount. Employment by Lender shall not
  disqualify a person from service as a receiver.

  Collect Revenues, Apply Accounts. Lender, either itself or through a
  receiver, may collect the payments, rents income, and revenues from
  the Collateral. Lender may at any time in Lender's discretion
  transfer any Collateral into Lender's own name or that of Lender's
  nominee and receive the payments, rents income, and revenues
  therefrom and hold the same as security for the Indebtedness or
  apply it to payment of the Indebtedness in such order of preference
  as Lender may determine. Insofar as the Collateral consists of
  accounts, general intangibles, insurance policies, instruments,
  chattel paper, chooses in action, or similar property, Lender may
  demand, collect, receipt for, settle, compromise, adjust, sue for,
  foreclose, or realize on the Collateral as Lender may determine,
  whether or not Indebtedness or Collateral is then due. For these
  purposes, Lender may, on behalf of and in the name of Grantor,
  receive, open and dispose of mail addressed to Grantor; change any
  address to which mail and payments are to be sent; and endorse
  notes, checks, drafts, money orders, documents of title, instruments
  and items pertaining to payment, shipment, or storage of any
  Collateral. To facilitate collection, Lender may notify account
  debtors and obligors on any Collateral to make payments directly to
  Lender.

  Obtain Deficiency. If Lender chooses to sell any or all of the
  Collateral, Lender may obtain a judgment against Grantor for any
  deficiency remaining on the Indebtedness due to Lender after
  application of all amount received from the exercise of the rights
  provided in this Agreement. Grantor shall be liable for a deficiency
  even if the transaction described in this subsection is a sale of
  accounts or chattel paper.

  Other Rights and Remedies. Lender shall have all the rights and
  remedies of a secured creditor under the provisions of the Uniformed
  Commercial Code, as may be amended from time to time. In addition,
  Lender shall have and may exercise ay or all other rights and
  remedies it may have available at law, in equity, or otherwise.

  Election of Remedies. Except as may be prohibited by applicable law,
  all of Lender's rights and remedies, whether evidenced by this
  Agreement, the Related Documents, or by any other writing, shall be
  cumulative and may be exercised singularly or concurrently. Election
  by Lender to pursue any remedy shall not exclude pursuit of any
  other remedy, and an election to make expenditures or to take action
  to perform an obligation of Grantor under this Agreement, after
  Grantor's failure to perform, shall not affect Lender's right to
  declare a default and exercise its remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this agreement:

  Amendments. This agreement, together with any Related Documents,
  constitutes the entire understanding and agreement of the parties as
  to the matters set forth in this Agreement. No alteration of or
  amendment to this Agreement shall be effective unless given in
  writing and signed by the party or parties sought to be charged or
  bound by the alteration or amendment.

  Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of
  Lenders costs and expenses, including Lender's reasonable attorneys'
  fees and Lenders legal expenses, incurred in connection with the
  enforcement of this Agreement. Lender may hire or pay

                        Exhibit 10.12 Page 15 of 29

<PAGE>

                        COMMERCIAL SECURITY AGREEMENT
                                 (Continued)                         Page 4
===========================================================================

  someone else to help enforce this Agreement, and Grantor shall pay
  the costs and expenses of such enforcement.  Costs and expenses
  include Lender's reasonable attorneys' fees and legal expenses
  whether or not there is a lawsuit, including reasonable attorneys'
  fees and legal expenses for bankruptcy proceedings (including
  efforts to modify or vacate any automatic stay or injunction),
  appeals, and any anticipated post-judgment collection services.
  Grantor also shall pay all court costs and such additional fees as
  may be directed by the court.

  Caption Headings.  Caption headings in this Agreement are for
  convenience purposes only and are not to be used to interpret or
  define the provisions of this Agreement.

  Governing Law.  This Agreement will be governed by, construed and
  enforced in accordance with federal law and the laws of the State of
  Florida.  This Agreement has been accepted by Lender in the State of
  Florida.

  Choice of Venue.  If there is a lawsuit, Grantor agrees upon
  Lender's request to submit to the jurisdiction of the courts of Palm
  Beach County, State of Florida.

  No Waiver by Lender.  Lender shall not be deemed to have waived any
  rights under this Agreement unless such waiver is given in writing
  and signed by Lender.  No delay or omission on the part of Lender in
  exercising any right shall operate as a waiver of such right or any
  other right.  A waiver by Lender of a provision of this Agreement
  shall not prejudice or constitute a waiver of Lender's right
  otherwise to demand strict compliance with that provision of this
  Agreement.  No prior waiver by Lender, nor any course of dealing
  between Lender and Grantor, shall constitute a waiver of any of
  Lender's rights or of any of Grantor's obligations as to any future
  transactions.  Whenever the consent of Lender is required under this
  Agreement, the granting of such consent by Lender in any instance
  shall not constitute continuing consent to subsequent instances
  where such consent is required and in all cases such consent may be
  granted or withheld in the sole discretion of Lender.

  Notices.  Any notice required to be given under this Agreement shall
  be given in writing, and shall be effective when actually delivered,
  when actually received by telefacsimile (unless otherwise required
  by law), when deposited with a nationally recognized overnight
  courier, or, if mailed, when deposited in the United States mail, as
  first class, certified or registered mail postage prepaid, directed
  to the addresses shown near the beginning of this Agreement.  Any
  party may change its address for notices under this Agreement by
  giving written notice to the other parties, specifying that the
  purpose of the notice is to change the party's address.  For notice
  purposes, Grantor agrees to keep Lender informed at all times of
  Grantor's current address.  Unless otherwise provided or required by
  law, if there is more than one Grantor, any notice given by Lender
  to any Grantor is deemed to be notice given to all Grantors.

  Power of Attorney.  Grantor hereby appoints Lender as Grantor's
  irrevocable attorney-in-fact for the purpose of executing any
  documents necessary to perfect, amend, or to continue the security
  interest granted in this Agreement or to demand termination of
  filings of other secured parties.  Lender may at any time, and
  without further authorization from Grantor, file a carbon,
  photographic or other reproduction of any financing statement or
  this Agreement for use as a financing statement.  Grantor will
  reimburse Lender for all expenses for the perfection and the
  continuation of the perfection of Lender's security interest in the
  Collateral.

  Severability.  If a court of competent jurisdiction finds any
  provision of this Agreement to be illegal, invalid, or unenforceable
  as to any other circumstance.  If feasible, the offending provision
  shall be considered modified so that it becomes legal, valid and
  enforceable.  If the offending provision cannot be so modified, it
  shall be considered deleted from this Agreement.  Unless otherwise
  required by law, the illegality, invalidity, or unenforceability of
  any provision of this Agreement shall not affect the legality,
  validity or enforceability of any other provision of this Agreement.

  Successors and Assigns.  Subject to any limitations stated in this
  Agreement on transfer of Grantor's interest, this Agreement shall be
  binding upon and inure to the benefit of the parties, their
  successors and assigns.  If ownership of the Collateral becomes
  vested in a person other than Grantor, Lender, without notice to
  Grantor, may deal with Grantor's successors with reference to this
  Agreement and the Indebtedness by way of forbearance or extension
  without releasing Grantor from the obligations of this Agreement or
  liability under the Indebtedness.

  Survival of Representations and Warranties.  All representations,
  warranties, and agreements made by Grantor in this Agreement shall
  survive the execution and delivery of this Agreement, shall be
  continuing in nature, and shall remain  in full force and effect
  until such time as Grantor's Indebtedness shall be paid in full.

  Time is of the Essence.  Time is of the essence in the performance
  of this Agreement.

DEFINITIONS.  The following capitalized words and terms shall have the
following meanings when used in this Agreement.  Unless specifically
stated to the contrary, all references to dollar amounts shall mean
amounts in lawful money of the United States of America.  Words and terms
stated in the singular shall include the plural, and the plural shall
include the singular, as the context may require.  Words and terms not
otherwise defined in this Agreement shall have the meanings attributed to
such terms in the Uniform Commercial Code:

  Agreement.  The word "Agreement" means this Commercial Security
  Agreement, as this Commercial Security Agreement may be amended or
  modified from time to time, together with all exhibits and schedules
  attached to this Commercial Security Agreement from time to time.

  Borrower.  The word "Borrower" means Petmed Express, Inc. and
  includes all co-signers and co-makers signing the Note.

  Collateral.  The word "Collateral" means all of Grantor's right,
  title and interest in and to all the Collateral as described in the
  Collateral Description section of this Agreement.

  Default.  The word "Default" means the Default set forth in this
  Agreement in the section titled "Default".

  Environmental Laws.  The words "Environmental Laws" mean any and all
  state, federal and local statutes, regulations and ordinances
  relating to the protection of human health or the environment,
  including without limitation the Comprehensive Environmental
  Response, Compensation, and Liability Act of 1980, as amended, 42
  U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments
  and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the
  Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
  seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section
  6901, et seq., or other applicable state or federal laws, rules, or
  regulations adopted pursuant thereto.

  Event of Default.  The words "Event of Default" mean any of the
  events of default set forth in this Agreement in the default section
  of this Agreement.

  Grantor.  The word "Grantor" means Petmed Express, Inc.

  Guarantor.  The word "Guarantor" means any guarantor, surety, or
  accommodation party of any of the Indebtedness.

  Guaranty.  The word "Guaranty" means the guaranty from Guarantor to
  Lender, including without limitation a guaranty of all or part of
  the Note.

  Hazardous Substances.  The words "Hazardous Substances" mean
  materials that, because of their quantity, concentration or
  physical, chemical or infectious characteristics, nay cause or pose
  a present or potential hazard to human health or the environment
  when improperly used, treated, stored, disposed of, generated,
  manufactured, transported or otherwise handled.  The words
  "Hazardous Substances" are used in their very broadest sense and
  include without limitation any and all hazardous or toxic
  substances, materials or waste as defined by or listed under the
  Environmental Laws.  The term "Hazardous Substances" also includes,
  without limitation, petroleum and petroleum by-products or any
  fraction thereof and asbestos.

  Indebtedness.  The word "Indebtedness" means the indebtedness
  evidenced by the Note or Related Documents, including all principal
  and interest together with all other indebtedness and costs and
  expenses for which Grantor is responsible under this Agreement or
  under any of the Related Documents.

  Lender.  The word "Lender" means RBC CENTURA BANK, its successors
  and assigns.

  Note.  The word "Note" means the Note executed by Petmed Express,
  Inc. in the principal amount of $6,000,000.00 dated November 2,
  2004, together with all renewals of, extensions of, modifications
  of, refinancings of, consolidations of, and substitutions for the
  note or credit agreement.

  Property.  The word "Property" means all of Grantor's right, title
  and interest in and to all the Property as described in the
  "Collateral Description" section of this Agreement.

  Related Documents.  The words "Related Documents" mean all
  promissory notes, credit agreements, loan agreements, environmental
  agreements and documents, whether now or hereafter existing,
  executed in connection with the Indebtedness.

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT AND AGREES TO ITS TERMS.  THIS AGREEMENT IS DATED
NOVEMBER 2, 2004.

                        Exhibit 10.12 Page 16 of 29

<PAGE>

                        COMMERCIAL SECURITY AGREEMENT
                                 (Continued)                         Page 5
===========================================================================

     GRANTOR:

     PETMED EXPRESS, INC.

     By: /s/ Bruce S. Rosenbloom
        ---------------------------
        Bruce Rosenbloom, Treasurer of Petmed Express, Inc.

                        Exhibit 10.12 Page 17 of 29

<PAGE>

                             COMMERCIAL GUARANTY
===========================================================================

Borrower:    Petmed Express Inc.         Lender: RBC CENTURA BANK
             1441 SW 29th Ave                    Boca Raton, FL
             Pompano Beach, FL 30369             Lending Service Center (FL)
                                                 2801 PGA Blvd. Suite 280H
                                                 Palm Beach Gardens, FL 33410
Guarantor:   First Image Marketing, Inc.
             1441 SW 29th Ave
             Pompano Beach, FL 30369
===========================================================================

AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited.

CONTUNUE UNLIMITED GUARANTY. For good and valuable consideration, First
Image Marketing, Inc. ("Guarantor") absolutely and unconditionally
guarantees and promises to pay to RBC CENTURA BANK ("Lender") or  its
order, in legal tender of the United States of America, the indebtedness
(as that term is defined below) of Petmed Express, Inc. ("Borrower") to
Lender on the terms and conditions set forth in this guaranty. Under this
Guaranty, the liability of Guarantor is unlimited and the obligations of
Guarantor are continuing.

INDEBTEDNESS GUARANTEED.  The Indebtedness guaranteed by this Guaranty
includes any and all of Borrower's indebtedness to Lender and is used in
the most comprehensive sense and means and includes any and all of the
Borrower's liabilities, obligations and debts to Lender, now existing or
hereinafter incurred or created, including, without limitation, all loans,
advances, interest, costs, debts, overdraft indebtedness, credit card
indebtedness, lease obligations, and liabilities of Borrower, or any of
them, and any present or future judgments against Borrower, or any of
them; and whether any such Indebtedness is voluntarily or involuntarily
incurred, due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined; whether Borrower may be liable
individually or jointly with others, or primarily or secondarily, or as
guarantor or surety; whether recovery on the Indebtedness may be or may
become barred or unenforceable against Borrower for any reason whatsoever;
and whether the indebtedness arise from transactions which may be voidable
on account of infancy, insanity, ultra vires, or other wise.

DURATION OF GUARANTY. This Guaranty will take effect when received by
Lender without the necessity of nay acceptance by Lender, or any notice to
Guarantor or to Borrower, and will continue in full force until all
Indebtedness incurred or contracted before receipt by Lender of any notice
of revocation shall have been fully and finally paid and satisfied and all
Guarantor's other obligations under this Guaranty shall have been
performed in full. If Guarantor elects to revoke this Guaranty, Guarantor
may only do so in writing, Guarantor's written notice of revocation must
be mailed to Lender, by certified mail, at Lender's address listed above
or such other place as Lender may designate in writing. Written revocation
of this Guaranty will apply only advances or new Indebtedness created
after actual receipt by Lender of Guarantor's written revocation. For this
purpose and without limitation, the term "new Indebtedness" does not
include Indebtedness which at the time of notice of revocation is
contingent, unliquidated, undetermined or not due and which later becomes
absolute, liquidated, determined or due. This Guaranty will continue to
bind Guarantor for all Indebtedness incurred by Borrower or committed by
Lender prior to receipt of Guarantor's written notice of revocation,
including any extensions, renewals, substitutions or modifications of the
Indebtedness. All renewals, extensions, substitutions, and modifications
of the Indebtedness granted after Guarantor's revocation, are contemplated
under this Guaranty and, specifically will not be considered to be new
Indebtedness. This Guaranty shall bind Guarantor's estate as to
Indebtedness created both before and after Guarantor's death or
incapacity, regardless of Lender's actual notice of Guarantor's death.
Subject to the foregoing, Guarantor's executor or administrator or other
legal representative may terminate this Guaranty in the same manner in
which Guarantor mind have terminated it and with the same effect. Release
of any other guarantor or termination of any other guaranty of the
Indebtedness shall not affect the liability of the Guarantors under this
Guaranty. It is anticipated that fluctuations may occur in the aggregate
amount of Indebtedness covered by this Guaranty, and Guarantor
specifically acknowledges and agrees that reductions in the amount of
Indebtedness, eve to zero dollars ($0.00), prior to Guarantor's written
revocation of this Guaranty shall not constitute a termination of this
Guaranty. This Guaranty is binding upon Guarantor and Guarantor's heirs,
successors and assigns so long as any of the guaranteed Indebtedness
remains unpaid and even though the Indebtedness guaranteed may from time
to time be zero dollars ($0.00).

GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either
before or after any revocation hereof, without notice or demand and
without lessening Guarantor's liability under this Guaranty from time to
time. (A) Prior to revocation as set forth above, to make one or more
additional secure or unsecured loans to Borrower, to lease equipment or
other goods to Borrowers, or otherwise to extend additional credit to
Borrower; (B) to alter, compromise, renew, extend, accelerate, or other
wise change one or more times the time for payment or other terms of the
Indebtedness or any part of the Indebtedness, including increases and
decreases of the rate interest on the Indebtedness; extensions may be
repeated and may be for longer than the original loan term; (C) to take
and hold security for the payment of this Guaranty or the Indebtedness,
and exchange, enforce, waive, subordinate, fail or decide not to perfect,
and release any such security, with or without the substitution of new
collateral; (D) to release, substitute, agree not to sue, or deal with any
one or more of Borrower's sureties, endorsers, or other guarantors on any
terms or in any manner Lender may choose; (E) to determine how, when and
what application of payments and credits shall be made on the Indebtedness
(F) to apply such security and direct the order or manner of sale thereof,
including without limitation, any nonjudicial sale permitted by the terms
of the controlling security agreement or deed of trust, as Lender in its
discretion may determine; (G) to sell, transfer, assign or grant
participations in all or any part of the indebtedness; and (H) to assign
or transfer this Guaranty in whole or in part.

GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Lender that (A) no representations or agreements of any kind
have been made to Guarantor which would limit or qualify in any way the
terms of this Guaranty; (B) This Guaranty is executed at Borrower's
request and not at the request of Lender; (C) Guarantor has full power,
right and authority to enter into this Guaranty; (D) the provisions of
this Guaranty do not conflict with or result in a default under any
agreement or other instrument binding upon Guarantor and do not result in
a violation of any law, regulation, court decree or other applicable to
Guarantor; (E) Guarantor has not and will not, without the prior written
consent of lender, sell lease, assign, encumber, hypothecate, transfer or
otherwise dispose of all or substantially all Guarantor's assets, or any
interest therein; (F) upon Lender's request, Guarantor will provide to
Lender financial and credit information in form acceptable to Lender, and
all such financial information which currently has been and all future
financial information which will be provided to Lender is and will be true
and correct in all material respects and fairly present Guarantor's
financial condition as of the dates the financial information is provided;
(G) no material adverse change has occurred in Guarantor's financial
condition since the date of the most recent financial statements provided
to Lender and no event has occurred which may materially adversely affect
Guarantor's financial condition; (H) no litigation, claim investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Guarantor is pending or threatened; (I) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and
(J) Guarantor has established adequate means of obtaining from Borrower on
a continued basis information regarding borrower's financial condition.
Guarantor agrees to keep adequately informed from such means of any facts,
events or circumstances which might in any way affect Guarantor's risks
under this Guaranty, and Guarantor further agrees that, absent a request
for information, Lender shall have no obligation to disclose to Guarantor
any information or documents acquired by Lender in the course of its
relationship with Borrower.

GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor
waives any right to require Lender (A) to continue lending money or extend
other credit to Borrower; (B) to make any presentment, protest, demand, or
notice of any kind, including notice of any nonpayment of the Indebtedness
or of any nonpayment related to any collateral, or notice of any action or
nonaction on the part of Borrower, Lender, any surety, endorser, or other
guarantor in connection with the Indebtedness or in connection or in
connection with the creation of new or additional loans or obligations;
(C) to resort for payment or to proceed directly or at once against any
person, including Borrower or any other guarantor; (D) to proceed directly
against or exhaust any collateral held by Lender from Borrower, any other
guarantor, or any other person; (E) to pursue any other remedy within
Lender's power; (F) to commit any act or omission of any kind or at any
time, with respect to any matter whatsoever.

Guarantor also waives any and all rights or defenses arising by reason of
(A)any "one action" or "anti-deficiency" law or any other law which may
prevent Lender form binging any action, including a claim for deficiency,
against Guarantor before or after Lender's commencement or completion of
any foreclosure action, either judicially or by exercise of a power of
sale; (B) any election of remedies by Lender which destroys otherwise
adversely affects Guarantor's subrogation rights or Guarantor's rights to
proceed against Borrower for reimbursement, including without limitation,
any loss of rights Guarantor may suffer by reason of any law limiting,
qualifying, or discharging the Indebtedness; (C) any disability or other
defense of Borrower, of any other guarantor, or of any other person or by
reason of cessation of Borrower's liability from any cause whatsoever,
other than payment in full in legal tender, of the Indebtedness; (D) any
right to claim discharge of the Indebtedness on the basis of unjustified
impairment of any collateral for the Indebtedness; (E) Any statute of
limitations, if at any time any action or suit brought by Lender against
Guarantor is commenced, there is outstanding Indebtedness  of Borrower to
Lender which is not barred by any applicable statute of limitations; or
(F) any defenses given to guarantors at law or any equity other than
actual payment and performance of the Indebtedness. If payment is made by
Borrower, whether voluntarily or otherwise, or by any third party, on the
Indebtedness and thereafter Lender is forced to remit the amount of that
payment to Borrower's trustee in bankruptcy or to any similar person under
any federal or state bankruptcy law or law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of the enforcement
of the Guaranty.

Guarantor further waives and agrees not to assert or claim at nay time any
deductions to the mount guaranteed under this Guaranty for any claim of
setoff, counterclaim, counter demand, recoupment or similar right, whether
such claim, demand or right may be asserted by the

                        Exhibit 10.12 Page 18 of 29

<PAGE>

                            COMMERCIAL GUARANTY
                                (Continued)                          Page 2
===========================================================================

Borrower, the Guarantor, or both.

GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and
agrees that each of the waivers set forth above is made with Guarantor's
full knowledge of its significance and consequences and that, under
circumstance, the waivers are reasonable and not contrary to public policy
or law. If any such waiver is determined to be contrary to any applicable
law or public policy, such waiver shall be effective only to the extent
permitted by law or public policy.

SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter
created, shall be superior to any claim that Guarantor may now have or
hereafter acquire against Borrower, whether or not Borrower becomes
insolvent. Guarantor hereby expressly subordinates any claim Guarantor may
have against Borrower, upon any account whatsoever, to any claim that
Lender may now or hereafter have against Borrower. In the event of
insolvency and consequent liquidation of the assets of Borrower, through
bankruptcy, by assignment for the benefit of creditors, by voluntary
liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender
and shall be fist applied by Lender to the Indebtedness of Borrower to
Lender. Guarantor does hereby assign to Lender all claims which it may
have or acquire against Borrower or against any assignee or trustee in
bankruptcy or Borrower; provided however, that such assignment shall be
effective only for the purpose of assuring to Lender full payment in legal
tender of the Indebtedness. If Lender so requests, any notes or credit
agreements now or hereafter evidencing any debts or obligations of
Borrower to Guarantor shall be marked with a legend that the same are
subject to this Guaranty and shall be delivered to Lender. Guarantor
agrees, and Lender is hereby authorized, in the name of Guarantor, form
time to time to file financing statements and continuation statements and
to execute documents and to take such other actions as Lender deems
necessary or appropriate to perfect, preserve and enforce its rights under
this Guaranty.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Guaranty:

  Amendments. This Guaranty, together with any Related Documents,
  constitutes the entire understanding and agreement of the parties as
  to the matters set forth in this Guaranty. No alterations of or
  amendment to this Guaranty shall be effective unless given in
  writing signed by the parties sought to be charged or bound by the
  alteration or amendment.

  Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand the
  all of Lenders costs and expenses, including Lender's reasonable
  attorneys' fees and Lender's legal expenses, incurred in connection
  with the enforcement of this Guaranty. Lender may hire or pay
  someone else to help enforce this Guaranty, and Guarantor shall pay
  the costs and expenses of such enforcement. Costs and expenses
  include Lender's reasonable attorney's fees and legal expenses
  whether or not there is a lawsuit, including reasonable attorneys'
  fees and legal expenses for bankruptcy proceedings (including
  efforts to modify or vacate any automatic stay or injunction).
  Appeals and any anticipated post-judgment collection services.
  Guarantor also shall pay all court costs and such add ional fees as
  may be directed by the court.

  Caption Headings. Caption headings in this Guaranty are for
  convenience purposes only and are not to be used to interpret or
  define the provisions of this Guaranty.

  Governing Law. This Guaranty will be governed by, construed and
  enforced in accordance with federal law and the laws of the state of
  Florida. This Guaranty has been accepted by Lender in the State of
  Florida.

  Choice of Venue. If there is a lawsuit, Guarantor agrees upon
  Lender's request to submit to the jurisdiction of the courts of Palm
  Beach County, State of Florida.

  Integration. Guarantor further agrees that Guarantor has read and
  fully understands the terms of this Guaranty; Guarantor has had the
  opportunity to be advised by Guarantor's attorney with respect to
  this Guaranty; the Guaranty fully reflects Guarantor's intentions
  and parol evidence is not required to interpret the terms of this
  Guaranty. Guarantor hereby indemnifies and holds Lender harmless
  from all losses, claims, damages, and costs (including Lender's
  attorneys' fees) suffered or incurred by Lender as a result of any
  breach by Guarantor of the warranties, representations and
  agreements of this paragraphs.

  Interpretation. In all cases where there is more than one Borrower
  or Guarantor, then all words used in this Guaranty in the singular
  shall be deemed to have been used in the plural where the context
  and construction so require; and where there is more than one
  Borrower named in this Guaranty or when this Guaranty is executed by
  more than one Guarantor, the words "Borrower" and "Guarantor"
  respectively shall mean all and nay one or more of them. The words
  "Guarantor,"  "Borrower," and "Lender" include the heirs,
  successors, assigns, and transferees of each of them. If a court
  finds that any provision of this Guaranty is not valid or should not
  be enforced, that fact by itself will not mean that the rest of the
  Guaranty will not be valid or enforced. Therefore, a court will
  enforce the rest of the provisions of this Guaranty even if a
  provision of this Guaranty may be found to be invalid or
  unenforceable. If any one or more of Borrower or Guarantor are
  corporations, partnerships, limited liability companies, or similar
  entities, it is not necessary for Lender to inquire into the powers
  of Borrower or Guarantor or of the officers, directors, partners,
  managers, or other agents acting or purporting to act on their
  behalf, and any indebtedness made or created reliance upo9n the
  professed exercise of such powers shall be guaranteed under this
  Guaranty.

  Notices. Any notice required to be given under this Guaranty shall
  be given in writing , and, except for revocation notices by
  Guarantor, shall be effective when actually delivered, when actually
  received by telefacsimile (unless otherwise required by law), when
  deposited with a nationally recognized overnight courier, or, if
  mailed, when deposited in the United States mail, as first class,
  certified or registered mail postage prepaid, directed to the
  addresses shown near the beginning of this Guaranty. All revocation
  notices by Guarantor shall be in writing and shall be effective upon
  delivery to Lender as provided in the section of this Guaranty
  entitled "DURATION OF GUARANTY." Any party may change its address
  for notices under this Guaranty by giving written notice to the
  other parties, specifying that the purpose of the notice is to
  change the party's address. For notice purposes, Guarantor agrees to
  keep Lender informed at all times of Guarantor's current address.
  Unless otherwise provided or required by law, if there is more than
  one Guarantor, any notice given by Lender to any Guarantor is deemed
  to be notice given to all Guarantors.

  No waiver by Lender. Lender shall not be deemed to have waived any
  rights under this Guaranty unless such waiver is given in writing
  and signed by Lender. No delay or omission on the part of Lender in
  exercising any right shall operate as a waiver of such right or any
  other right. A waiver by Lender of a provision of this Guaranty
  shall not prejudice or constitute a waiver of Lender's right
  otherwise to demand strict compliance with that provision or any
  other provision of this Guaranty. No prior waiver by Lender, nor any
  course of dealing between Lender and Guarantor, shall constitute a
  waiver of any of Lender's rights or of any of Guarantor's
  obligations as to any future transactions. Whenever the consent of
  Lender is required under this Guaranty, the granting of such consent
  by Lender is required under this Guaranty, the granting of such
  consent by Lender in any instance shall not constitute continuing
  consent to subsequent instances where such consent is required and
  in all cases such consent may be granted or withheld in the sole
  discretion of Lender.

  Successors and Assigns. Subject to any limitations stated in this
  Guaranty on transfer of Guarantor's interest, this Guaranty shall be
  binding upon and inure to the benefit of the parties, their
  successors and assigns.

DEFINITIONS. The following capitalized words and terms shall have the
following meanings when used in this Guaranty. Unless specifically stated
to the contrary, all references to dollar amounts shall mean amounts in
lawful money of the United States of America. Words and terms are used in
the singular shall include the plural, and the plural shall include the
singular, as the context may require. Words and terms not otherwise defied
in this Guaranty shall have the meaning attributed to such terms in the
Uniformed Commercial Code:

  Borrower. The word "Borrower" means Petmed Express, Inc. and
  includes all co-signers and co-makers signing the Note.

  Guarantor. The word "Guarantor" means each and every person or
  entity signing this Guaranty, including without limitation First
  Image Marketing, Inc.

  Guaranty. The word "Guaranty" means the guaranty from Guarantor to
  Lender, including without limitation a guaranty of all or party of
  the Note.

  Indebtedness. The word "Indebtedness" means Borrower's indebtedness
  to Lender as more particularly described in this Guaranty.

  Lender. The word "Lender" means RBC CENTURA BANK, its successors and
  assigns.

  Note. The word "Note" means and includes without limitation all of
  Borrower's promissory notes and/or credit agreements evidencing
  Borrower's loan obligations in favor of Lender, together with all
  renewals of, extensions of, modifications of, refinancings of,
  consolidations of and substitutions for promissory notes or credit
  agreements.

  Related Documents. The words "Related Documents" mean all promissory
  notes, credit agreements, environmental agreements, guaranties,
  security agreements, mortgages, deeds of trust, security deeds,
  collateral mortgages, and all other instruments, agreements and
  documents, whether now or hereafter existing, executed in connection
  with the Indebtedness.

                        Exhibit 10.12 Page 19 of 29

<PAGE>

                            COMMERCIAL GUARANTY
                               (Continued)                           Page 3
===========================================================================

SUCH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF
THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR
UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND
DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE
UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED "DURATION
OF GUARANTY". NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS
GUARANTY EFFECTIVE. THIS GUARANTY IS DATED NOVEMBER 2, 2004.

GUARANTOR:

FIRST IMAGE MARKETING, INC.

By: /s/ Marc Puleo
    -------------------
    Marc Puleo, Director of First Image Marketing, Inc.
===========================================================================

                        Exhibit 10.12 Page 20 of 29

<PAGE>

                              COMMERCIAL GUARANTY
===========================================================================

Borrower:   Petmed Express Inc.        Lender: RBC CENTURA BANK
            1441 SW 29th Ave                   Boca Raton, FL
            Pompano Beach, FL 30369            Lending Service Center (FL)
                                               2801 PGA Blvd. Suite 280H
                                               Palm Beach Gardens, FL 33410

Guarantor:  Southeastern Veterinary Exports, Inc.
            1441 SW 29th Ave
            Pompano Beach, FL 30369
===========================================================================

AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited.

CONTUNUE UNLIMITED GUARANTY. For good and valuable consideration,
Southeastern Veterinary Exports, Inc. ("Guarantor") absolutely and
unconditionally guarantees and promises to pay to RBC CENTURA BANK
("Lender") or  its order, in legal tender of the United States of America,
the indebtedness (as that term is defined below) of Petmed Express, Inc.
("Borrower") to Lender on the terms and conditions set forth in this
guaranty. Under this Guaranty, the liability of Guarantor is unlimited and
the obligations of Guarantor are continuing.

INDEBTEDNESS GUARANTEED.  The Indebtedness guaranteed by this Guaranty
includes any and all of Borrower's indebtedness to Lender and is used in
the most comprehensive sense and means and includes any and all of the
Borrower's liabilities, obligations and debts to Lender, now existing or
hereinafter incurred or created, including, without limitation, all loans,
advances, interest, costs, debts, overdraft indebtedness, credit card
indebtedness, lease obligations, and liabilities of Borrower, or any of
them, and any present or future judgments against Borrower, or any of
them; and whether any such Indebtedness is voluntarily or involuntarily
incurred, due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined; whether Borrower may be liable
individually or jointly with others, or primarily or secondarily, or as
guarantor or surety; whether recovery on the Indebtedness may be or may
become barred or unenforceable against Borrower for any reason whatsoever;
and whether the indebtedness arise from transactions which may be voidable
on account of infancy, insanity, ultra vires, or other wise.

DURATION OF GUARANTY. This Guaranty will take effect when received by
Lender without the necessity of nay acceptance by Lender, or any notice to
Guarantor or to Borrower, and will continue in full force until all
Indebtedness incurred or contracted before receipt by Lender of any notice
of revocation shall have been fully and finally paid and satisfied and all
Guarantor's other obligations under this Guaranty shall have been
performed in full. If Guarantor elects to revoke this Guaranty, Guarantor
may only do so in writing, Guarantor's written notice of revocation must
be mailed to Lender, by certified mail, at Lender's address listed above
or such other place as Lender may designate in writing. Written revocation
of this Guaranty will apply only advances or new Indebtedness created
after actual receipt by Lender of Guarantor's written revocation. For this
purpose and without limitation, the term "new Indebtedness" does not
include Indebtedness which at the time of notice of revocation is
contingent, unliquidated, undetermined or not due and which later becomes
absolute, liquidated, determined or due. This Guaranty will continue to
bind Guarantor for all Indebtedness incurred by Borrower or committed by
Lender prior to receipt of Guarantor's written notice of revocation,
including any extensions, renewals, substitutions or modifications of the
Indebtedness. All renewals, extensions, substitutions, and modifications
of the Indebtedness granted after Guarantor's revocation, are contemplated
under this Guaranty and, specifically will not be considered to be new
Indebtedness. This Guaranty shall bind Guarantor's estate as to
Indebtedness created both before and after Guarantor's death or
incapacity, regardless of Lender's actual notice of Guarantor's death.
Subject to the foregoing, Guarantor's executor or administrator or other
legal representative may terminate this Guaranty in the same manner in
which Guarantor mind have terminated it and with the same effect. Release
of any other guarantor or termination of any other guaranty of the
Indebtedness shall not affect the liability of the Guarantors under this
Guaranty. It is anticipated that fluctuations may occur in the aggregate
amount of Indebtedness covered by this Guaranty, and Guarantor
specifically acknowledges and agrees that reductions in the amount of
Indebtedness, eve to zero dollars ($0.00), prior to Guarantor's written
revocation of this Guaranty shall not constitute a termination of this
Guaranty. This Guaranty is binding upon Guarantor and Guarantor's heirs,
successors and assigns so long as any of the guaranteed Indebtedness
remains unpaid and even though the Indebtedness guaranteed may from time
to time be zero dollars ($0.00).

GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either
before or after any revocation hereof, without notice or demand and
without lessening Guarantor's liability under this Guaranty from time to
time. (A) Prior to revocation as set forth above, to make one or more
additional secure or unsecured loans to Borrower, to lease equipment or
other goods to Borrowers, or otherwise to extend additional credit to
Borrower; (B) to alter, compromise, renew, extend, accelerate, or other
wise change one or more times the time for payment or other terms of the
Indebtedness or any part of the Indebtedness, including increases and
decreases of the rate interest on the Indebtedness; extensions may be
repeated and may be for longer than the original loan term; (C) to take
and hold security for the payment of this Guaranty or the Indebtedness,
and exchange, enforce, waive, subordinate, fail or decide not to perfect,
and release any such security, with or without the substitution of new
collateral; (D) to release, substitute, agree not to sue, or deal with any
one or more of Borrower's sureties, endorsers, or other guarantors on any
terms or in any manner Lender may choose; (E) to determine how, when and
what application of payments and credits shall be made on the Indebtedness
(F) to apply such security and direct the order or manner of sale thereof,
including without limitation, any nonjudicial sale permitted by the terms
of the controlling security agreement or deed of trust, as Lender in its
discretion may determine; (G) to sell, transfer, assign or grant
participations in all or any part of the indebtedness; and (H) to assign
or transfer this Guaranty in whole or in part.

GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Lender that (A) no representations or agreements of any kind
have been made to Guarantor which would limit or qualify in any way the
terms of this Guaranty; (B) This Guaranty is executed at Borrower's
request and not at the request of Lender; (C) Guarantor has full power,
right and authority to enter into this Guaranty; (D) the provisions of
this Guaranty do not conflict with or result in a default under any
agreement or other instrument binding upon Guarantor and do not result in
a violation of any law, regulation, court decree or other applicable to
Guarantor; (E) Guarantor has not and will not, without the prior written
consent of lender, sell lease, assign, encumber, hypothecate, transfer or
otherwise dispose of all or substantially all Guarantor's assets, or any
interest therein; (F) upon Lender's request, Guarantor will provide to
Lender financial and credit information in form acceptable to Lender, and
all such financial information which currently has been and all future
financial information which will be provided to Lender is and will be true
and correct in all material respects and fairly present Guarantor's
financial condition as of the dates the financial information is provided;
(G) no material adverse change has occurred in Guarantor's financial
condition since the date of the most recent financial statements provided
to Lender and no event has occurred which may materially adversely affect
Guarantor's financial condition; (H) no litigation, claim investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Guarantor is pending or threatened; (I) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and
(J) Guarantor has established adequate means of obtaining from Borrower on
a continued basis information regarding borrower's financial condition.
Guarantor agrees to keep adequately informed from such means of any facts,
events or circumstances which might in any way affect Guarantor's risks
under this Guaranty, and Guarantor further agrees that, absent a request
for information, Lender shall have no obligation to disclose to Guarantor
any information or documents acquired by Lender in the course of its
relationship with Borrower.

GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor
waives any right to require Lender (A) to continue lending money or extend
other credit to Borrower; (B) to make any presentment, protest, demand, or
notice of any kind, including notice of any nonpayment of the Indebtedness
or of any nonpayment related to any collateral, or notice of any action or
nonaction on the part of Borrower, Lender, any surety, endorser, or other
guarantor in connection with the Indebtedness or in connection or in
connection with the creation of new or additional loans or obligations;
(C) to resort for payment or to proceed directly or at once against any
person, including Borrower or any other guarantor; (D) to proceed directly
against or exhaust any collateral held by Lender from Borrower, any other
guarantor, or any other person; (E) to pursue any other remedy within
Lender's power; (F) to commit any act or omission of any kind or at any
time, with respect to any matter whatsoever.

Guarantor also waives any and all rights or defenses arising by reason of
(A)any "one action" or "anti-deficiency" law or any other law which may
prevent Lender form binging any action, including a claim for deficiency,
against Guarantor before or after Lender's commencement or completion of
any foreclosure action, either judicially or by exercise of a power of
sale; (B) any election of remedies by Lender which destroys otherwise
adversely affects Guarantor's subrogation rights or Guarantor's rights to
proceed against Borrower for reimbursement, including without limitation,
any loss of rights Guarantor may suffer by reason of any law limiting,
qualifying, or discharging the Indebtedness; (C) any disability or other
defense of Borrower, of any other guarantor, or of any other person or by
reason of cessation of Borrower's liability from any cause whatsoever,
other than payment in full in legal tender, of the Indebtedness; (D) any
right to claim discharge of the Indebtedness on the basis of unjustified
impairment of any collateral for the Indebtedness; (E) Any statute of
limitations, if at any time any action or suit brought by Lender against
Guarantor is commenced, there is outstanding Indebtedness  of Borrower to
Lender which is not barred by any applicable statute of limitations; or
(F) any defenses given to guarantors at law or any equity other than
actual payment and performance of the Indebtedness. If payment is made by
Borrower, whether voluntarily or otherwise, or by any third party, on the
Indebtedness and thereafter Lender is forced to remit the amount of that
payment to Borrower's trustee in bankruptcy or to any similar person under
any federal or state bankruptcy law or law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of the enforcement
of the Guaranty.

Guarantor further waives and agrees not to assert or claim at nay time any
deductions to the mount guaranteed under this Guaranty for any claim of
setoff, counterclaim, counter demand, recoupment or similar tight, whether
such claim, demand or right may be asserted by the

                        Exhibit 10.12 Page 21 of 29

<PAGE>

                             COMMERCIAL GUARANTY
                                  (Continued)                        Page 2
===========================================================================

Borrower, the Guarantor, or both.

GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and
agrees that each of the waivers set forth above is made with Guarantor's
full knowledge of its significance and consequences and that, under
circumstance, the waivers are reasonable and not contrary to public policy
or law. If any such waiver is determined to be contrary to any applicable
law or public policy, such waiver shall be effective only to the extent
permitted by law or public policy.

SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter
created, shall be superior to any claim that Guarantor may now have or
hereafter acquire against Borrower, whether or not Borrower becomes
insolvent. Guarantor hereby expressly subordinates any claim Guarantor may
have against Borrower, upon any account whatsoever, to any claim that
Lender may now or hereafter have against Borrower. In the event of
insolvency and consequent liquidation of the assets of Borrower, through
bankruptcy, by assignment for the benefit of creditors, by voluntary
liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender
and shall be fist applied by Lender to the Indebtedness of Borrower to
Lender. Guarantor does hereby assign to Lender all claims which it may
have or acquire against Borrower or against any assignee or trustee in
bankruptcy or Borrower; provided however, that such assignment shall be
effective only for the purpose of assuring to Lender full payment in legal
tender of the Indebtedness. If Lender so requests, any notes or credit
agreements now or hereafter evidencing any debts or obligations of
Borrower to Guarantor shall be marked with a legend that the same are
subject to this Guaranty and shall be delivered to Lender. Guarantor
agrees, and Lender is hereby authorized, in the name of Guarantor, form
time to time to file financing statements and continuation statements and
to execute documents and to take such other actions as Lender deems
necessary or appropriate to perfect, preserve and enforce its rights under
this Guaranty.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Guaranty:

  Amendments. This Guaranty, together with any Related Documents,
  constitutes the entire understanding and agreement of the parties as
  to the matters set forth in this Guaranty. No alterations of or
  amendment to this Guaranty shall be effective unless given in
  writing signed by the parties sought to be charged or bound by the
  alteration or amendment.

  Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand the
  all of Lenders costs and expenses, including Lender's reasonable
  attorneys' fees and Lender's legal expenses, incurred in connection
  with the enforcement of this Guaranty. Lender may hire or pay
  someone else to help enforce this Guaranty, and Guarantor shall pay
  the costs and expenses of such enforcement. Costs and expenses
  include Lender's reasonable attorney's fees and legal expenses
  whether or not there is a lawsuit, including reasonable attorneys'
  fees and legal expenses for bankruptcy proceedings (including
  efforts to modify or vacate any automatic stay or injunction).
  Appeals and any anticipated post-judgment collection services.
  Guarantor also shall pay all court costs and such add ional fees as
  may be directed by the court.

  Caption Headings. Caption headings in this Guaranty are for
  convenience purposes only and are not to be used to interpret or
  define the provisions of this Guaranty.

  Governing Law. This Guaranty will be governed by, construed and
  enforced in accordance with federal law and the laws of the state of
  Florida. This Guaranty has been accepted by Lender in the State of
  Florida.

  Choice of Venue. If there is a lawsuit, Guarantor agrees upon
  Lender's request to submit to the jurisdiction of the courts of Palm
  Beach County, State of Florida.

  Integration. Guarantor further agrees that Guarantor has read and
  fully understands the terms of this Guaranty; Guarantor has had the
  opportunity to be advised by Guarantor's attorney with respect to
  this Guaranty; the Guaranty fully reflects Guarantor's intentions
  and parol evidence is not required to interpret the terms of this
  Guaranty. Guarantor hereby indemnifies and holds Lender harmless
  from all losses, claims, damages, and costs (including Lender's
  attorneys' fees) suffered or incurred by Lender as a result of any
  breach by Guarantor of the warranties, representations and
  agreements of this paragraphs.

  Interpretation. In all cases where there is more than one Borrower
  or Guarantor, then all words used in this Guaranty in the singular
  shall be deemed to have been used in the plural where the context
  and construction so require; and where there is more than one
  Borrower named in this Guaranty or when this Guaranty is executed by
  more than one Guarantor, the words "Borrower" and "Guarantor"
  respectively shall mean all and nay one or more of them. The words
  "Guarantor,"  "Borrower," and "Lender" include the heirs,
  successors, assigns, and transferees of each of them. If a court
  finds that any provision of this Guaranty is not valid or should not
  be enforced, that fact by itself will not mean that the rest of the
  Guaranty will not be valid or enforced. Therefore, a court will
  enforce the rest of the provisions of this Guaranty even if a
  provision of this Guaranty may be found to be invalid or
  unenforceable. If any one or more of Borrower or Guarantor are
  corporations, partnerships, limited liability companies, or similar
  entities, it is not necessary for Lender to inquire into the powers
  of Borrower or Guarantor or of the officers, directors, partners,
  managers, or other agents acting or purporting to act on their
  behalf, and any indebtedness made or created reliance upo9n the
  professed exercise of such powers shall be guaranteed under this
  Guaranty.

  Notices. Any notice required to be given under this Guaranty shall
  be given in writing , and, except for revocation notices by
  Guarantor, shall be effective when actually delivered, when actually
  received by telefacsimile (unless otherwise required by law), when
  deposited with a nationally recognized overnight courier, or, if
  mailed, when deposited in the United States mail, as first class,
  certified or registered mail postage prepaid, directed to the
  addresses shown near the beginning of this Guaranty. All revocation
  notices by Guarantor shall be in writing and shall be effective upon
  delivery to Lender as provided in the section of this Guaranty
  entitled "DURATION OF GUARANTY." Any party may change its address
  for notices under this Guaranty by giving written notice to the
  other parties, specifying that the purpose of the notice is to
  change the party's address. For notice purposes, Guarantor agrees to
  keep Lender informed at all times of Guarantor's current address.
  Unless otherwise provided or required by law, if there is more than
  one Guarantor, any notice given by Lender to any Guarantor is deemed
  to be notice given to all Guarantors.

  No waiver by Lender. Lender shall not be deemed to have waived any
  rights under this Guaranty unless such waiver is given in writing
  and signed by Lender. No delay or omission on the part of Lender in
  exercising any right shall operate as a waiver of such right or any
  other right. A waiver by Lender of a provision of this Guaranty
  shall not prejudice or constitute a waiver of Lender's right
  otherwise to demand strict compliance with that provision or any
  other provision of this Guaranty. No prior waiver by Lender, nor any
  course of dealing between Lender and Guarantor, shall constitute a
  waiver of any of Lender's rights or of any of Guarantor's
  obligations as to any future transactions. Whenever the consent of
  Lender is required under this Guaranty, the granting of such consent
  by Lender is required under this Guaranty, the granting of such
  consent by Lender in any instance shall not constitute continuing
  consent to subsequent instances where such consent is required and
  in all cases such consent may be granted or withheld in the sole
  discretion of Lender.

  Successors and Assigns. Subject to any limitations stated in this
  Guaranty on transfer of Guarantor's interest, this Guaranty shall be
  binding upon and inure to the benefit of the parties, their
  successors and assigns.

DEFINITIONS. The following capitalized words and terms shall have the
following meanings when used in this Guaranty. Unless specifically stated
to the contrary, all references to dollar amounts shall mean amounts in
lawful money of the United States of America. Words and terms are used in
the singular shall include the plural, and the plural shall include the
singular, as the context may require. Words and terms not otherwise defied
in this Guaranty shall have the meaning attributed to such terms in the
Uniformed Commercial Code:

  Borrower. The word "Borrower" means Petmed Express, Inc. and
  includes all co-signers and co-makers signing the Note.

  Guarantor. The word "Guarantor" means each and every person or
  entity signing this Guaranty, including without limitation First
  Image Marketing, Inc.

  Guaranty. The word "Guaranty" means the guaranty from Guarantor to
  Lender, including without limitation a guaranty of all or party of
  the Note.

  Indebtedness. The word "Indebtedness" means Borrower's indebtedness
  to Lender as more particularly described in this Guaranty.

  Lender. The word "Lender" means RBC CENTURA BANK, its successors and
  assigns.

  Note. The word "Note" means and includes without limitation all of
  Borrower's promissory notes and/or credit agreements evidencing
  Borrower's loan obligations in favor of Lender, together with all
  renewals of, extensions of, modifications of, refinancings of,
  consolidations of and substitutions for promissory notes or credit
  agreements.

  Related Documents. The words "Related Documents" mean all promissory
  notes, credit agreements, environmental agreements, guaranties,
  security agreements, mortgages, deeds of trust, security deeds,
  collateral mortgages, and all other instruments, agreements and
  documents, whether now or hereafter existing, executed in connection
  with the Indebtedness.

                        Exhibit 10.12 Page 22 of 29

<PAGE>

                          COMMERCIAL GUARANTY
                              (Continued)                            Page 3
===========================================================================

SUCH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF
THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR
UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND
DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE
UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED "DURATION
OF GUARANTY". NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS
GUARANTY EFFECTIVE. THIS GUARANTY IS DATED NOVEMBER 2, 2004.

GUARANTOR:

SOUTHEASTERN VETERINARY EXPORTS, INC.

By: /s/ Bruce S. Rosenbloom
    -----------------------
    Bruce Rosenbloom, President of Southeastern Veterinary Exports, Inc.
===========================================================================

                        Exhibit 10.12 Page 23 of 29

<PAGE>

                      AGREEMENT TO PROVIDE INSURANCE
===========================================================================

Grantor:    Petmed Express Inc.       Lender:  RBC CENTURA BANK
            1441 SW 29th Ave                   Boca Raton, FL
            Pompano Beach, FL 30369            Lending Service Center (FL)
                                               2801 PGA Blvd. Suite 280H
                                               Palm Beach Gardens, FL 33410
===========================================================================

  INSURANCE REQUIREMENTS.  Grantor, Petmed Express, Inc. ("Grantor"),
  understands that insurance coverage is required in connection with the
  extending of a loan or the providing of other financial accommodations to
  Grantor by Lender.  These requirements are set forth in the security
  documents for the loan.  The following minimum insurance coverages must be
  provided on the following described collateral (the "Collateral"):

   Collateral:  All Inventory and EquipmentAll .
   Type:  All risks, including fire, theft and liability.
   Amount:  Loan Amount.
   Basis:  Replacement value.
   Endorsements:  Lender loss payable clause with stipulation that will
                  not be cancelled or diminished without a
                  minimum of thirty (30) days prior written notice to Lender.
   Comments:  Customer #.
   Latest Delivery Date:  By the loan closing date.

  INSURANCE COMPANY.  Grantor may obtain insurance from any insurance
  company Grantor may choose that is reasonably acceptable to Lender.
  Grantor understands that credit may not be denied solely because insurance
  was not purchased through Lender.

  INSURANCE MAILING ADDRESS.  All documents and other materials relating to
  insurance for this loan should be mailed, delivered or directed to the
  following address:

		RBC CENTURA BANK
		P.O. Box 1220
		Rocky Mount, NC 27802

  FAILURE TO PROVIDE INSURANCE.  Grantor agrees to deliver to Lender, on the
  latest delivery date stated above, proof of the required insurance as
  provided above, with an effective date of November 2, 2004, or earlier.
  Grantor acknowledges and agrees that if Grantor fails to provide any
  required insurance or fails to continue such insurance in force, Lender
  may do so at Grantor's expense as provided in the applicable security
  document.  GRANTOR ACKNOWLEDGES THAT IF LENDER SO PURCHASES ANY SUCH
  INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYUSICAL
  DAMAGE TO THE COLLATERAL, UP TO AN AMOUNT EQUAL TO THE LESSER OF (1) THE
  UNPAID BALANCE OF THE DEBT, EXCLUDING ANY UNEARNED FINANCE CHARGES, OR (2)
  THE VALUE OF THE COLLATERAL; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL
  MAY NOT BE INSURED.  IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC
  LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
  REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.

  AUTHORIZATION.  For purposes of insurance coverage on the Collateral,
  Grantor authorizes Lender to provide to any person (including any
  insurance agent or company) all information Lender deems appropriate,
  whether regarding the Collateral, the loan or other financial
  accommodations, or both.

  GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
  PROVIDE INSURANCE AND AGREES TO ITS TERMS.  THIS AGREEMENT IS DATED
  NOVEMBER 2, 2004.

  GRANTOR:

  PETMED EXPRESS, INC.

  By: /s/ Bruce S. Rosenbloom
     ------------------------
     Bruce Rosenbloom, Treasurer of Petmed Express, Inc.

                        Exhibit 10.12 Page 24 of 29

<PAGE>

                      NOTICE OF INSURANCE REQUIREMENTS
===========================================================================

Grantor:   Petmed Express Inc.       Lender:  RBC CENTURA BANK
           1441 SW 29th Ave                   Boca Raton, FL
           Pompano Beach, FL 30369            Lending Service Center (FL)
                                              2801 PGA Blvd. Suite 280H
                                              Palm Beach Gardens, FL 33410
===========================================================================

  TO:     ATTN:  Insurance Agent                DATE:  November 2, 2004

  RE:     Policy Number(s):

  Insurance Companies/Company:

  Dear Insurance Agent:

  Grantor, Petmed Express, Inc.  ("Grantor") is obtaining a loan from RBC
  CENTURA BANK.  Please send appropriate evidence of insurance to RBC
  CENTURA BANK, together with the requested endorsements, on the
  following property, which Grantor is giving as security for the loan.

   Collateral:   All Inventory and EquipmentAll .
                 Type:  All risks, including fire theft and liability.
                 Amount:  Loan Amount.
                 Basis:  Replacement value.
                 Endorsements:  Lender loss payable clause with stipulation
                 that coverage will not be cancelled or diminished without a
                 minimum of thirty (30) days prior written notice to Lender.
                 Comments:  Customer #.
                 Latest Delivery Date:  By the loan closing date.

   GRANTOR:

   PETMED EXPRESS, INC.

   By: /s/ Bruce S. Rosenbloom
       -----------------------
       Bruce Rosenbloom, Treasurer of Petmed Express, Inc.

                        Exhibit 10.12 Page 25 of 29

<PAGE>

                             PROMISSORY NOTE
===========================================================================

Borrower:   Petmed Express Inc.        Lender: RBC CENTURA BANK
            1441 SW 29th Ave                   Boca Raton, FL
            Pompano Beach, FL 30369            Lending Service Center (FL)
                                               2801 PGA Blvd. Suite 280H
                                               Palm Beach Gardens, FL 33410
===========================================================================

Principal Amount: $6,000,000.00  Initial Rate: 3.490%
                                             Date of Note: November 2, 2004

PROMISE TO PAY.  Petmed Express, Inc.  ("Borrower") promises to pay to RBC
CENTURA BANK ("Lender"), or order, in lawful money of the United States of
America, the principal amount of Six Million & 00/100 Dollars
($6,000,000.00) or so much as may be outstanding, together with interest
on the unpaid outstanding principal balance of each advance.  Interest
shall be calculated from the date of each advance until repayment of each
advance.

PAYMENT.  Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on November 1, 2005.  In
addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning December 1, 2004, with all
subsequent interest payments to be due on the same day of each month after
that.  Unless otherwise agreed or required by applicable law, payments
will be applied first to any unpaid collection costs; then to any late
charges; then to any accrued unpaid interest; and then to principal.  The
annual interest rate for this Note is computed on a 365/360 basis; that
is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding by the actual number of days the
principal balance is outstanding.  Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in
writing.

VARIABLE INTEREST RATE.  The interest rate on this Note is subject to
change from time to time based on changes in an independent index which is
the LIBOR Base Rate (the "Index").  The Index is not necessarily the
lowest rate charged by Lender on its loans.  If the Index becomes
unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower.  Lender will tell Borrower the
current Index rate upon Borrower's request.  The interest rate change will
not occur more often than each month.  The "LIBOR Base Rate: is the London
Interbank Offer Rate for U.S. dollars for a term of one month which
appears on the Telerate Page 3750, Bloomberg Professional screen BBAM (or
any generally recognized successor method or means of publication) as of
11:00 a.m., London time, two (2) London business days prior to the day on
which the rate will become effective.  The rate will initially become
effective on the date of the Note as shown on the face of the Note.
Thereafter, the rate will change and a new rate will become effective on
the first calendar day of each succeeding month.  If for any reason, the
London Interbank Offer Rate is not available, the "LIBOR Base Rate" shall
mean the rate per annum which banks charge each other in a market
comparable to England's Eurodollar market on short-term money in U.S.
dollars for an amount substantially equivalent to the principal amount due
under this Note, as determined at 11:00 A.M. London time, two (2) London
Business days prior to the day on which the rate will become effective, as
determined in Bank's sole discretion.  Bank determination of such interest
rate shall be conclusive, absent manifest error.  Borrower understands
that Lender may make loans based on other rates as well.  The Index
currently is 1.990% per annum.  The interest rate to be applied to the
unpaid principal balance of this Note will be at a rate of 1.500
percentage pints over the Index, resulting in an initial rate of 3.490%
per annum.  NOTICE:  Under no circumstances will the effective rate of
interest on this Note be more than the maximum rate allowed by applicable
law.

PREPAYMENT.  Borrower agrees that all loan fees and other prepaid finance
charges are earned fully as of the date of the loan and will not be
subject to refund upon early payment (whether voluntary or as a result of
default), except as otherwise required by law.  Except for the foregoing,
Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due.  Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments of accrued unpaid interest.  Rather, early payments will
reduce the principal balance due.  Borrower agrees not to send Lender
payments marked "paid in full", "without recourse", or similar language.
If Borrower sends such a payment, Lender may accept it without losing any
of Lender's rights under this Note, and Borrower will remain obligated to
pay any further amount owed to Lender.  All written communications
concerning disputed amounts, including any check or other payment
instrument that indicates that the payment constitutes "payment in full"
of the amount owed or that is tendered with other conditions or
limitations or as full satisfaction of a disputed amount must be mailed or
delivered to:  RBC CENTURA BANK, Boca Raton, FL, Lending Service Center
(FL), 2801 PGA Blvd., Suite 280H, Palm Beach Gardens, FL 33410.

LATE CHARGE.  If a payment is 10 days or more late, Borrower will be
charged 5.000% of the unpaid portion of the regularly scheduled payment.

INTEREST AFTER DEFAULT.  Upon default, including failure to pay upon final
maturity, Lender, at its option, may, if permitted under applicable law,
increase the variable interest rate on this Note to 18.000% per annum, if
and to the extent that the increase does not cause the interest rate to
exceed the maximum rate permitted by applicable law.

DEFAULT.  Each of the following shall constitute an event of default
("Event of Default") under this Note:

  Payment Default.  Borrower fails to make any payment when due under
  this Note.

  Other Defaults.  Borrower fails to comply with or to perform any
  other term, obligation, covenant or condition contained in this Note
  or in any of the related documents or to comply with or to perform
  any term, obligation, covenant or condition in any other agreement
  between Lender and Borrower.

  Default in Favor of Third Parties.  Borrower or any Grantor defaults
  under any loan, exte3nsion of credit, security agreement, purchase or
  sales agreement, or any other agreement, in favor of any other
  creditor or person that may materially affect any of Borrower's
  property or Borrower's ability to repay this Note or perform
  Borrower's obligations under this Note or any of the related
  documents.

  False Statements.  Any warranty, representation or statement made or
  furnished to Lender by Borrower or on Borrower's behalf under this
  Note or the related documents is false or misleading in any material
  respect, either now or at the time made or furnished or becomes false
  or misleading at any time thereafter.

  Insolvency.  The dissolution or termination of Borrower's existence
  as a going business, the insolvency of Borrower, the appointment of a
  receiver for any part of Borrower's property, any assignment for the
  benefit of creditors, any type of creditor workout, or the
  commencement of any proceeding under any bankruptcy or insolvency
  laws by or against Borrower.

  Creditor of Forfeiture Proceedings.  Commencement of foreclosure or
  forfeiture proceedings, whether by judicial proceeding, self-help,
  repossession or any other method, by any creditor of Borrower or by
  any governmental agency against any collateral securing the loan.
  This includes a garnishment of any of Borrower's accounts, including
  deposit accounts, with Lender.  However, this Event of Default shall
  not apply if there is a good faith dispute by Borrower as to the
  validity or reasonableness of the claim which is the basis of the
  creditor or forfeiture proceeding and if Borrower gives Lender
 written notice of the creditor or forfeiture proceeding and deposits
  with Lender monies or a surety bond for the creditor or forfeiture
  proceeding, in an amount determined by Lender, in its sole
  discretion, as being an adequate reserve or bond for the dispute.

  Events Affecting Guarantor.  Any of the preceding events occurs with
  respect to any Guarantor of any of the indebtedness or any Guarantor
  dies or becomes incompetent, or revokes or disputes the validity of,
  or liability under, any guaranty of the indebtedness evidenced by
  this Note.  In the event of a death, Lender, at its option, may, but
  shall not be required to, permit the Guarantor's estate to assume
  unconditionally the obligations arising under the guaranty in a
  manner satisfactory to Lender, and, in doing so, cure any Event of
  Default.

  Change In Ownership.  Any change in ownership of twenty-five percent
  (25%) or more of the common stock of Borrower.

  Adverse Change.  A material adverse change occurs in Borrower's
  financial condition, or Lender believes the prospect of payment or
  performance of this Note is impaired.

  Insecurity.  Lender in good faith believes itself insecure.

  Cure Provisions.  If any default, other than a default in payment is
  curable and if Borrower has not been given a notice of a breach of
  the same provision of this Note within the preceding twelve (12)
  months, it may be cured if Borrower, after receiving written notice
  from Lender demanding cure of such default:  (1) cures the default
  within fifteen (15) days; or (2) if the cure requires more than
  fifteen (15) days, immediately initiates steps which Lender deems in
  Lender's sole discretion to be sufficient to cure the default and
  thereafter continues and completes all reasonable and necessary steps
  sufficient to produce compliance as soon as reasonably practical.

LENDER'S RIGHTS.  Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, and then Borrower will pay that amount.

ATTORNEYS' FEES; EXPENSES.  Lender may hire or pay someone else to help
collect this Note if Borrower does not pay.  Borrower will pay Lender the
amount of these costs and expenses, which includes, subject to any limits
under applicable law, Lender's reasonable attorneys' fees and Lender's
Legal expenses whether or not there is a lawsuit, including reasonable
attorneys' fees and legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), and
appeals.  If not prohibited by applicable law, Borrower also will pay any
court costs, in addition to all other sums provided by law.

                        Exhibit 10.12 Page 26 of 29

<PAGE>

                              PROMISSORY NOTE
                                (Continued)                          Page 2
===========================================================================

GOVERNING LAW.  This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of Florida.  This
Note has been accepted by Lender in the State of Florida.

CHOICE OF VENUE.  If there is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of Palm Beach County,
State of Florida.

DISHONORED ITEM FEE.  Borrower will pay a fee to Lender of $25.00 if
Borrower makes a payment on Borrower's loan and the check or preauthorized
charge with which Borrower pays is later dishonored.

COLLATERAL.  Borrower acknowledges this Note is secured by the following
collateral described in the security instrument listed herein:  inventory,
chattel paper, accounts, equipment and general intangibles described in a
Commercial Security Agreement dated November 2, 2004.

LINE OF CREDIT.  This Note evidences a revolving line of credit.  Advances
under this Note may be requested orally by Borrower or as provided in this
paragraph.  All oral requests shall be confirmed in writing on the day of
the request.  All communications, instructions, or directions by telephone
or otherwise to Lender are to be directed to Lender's office shown above.
The following person currently is authorized, except as provided in this
paragraph, to request advances and authorize payments under the line of
credit until Lender receives from Borrower, at Lender's address shown
above, written notice of revocation of his or her authority:  Bruce
Rosenbloom.  Borrowing Base Advances:

Inventory advances shall be based on 50% of eligible inventory including a
sub limit, which will limit reliance on prescription drug inventory to a
maximum of $2,000,000.00 ($4,000,000.00 prescription inventory at 50%
advance rate).  The Bank reserves the right to request an inventory audit
at any time.  Stale dated inventory shall be excluded from the borrowing
base.  This will be checked annually by the company's auditor.  Borrower
agrees to be liable for all sums either:  (A) advanced in accordance with
the instructions of an authorized person or (B) credited to any of
Borrower's accounts with Lender.  The unpaid principal balance owing on
this Note at any time may be evidenced by endorsements on this Note or by
Lender's internal records, including daily computer print-outs.  Lender
will have no obligation to advance funds under this Note if :  (A)
Borrower or any guarantor is in default under the terms of this Note or
any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (B)
Borrower or any guarantor ceases doing business or is insolvent; (C) any
guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such guarantor's guarantee of this Note or any other loan with Lender; (D)
Borrower has applied funds provided pursuant to this Note for purposes
other than those authorized by Lender; or (E) Lender in good faith
believes itself insecure.

ADDITIONAL DEFAULT PROVISION.  Loan shall be in default upon the death,
dissolution, merger, consolidation or termination of existence of any
party.

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon
Borrower, and upon Borrower's heirs, personal representatives, successors
and assign, and shall inure to the benefit of Lender and its successors
and assigns.

NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING
AGENCIES.  Please notify us if we report any inaccurate information about
your account(s) to a consumer reporting agency.  Your written notice
describing the specific inaccuracy(ies) should be sent to us at the
following address:  RBC CENTURA BANK, Boca Raton, FL, Lending Service
Center (FL), 2801 PGA Blvd., Suite 280H, Palm Beach Gardens, FL 33410

GENERAL PROVISIONS.  If any part of this Note cannot be enforced, this
fact will not affect the rest of the Note.  Borrower does not agree or
intend to pay, and Lender does not agree or intend to contract for,
charge, collect take, reserve or receive (collectively referred to herein
as "charge or collect"), any amount in the nature of interest or in the
nature of a fee for this loan, which would in any way or event (including
demand, prepayment, or acceleration) cause Lender to charge or collect
more for this loan than the maximum Lender would be permitted to charge
collect by federal law or the law of the State of Florida (as applicable).
Any such excess interest or unauthorized fee shall, instead of anything
stated to the contrary, be applied first to reduce the principal balance
of this loan, and when the principal has been paid in full, be refunded to
Borrower.  Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them.  Borrower and any other
person who signs, guarantees or endorses this Note, to the extent allowed
by law, waive presentment, demand for payment, and notice of dishonor.
Upon any change in the terms of this Note, and unless otherwise expressly
stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from
liability.  All such parties agree that Lender may renew or extend
(repeatedly and for any length of time) this loan or release any party or
guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone.
All such parties also agree that Lender may modify this loan without the
consent of or notice to anyone other than the party with whom the
modification is made.  The obligations under this Note are joint and
several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLTED COPY OF THIS PROMISSORY NOTE.

BORROWER:

PETMED EXPRESS, INC.

By: /s/ Bruce S. Rosenbloom
    ------------------------
    Bruce Rosenbloom, Treasurer of Petmed Express, Inc.

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

                        Exhibit 10.12 Page 27 of 29

<PAGE>

                             COMPLIANCE AGREEMENT
===========================================================================

Borrower:   Petmed Express Inc.        Lender: RBC CENTURA BANK
            1441 SW 29th Ave                   Boca Raton, FL
            Pompano Beach, FL 30369            Lending Service Center (FL)
                                               2801 PGA Blvd. Suite 280H
                                               Palm Beach Gardens, FL 33410
===========================================================================

  This COMPLIANCE AGREEMENT is attached to and by this reference is made
  a part of the Promissory Note, dated November 2, 2004, and executed in
  connection with a loan or other financial accommodations between RBC
  CENTURA BANK and Petmed Express, Inc.

             COMPLIANCE AGREEMENT

In consideration of the above-referenced Lender lending funds (the
"Loan") to Borrower, the undersigned, as borrower (the "Obligor")
agrees, upon request of Lender or upon request of any person acting on
behalf of Lender, to fully cooperate with Lender or such person to
correct any inaccurate term or provision of, mistake in, or omission
from any document associated with the closing of the loan.  Failure or
refusal of Obligor to execute the aforementioned required additional
documents, or to correct those already executed, shall constitute a
default under the terms of the Loan documents and shall give Lender the
right to pursue any available remedy, including, but not limited to,
the right to declare all sums secured by the Loan documents immediately
due and payable.  The rights and powers of Lender under this Compliance
Agreement shall inure to the benefit of any subsequent holder of said
Loan documents.

THIS COMPLIANCE AGREEMENT IS EXECUTED ON NOVEMBER 2, 2004.

BORROWER:

PETMED EXPRESS, INC.

By: /s/ Bruce S. Rosenbloom
    ------------------------
    Bruce Rosenbloom, Treasurer of Petmed Express, Inc.

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

                        Exhibit 10.12 Page 28 of 29

<PAGE>

                   DISBURSEMENT REQUEST AND AUTHORIZATION
===========================================================================

Borrower:   Petmed Express Inc.        Lender: RBC CENTURA BANK
            1441 SW 29th Ave                   Boca Raton, FL
            Pompano Beach, FL 30369            Lending Service Center (FL)
                                               2801 PGA Blvd. Suite 280H
                                               Palm Beach Gardens, FL 33410
===========================================================================

  LOAN TYPE.  This is a Variable Rate Nondisclosable Revolving Line of
  Credit Loan to a Corporation for $6,000,000.00 due on November 1, 2005.
  The reference rate (LIBOR Base Rate, currently 1.990%) is added to the
  margin of 1.500%, resulting in an initial rate of 3.490.

  PRIMARY PURPOSE OF LOAN.  The primary purpose of this loan is for:

  [ ] Personal, Family, or Household Purposes or Personal Investment.
  [X] Business (Including Real Estate Investment).

  SPECIFIC PURPOSE.  The specific purpose of this loan is:  Support
  short-term cash/working capital requirement.

  DISBURSEMENT INSTRUCTIONS.  Borrower understands that no loan proceeds
  will be disbursed until all of Lender's conditions for making the loan
  have been satisfied.  Please disburse the loan proceeds of
  $6,000,000.00 as follows:

    Amount paid to others on Borrower's behalf:                   $0.00

    Other Disbursements:                                  $6,000,000.00
         $6,000,000.00 Funds available for disbursement    ____________

    Note Principal:                                       $6,000,000.00

  CHARGES PAID IN CASH.  Borrower has paid or will pay in cash as agreed
  the following charges:

    Prepaid Finance Charges Paid in Cash:                    $10,000.00
       $10,000.00 Loan Fees ($5,000.00 Paid
       POC)

    Other Charges Paid in Cash:                                  $41.00
       $31.00 UCC-1 Filing Fee (FL)
       $10.00 Overnight courier fee
                                                           ____________

    Total Charges Paid in Cash:                              $10,041.00

  FINANCIAL CONDITION.  BY SIGNING THIS AUTHORIZATION, BORROWER
  REPRESENTS AND WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE
  IS TRUE AND CORRECT AND THAT THERR HAS BEEN NO MATERIAL ADVERSE CHANGE
  IN BORROWER'S FINANCIAL CONDITION AS DISCLOSED IN BORROWER'S MOST
  RECENT FINANCIAL STATEMENT TO LENDER.  THIS AUTHORIZATION IS DATED
  NOVEMBER 2, 2004.

  BORROWER:

  PETMED EXPRESS, INC.

  By: /s/ Bruce S. Rosenbloom
     -------------------------
     Bruce Rosenbloom, Treasurer of Petmed Express, Inc.

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

                        Exhibit 10.12 Page 29 of 29

<PAGE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}]]