Document:

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                                                                    Exhibit 10.6

                           Second Amended and Restated
                           Loan and Security Agreement

                                  by and among

                    CONGRESS FINANCIAL CORPORATION (WESTERN)
                                   as Lender

                                      and

                          CENTRAL GARDEN & PET COMPANY
                    MATTHEWS REDWOOD AND NURSERY SUPPLY, INC.
                            FOUR PAWS PRODUCTS, LTD.
                           EZELL NURSERY SUPPLY, INC.
                          KAYTEE PRODUCTS INCORPORATED
                          NORCAL POTTERY PRODUCTS, INC.
                            T.F.H. PUBLICATIONS, INC.
                             WELLMARK INTERNATIONAL
                                  as Borrowers

                            Dated: December 12, 2000
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                               TABLE OF CONTENTS
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                                                                                              Page
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SECTION 1.   DEFINITIONS ...................................................................     1
---------

SECTION 2.   CREDIT FACILITIES .............................................................    15
    2.1      Revolving Loans ...............................................................    15
    2.2      Letter of Credit Accommodations ...............................................    17
    2.3      Availability Reserves .........................................................    19
    2.4      Joint and Several Liability ...................................................    19
    2.5      Reduction of Maximum Credit ...................................................    20

SECTION 3.   INTEREST AND FEES .............................................................    21
    3.1      Interest ......................................................................    21
    3.2      Intentionally Deleted .........................................................    22
    3.3      Intentionally Deleted .........................................................    22
    3.4      Servicing Fee .................................................................    22
    3.5      Unused Line Fee ...............................................................    22
    3.6      Changes in Laws and Increased Costs of Loans ..................................    22

SECTION 4.   CONDITIONS PRECEDENT ..........................................................    23
    4.1      Conditions Precedent to Initial Loans and Letter of Credit Accommodations .....    23
    4.2      Conditions Precedent to All Loans and Letter of Credit Accommodations .........    24

SECTION 5.   GRANT OF SECURITY INTEREST ....................................................    25

SECTION 6.   COLLECTION AND ADMINISTRATION .................................................    27
    6.1      Borrowers' Loan Accounts ......................................................    27
    6.2      Statements ....................................................................    27
    6.3      Collection of Accounts ........................................................    28
    6.4      Payments ......................................................................    30
    6.5      Authorization to Make Loans ...................................................    30
    6.6      Use of Proceeds ...............................................................    31
    6.7      Appointment of CG&Pet as Agent for Borrowers ..................................    31

SECTION 7.   COLLATERAL REPORTING AND COVENANTS ............................................    31
    7.1      Collateral Reporting ..........................................................    31
    7.2      Accounts Covenants ............................................................    32
    7.3      Inventory Covenants ...........................................................    33
    7.4      Equipment Covenants ...........................................................    34
    7.5      Power of Attorney .............................................................    34
    7.6      Right to Cure .................................................................    35
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                                      (i)
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    7.7      Access to Premises ............................................................    35

SECTION 8.   REPRESENTATIONS AND WARRANTIES ................................................    36
    8.1      Corporate Existence, Power and Authority; Subsidiaries ........................    36
    8.2      Financial Statements; No Material Adverse Change ..............................    36
    8.3      Chief Executive Office; Collateral Locations ..................................    37
    8.4      Priority of Liens; Title to Properties ........................................    37
    8.5      Tax Returns ...................................................................    37
    8.6      Litigation ....................................................................    37
    8.7      Compliance with Other Agreements and Applicable Laws ..........................    37
    8.8      Environmental Compliance ......................................................    38
    8.9      Employee Benefits .............................................................    38
    8.10     Bank Accounts .................................................................    39
    8.11     Accuracy and Completeness of Information ......................................    39
    8.12     Interrelated Business .........................................................    39
    8.13     Capitalization ................................................................    40
    8.14     Accounts Purchase Agreements ..................................................    40
    8.15     Survival of Warranties; Cumulative ............................................    40

SECTION 9.   AFFIRMATIVE AND NEGATIVE COVENANTS ............................................    40
    9.1      Maintenance of Existence ......................................................    40
    9.2      New Collateral Locations ......................................................    41
    9.3      Compliance with Laws, Regulations, Etc ........................................    41
    9.4      Payment of Taxes and Claims ...................................................    42
    9.5      Insurance .....................................................................    42
    9.6      Financial Statements and Other Information ....................................    43
    9.7      Sale of Assets, Consolidation, Merger, Dissolution, Etc .......................    44
    9.8      Encumbrances ..................................................................    44
    9.9      Indebtedness ..................................................................    45
    9.10     Loans, Investments, Guarantees, Etc ...........................................    46
    9.11     Dividends and Redemptions .....................................................    47
    9.12     Transactions with Affiliates ..................................................    47
    9.13     Additional Bank Accounts ......................................................    47
    9.14     Compliance with ERISA .........................................................    48
    9.15     Consolidated Net Worth ........................................................    48
    9.16     Costs and Expenses ............................................................    48
    9.17     Further Assurances ............................................................    49

SECTION 10.  EVENTS OF DEFAULT AND REMEDIES ................................................    49
    10.1     Events of Default .............................................................    49
    10.2     Remedies ......................................................................    51

SECTION 11.  JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW...................    52
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                                     (ii)
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    11.1     Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver .........    52
    11.2     Waiver of Notices .............................................................    54
    11.3     Amendments and Waivers ........................................................    54
    11.4     Waiver of Counterclaims .......................................................    54
    11.5     Indemnification ...............................................................    54

SECTION 12.  TERM OF AGREEMENT; MISCELLANEOUS ..............................................    54
    12.1     Term ..........................................................................    55
    12.2     Notices .......................................................................    56
    12.3     Partial Invalidity ............................................................    56
    12.4     Successors ....................................................................    56
    12.5     Entire Agreement ..............................................................    56

SECTION 13.  ACKNOWLEDGMENT AND RESTATEMENT ................................................    57
    13.1     Existing Obligations ..........................................................    57
    13.2     Acknowledgment of Security Interests ..........................................    57
    13.3     Existing Agreement ............................................................    57
    13.4     Restatement ...................................................................    57
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                                     (iii)
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                                   INDEX TO
                            EXHIBITS AND SCHEDULES
                            ----------------------

          Exhibit A        Information Certificates

          Schedule A       Existing Events of Default

          Schedule 7.3(j)  Distributor/Agents

          Schedule 8.4     Existing Liens

          Schedule 8.8     Environmental Matters

          Schedule 8.10    Bank Accounts

          Schedule 9.9     Existing Indebtedness

          Schedule 9.10    Existing Loans, Advances and Guarantees

                                      (iv)
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            SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
            -------------------------------------------------------

     This Second Amended and Restated Loan and Security Agreement dated as of
December 12, 2000 is entered into by and among CONGRESS FINANCIAL CORPORATION
(WESTERN), a California corporation ("Lender"), CENTRAL GARDEN & PET COMPANY, a
Delaware corporation ("CG&Pet"), MATTHEWS REDWOOD AND NURSERY SUPPLY, INC., a
California corporation ("Matthews"), FOUR PAWS PRODUCTS, LTD., a New York
corporation ("Four Paws"), and EZELL NURSERY SUPPLY, INC., a California
corporation ("Ezell"), KAYTEE PRODUCTS INCORPORATED, a Wisconsin corporation
("Kaytee"), T.F.H. PUBLICATIONS, INC., a Delaware corporation ("T.F.H."), NORCAL
POTTERY PRODUCTS, INC., a California corporation ("Norcal") and WELLMARK
INTERNATIONAL, a California corporation ("Wellmark"; and together with CG&Pet,
Matthews, Four Paws, Ezell, Kaytee, Norcal, T.F.H., each a "Borrower" and,
individually and collectively, "Borrowers").

                              W I T N E S S E T H:
                              - - - - - - - - - -

     WHEREAS, Lender, CG&Pet , Matthews Four Paws, Ezell, Kaytee, Norcal,
T.F.H., and Wellmark are presently parties to certain financing arrangements
pursuant to a Loan and Security Agreement dated as of December 17, 1997, as
amended (the "Existing Loan Agreement", together with all supplements thereto
and all other "Financing Agreements" as referred to therein, collectively, the
"Existing Financing Agreements"; and

     WHEREAS, Lender and Borrowers wish to amend and restate the Existing
Financing Agreements so as to (i) waive certain Existing Events of Default (as
such term is defined below), and (ii) reflect CG&Pet's termination of its
business relationship with Solaris and other modifications to the Existing
Financing Agreements, all on the terms and conditions set forth herein;

     NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

 SECTION 1.    DEFINITIONS
               -----------

     All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural, unless the context
otherwise requires. All references to Borrowers shall, unless the context
otherwise expressly provides, mean each Borrower and any one or more or all
Borrowers, individually and collectively, jointly and severally. All references
to Borrowers and Lender pursuant to the definitions set forth in the recitals
hereto, or to any other person herein, shall include their respective successors
and assigns. The words "hereof", "herein",
<PAGE>

"hereunder", "this Agreement" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meaning customarily given to such term
in accordance with GAAP. For purposes of this Agreement, the following terms
shall have the respective meanings given to them below:

     1.1 "Accounts" shall mean, as to each Borrower, all present and future
rights of such Borrower to payment for goods sold or leased or for services
rendered, which are not evidenced by instruments or chattel paper, and whether
or not earned by performance.

     1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by
dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage
equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
"Reserve Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the Reference Bank actually holds
or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.

     1.3 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans and Letter of Credit Accommodations which
would otherwise be available to Borrowers under the lending formula(s) provided
for herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, do or may affect either (i) the Collateral
or any other property which is security for the Obligations or its value, (ii
the assets, business or prospects of any Borrower or any Obligor or (ii the
security interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's good
faith belief that any collateral report or financial information furnished by or
on behalf of any Borrower or any Obligor to Lender is or may have been
incomplete, inaccurate or misleading in any material respect or (c) to reflect
outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof or
(d) in respect of any state of facts which Lender determines in good faith
constitutes an Event of Default or may, with notice or passage of time or both,
constitute an Event of Default.

     1.4 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.

                                       2
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     1.5 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of California or the State of North Carolina, and a day on
which the Reference Bank and Lender are open for the transaction of business,
except that if a determination of a Business Day shall relate to any Eurodollar
Rate Loans, the term Business Day shall also exclude any day on which banks are
closed for dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.

     1.6 "Capital Stock" shall mean any and all shares, interests,
participations, or other equivalents (however designated) of corporate stock or
partnership interests and any options or warrants with respect to any of the
foregoing.

     1.7 "Cash Dominion Certification" and "Cash Dominion Conditions" shall have
the meanings set forth in Section 6.3(a) hereof.

     1.8 "CG&Pet" shall mean Central Garden & Pet Company, a Delaware
corporation, and its successors and assign.

     1.9 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.

     1.10 "Collateral" shall have the meaning set forth in Section 5 hereof.

     1.11 "Consolidated Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: the difference between: (i) the aggregate net book value of all assets
of such Person and its subsidiaries, calculating the book value of inventory for
this purpose on a first-in-first-out basis, after deducting from such book
values all appropriate reserves in accordance with GAAP (including all reserves
for doubtful receivables, obsolescence, depreciation and amortization) and (ii
the aggregate amount of the indebtedness and other liabilities of such Person
and its subsidiaries (including tax and other proper accruals).

     1.12 "Distributor/Agents" shall mean independent third parties appointed by
Borrowers who hold and sell Inventory of any Borrower on consignment and remit
proceeds of the sale of such consigned Inventory to any such Borrower, minus any
commission or fee owed by any such Borrower in connection with such consignment
arrangements.

     1.13 "Eligible Accounts" shall mean, as to each Borrower, Accounts created
by such Borrower which are and continue to be acceptable to Lender based on the
criteria set forth below. In general, Accounts of a Borrower shall be Eligible
Accounts if:

                                       3
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          (a) such Accounts arise from the actual and bona fide sale and
                                                      ---- ----
delivery of goods by such Borrower or rendition of services by such Borrower in
the ordinary course of its business which transactions are completed in
accordance with the terms and provisions contained in any documents related
thereto;

          (b) such Accounts are not unpaid more than ninety (90) days after the
date of the original invoice for them (or more than one hundred fifty (150) days
after the date of the original invoice for them in the case of Accounts having
seasonal dating terms with respect to which extended eligibility has been
approved by Lender), or more than sixty (60) days past due;

          (c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;

          (d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;

          (e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America, or, at Lender's
option, if either: (i) the account debtor has delivered to such Borrower an
irrevocable letter of credit issued or confirmed by a bank satisfactory to
Lender and payable only in the United States of America and in U.S. dollars,
sufficient to cover such Account, in form and substance satisfactory to Lender
and, if required by Lender, the original of such letter of credit has been
delivered to Lender or Lender's agent and the issuer thereof notified of the
assignment of the proceeds of such letter of credit to Lender, or (ii such
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender, or (ii such Account is
otherwise acceptable in all respects to Lender (subject to such lending formula
with respect thereto as Lender may determine);

          (f) such Accounts do not consist of progress billings, bill and hold
invoices or retainage invoices, except as to bill and hold invoices, if Lender
shall have received an agreement in writing from the account debtor, in form and
substance satisfactory to Lender, confirming the unconditional obligation of the
account debtor to take the goods related thereto and pay such invoice;

          (g) the account debtor with respect to such Accounts has not asserted
a counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts
(but the portion of the Accounts of such account debtor in excess of the
aggregate amount at any time and from time to time owed by all Borrowers to such
account debtor or claimed owed by such account debtor may be deemed Eligible
Accounts);

                                       4
<PAGE>

          (h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;

          (i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;

        (j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent of
or affiliated with any Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;

        (k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;

          (l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition;

          (m) such Accounts of a single account debtor or its affiliates owed to
any or all Borrowers do not constitute more than twenty-five (25%) percent (or
forty-five (45%) percent in the case of Wal-Mart Stores Inc.) of all otherwise
Eligible Accounts (but the portion of the Accounts not in excess of such
percentage may be deemed Eligible Accounts);

          (n) such Accounts are not owed by an account debtor who has Accounts
unpaid more than ninety (90) days after the date of the original invoice for
them (or more than one hundred fifty (150) days after the date of the original
invoice for them, in the case of Accounts having seasonal dating terms with
respect to which extended eligibility has been approved by Lender), or are more
than sixty (60) days past due, which constitute more than fifty (50%) percent of
the total Accounts of such account debtor;

          (o) such Accounts are owed by account debtors whose aggregate
indebtedness to Borrowers does not exceed the credit limit with respect to such
account debtors as determined by Lender from time to time (but the portion of
the Accounts not in excess of such credit limit may be deemed Eligible
Accounts);

          (p) such Accounts are not owed by Distributor/Agents; and

                                       5
<PAGE>

          (q) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender, as determined by Lender.

General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.

     1.14 "Eligible Inventory" shall mean, as to each Borrower, Inventory
consisting of finished goods in the categories of lawn and garden and pet
products purchased and held for resale in the ordinary course of the business of
such Borrower which are acceptable to Lender based on the criteria set forth
below. In general, Eligible Inventory shall not include (a) raw materials,
work-in-process or any goods manufactured by or for Borrowers; (b) components
which are not part of finished goods; (c) spare parts for equipment; (d)
packaging and shipping materials; (e) supplies used or consumed in such
Borrower's business; (f) Inventory at premises other than those owned and
controlled by such Borrower, except if Lender shall have received an agreement
in writing from the person in possession of such Inventory and/or the owner or
operator of such premises in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory and
permitting Lender access to, and the right to remain on, the premises so as to
exercise Lender's rights and remedies and otherwise deal with the Collateral;
(g) Inventory subject to a security interest or lien in favor of any person
other than Lender except those permitted in this Agreement; (h) bill and hold
goods; (i) unserviceable, obsolete or slow moving Inventory; (j) Inventory which
is not subject to the first priority, valid and perfected security interest of
Lender; (k) damaged, out of date and/or defective Inventory; and (l) Inventory
purchased or sold on consignment, including, but not limited to, Inventory sold
on consignment by Distributor/Agents. Notwithstanding the foregoing, Lender, in
its discretion, may consider raw materials for such finished goods described
above to be Eligible Inventory, provided, that, Borrowers shall, at their
                                --------  ----
expense, at any time or times as Lender may request, deliver or cause to be
delivered written reports or appraisals as to such raw materials in form, scope
and methodology acceptable to Lender and by an appraiser acceptable to Lender,
addressed to Lender or upon which Lender is expressly permitted to rely (the
"Raw Materials Appraisal"). General criteria for Eligible Inventory may be
established and revised from time to time by Lender in good faith. Any Inventory
which is not Eligible Inventory shall nevertheless be part of the Collateral.

     1.15 "Environmental Laws" shall mean all foreign, Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower and any
governmental authority, (1) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (2) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened

                                       6
<PAGE>

release, of Hazardous Materials, or (3) relating to all laws with regard to
recordkeeping, notification, disclosure and reporting requirements respecting
Hazardous Materials. The term "Environmental Laws" includes (i) the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Federal Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Water Act, the Federal Clean
Air Act, the Federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of 1974,
(ii) applicable state counterparts to such laws, and (iii) any common law or
equitable doctrine that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to any
Hazardous Materials.

     1.16 "Equipment" shall mean, as to each Borrower, all of such Borrower's
now owned and hereafter acquired equipment, machinery, computers and computer
hardware and software (whether owned or licensed), vehicles, tools, furniture,
fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and replacements
thereof, wherever located.

     1.17 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.

     1.18 "ERISA Affiliate" shall mean any person required to be aggregated with
Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.

     1.19 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.

     1.20 "Eurodollar Rate" shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by a Borrower and approved by Lender) on
or about 9:00 a.m. (New York City time) two (2) Business Days prior to the
commencement of such Interest Period in amounts substantially equal to the
principal amount of the Eurodollar Rate Loans requested by and available to such
Borrower in accordance with this Agreement, with a maturity of comparable
duration to the Interest Period selected by such Borrower.

     1.21 "Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.

                                       7
<PAGE>

     1.22 "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of (i) the aggregate amount of
Revolving Loans available to Borrowers on a combined basis at such time based on
the applicable lending formulas under Section 2.1 hereof, as determined by
Lender, and subject to the Inventory Loan Limit as to each Borrower and all
other sublimits and all Availability Reserves from time to time established by
Lender hereunder and (ii) the Maximum Credit, less the face amount of
outstanding Letter of Credit Accommodations, minus (b) the amount of all then
                                             -----
outstanding and unpaid Obligations (other than the face amount of outstanding
Letter of Credit Accommodations).

     1.23 "Existing Events of Default" shall mean the Events of Default under
the Existing Financing Agreements as more particularly described in Schedule A
annexed hereto.

     1.24 "Ezell" shall mean Ezell Nursery Supply, Inc., a California
corporation, and its successors and assigns.

     1.25 "Existing Financing Agreements" shall have the meaning set forth in
the Recitals hereto.

     1.26 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by any
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.

     1.27 "Four Paws" shall mean Four Paws Products, Ltd., a New York
corporation, and its successors and assigns.

     1.28 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.15 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with those used in
the preparation of the audited financial statements delivered to Lender prior to
the date hereof.

     1.29 "Guarantors" shall mean each Person that at any time guaranties
payment or performance of the Obligations or any portion thereof, and shall
include (i) Mustang Products, Inc., an Ohio corporation, and (ii) unless
otherwise consented to in writing by Lender, each other existing and future
Subsidiary of CG&Pet that is not a Borrower hereunder.

     1.30 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation,

                                       8
<PAGE>

radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including materials which include hazardous constituents), sewage,
sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including any that are
or become classified as hazardous or toxic under any Environmental Law).

     1.31 "Information Certificate" shall mean, individually and collectively,
the Information Certificates of Borrowers constituting Exhibit A hereto
containing material information with respect to Borrowers, their business and
assets, provided by or on behalf of Borrowers to Lender in connection with the
preparation of this Agreement and the other Financing Agreements and the
financing arrangements provided for herein.

     1.32 "Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), or three (3) months duration as a Borrower may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, a Borrower
                                                   -------- ----
may not elect an Interest Period which will end after the last day of the then-
current term of this Agreement.

     1.33 "Interest Rate" shall mean, as to Prime Rate Loans, the Prime Rate
and, as to Eurodollar Rate Loans, a rate of two (2%) percent per annum in excess
of the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable for the
Interest Period selected by Borrower as in effect three (3) Business Days after
the date of receipt by Lender of the request of a Borrower for such Eurodollar
Rate Loans in accordance with the terms hereof, whether such rate is higher or
lower than any rate previously quoted to any Borrower); provided, that, the
                                                         -------- ----
Interest Rate shall mean the rate of two (2%) percent per annum in excess of the
Prime Rate as to Prime Rate Loans and the rate of four (4%) percent per annum in
excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, at Lender's
option, without notice, (a) for the period (i) from and after the date of
termination or non-renewal hereof until Lender has received full and final
payment of all obligations (notwithstanding entry of a judgment against any
Borrower) and (ii) from and after the date of the occurrence of an Event of
Default for so long as such Event of Default is continuing as determined by
Lender, and (b) on the Revolving Loans at any time outstanding in excess of the
amounts available to the applicable Borrowers under Section 2 (whether or not
such excess(es), arise or are made with or without Lender's knowledge or consent
and whether made before or after an Event of Default).

     1.34 "Inventory" shall mean, as to each Borrower, all of such Borrower's
now owned and hereafter existing or acquired raw materials, work in process,
finished goods and all other inventory of whatsoever kind or nature, wherever
located.

     1.35 "Inventory Loan Limit" shall mean (1) as to CG&Pet, the amount of
$125,000,000, less the amount of Obligations determined by Lender to be
outstanding at such time in respect of inventory loans of the other Borrowers,
(2) as to Matthews, the amount of $10,000,000, (3) as to Four Paws, the amount
of $10,000,000, (4) as to Ezell, the amount of $10,000,000, (5) as to

                                       9
<PAGE>

Kaytee, the amount of $10,000,000, (6) as to T.F.H., the amount of $5,000,000,
(7) as to Norcal, the amount of $5,000,000, and (8) as to Wellmark, the amount
of $10,000,000."

     1.36 "Kaytee" shall mean Kaytee Products Incorporated, a Wisconsin
corporation, and its successors and assigns.

     1.37 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of any Borrower or any Obligor or (b)
with respect to which Lender has agreed to indemnify the issuer or guaranteed to
the issuer the performance by any Borrower of its obligations to such issuer.

     1.38 "Loans" shall mean the Revolving Loans.

     1.39 "Matthews" shall mean Matthews Redwood and Nursery Supply, Inc., a
California corporation, and its successors and assigns.

     1.40 "Maximum Credit" shall mean the amount of $200,000,000.

     1.41 "Mortgage" shall mean each mortgage, deed of trust, deed to secure
debt or other instrument at any time granting or evidencing a lien upon Real
Property.

     1.42 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.

     1.43 "Norcal" means Norcal Pottery Products, Inc., a California
corporation, and its successors and assigns.

     1.44 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all Borrowers to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under the Existing Loan Agreement, the Existing
Financing Agreements, this Agreement or otherwise, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any case with
respect to any Borrower under the United States Bankruptcy Code or any similar
statute (including the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Lender.

                                       10
<PAGE>

     1.45 "Obligor" shall mean any Guarantor or any other guarantor, endorser,
acceptor, surety or other person liable on or with respect to the Obligations or
who is the owner of any property which is security for the Obligations, other
than a Borrower.

     1.46 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.

     1.47 "Pennington" shall mean Pennington Seed Inc., a Delaware corporation,
and its successors and assigns.

     1.48 "Pennington Purchase Agreements" shall mean, individually and
collectively, the Stock Purchase Agreement, dated September 30, 1998 between
CG&Pet and the shareholders of Pennington, together with all bills of sale,
quitclaim deeds, assignment and assumption agreements and such other instruments
of transfer as are referred to therein and all side letters with respect
thereto, and all agreements, documents and instruments executed and/or delivered
in connection therewith, as all of the foregoing now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.

     1.49 "Permitted Acquisition" shall mean:

          (a) the purchase by CG&Pet, for consideration consisting solely of
cash or common stock of CG&Pet, from non-affiliated Persons engaged in the
business of wholesale distribution or manufacturing in the United States of
pool, lawn and garden and pet supplies or related businesses, of either the
assets of such Person that are located in the United States which are used and
useful in such business or all of the Capital Stock of such Person; provided,
                                                                    --------
that,
----

               (i) Lender shall receive not less than fifteen (15) days' prior
written notice of each such proposed acquisition, together with financial and
other information with respect to the assets, liabilities and business to be
acquired, or the assets, liabilities and business of the Person whose Capital
Stock is to be acquired and of its subsidiaries,

               (ii) Lender shall receive all documents, instruments and
agreements (including all schedules and exhibits) to be executed and delivered
in connection with such acquisition,

               (iii) no Event of Default, or event which, with notice or passage
of time, or both, would constitute an Event of Default, shall exist or have
occurred and be continuing at the time of such purchase, or would result
therefrom,

               (iv) CG&Pet shall, at its expense, execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests of
Lender in any newly acquired assets and future assets of the business so
acquired, or, if applicable, of the Person whose Capital Stock is so acquired
and of its Subsidiaries, including, without limitation, in the case of a Person
whose Capital Stock is so acquired and its Subsidiaries, a first priority pledge
in favor of Lender of the Capital Stock of

                                       11
<PAGE>

such Person so acquired and of each Subsidiary of such Person, guaranties, by
such Person and its Subsidiaries, in favor of Lender, of payment and performance
of the Obligations and general security agreements and mortgages upon their
existing and future assets securing such guaranties with a first priority
security interest and lien in favor of Lender, all in form and substance
satisfactory to Lender, and including, without limitation, with respect to all
such acquisitions of assets or Capital Stock, the agreements from third parties
in favor of Lender of the types described in Section 4.1(e) hereof, and

               (v) Excess Availability, as determined by Lender, shall be not
less than $20,000,000 for the thirty (30) consecutive days immediately prior to
and immediately after giving effect to such acquisition and each payment by
CG&Pet of the purchase price therefor; and provided, further that (1) no Person
                                           --------  -------
whose Capital Stock is so acquired shall become a Borrower hereunder without
Lender's prior written consent, and (2) Lender shall be entitled to conduct such
due diligence concerning the assets, liabilities and business so purchased and,
if applicable, assets, liabilities and business of the Person whose Capital
Stock is so acquired and its Subsidiaries, as Lender shall require before
determining whether to approve any request that any Person whose Capital Stock
is so acquired or any of its Subsidiaries become a Borrower hereunder and/or
whether, and to what extent, the newly acquired assets, or any future assets
arising from the conduct of the businesses so acquired, or, if added as
Borrowers, of the Person whose Capital Stock is acquired or its Subsidiaries,
shall be deemed to be Eligible Accounts or Eligible Inventory under the
Financing Agreements, and, if so, the lending formulas and sublimits applicable
thereto; and

          (b) the purchase by CG&Pet, for consideration consisting of cash or
common stock of CG&Pet, from non-affiliated Persons, of the Capital Stock of
such Person, which Person is at the time of such purchase either (i) party to
existing financing arrangements with a financial institution other than Lender
or (ii) contemplates entering into financing arrangements with a financial
institution other than Lender either prior to, contemporaneously with or
subsequent to such acquisition (collectively, the "Third Party Financing");
provided, that,
--------  ----

               (i) Lender shall receive not less than fifteen (15) days' prior
written notice of each such proposed acquisition, together with financial and
other information with respect to the assets, liabilities and business of the
Person whose Capital Stock is to be acquired and of its subsidiaries,

               (ii) prior to the consummation of such acquisition, Lender shall
receive all documents, instruments and agreements (including all schedules and
exhibits) to be executed and delivered in connection with such acquisition and
in connection with such Third Party Financing, which shall be, in form and
substance, satisfactory to Lender,

               (iii) in no event shall the total amount of all payments by
CG&Pet in connection with all such acquisitions pursuant to this Section 1.48(b)
exceed $15,000,000 in the aggregate at any time,

                                       12
<PAGE>

               (iv) CG&Pet shall not become obligated with respect to any
indebtedness, nor shall any of its property become subject to any security
interest, mortgage, pledge, lien, charge, hypothec or other encumbrance pursuant
to such acquisition or Third Party Financing;

               (v) there shall be no intercompany loans at any time made by any
Borrower to such acquired Person or made by such acquired Person to any
Borrower;

               (vi) no Event of Default, or event which, with notice or passage
of time, or both, would constitute an Event of Default, shall exist or have
occurred and be continuing at the time of such purchase, or would result
therefrom, and

               (vii) Excess Availability, as determined by Lender, shall be not
less than $20,000,000 for the thirty (30) consecutive days immediately prior to
and immediately after giving effect to such acquisition and each payment by
CG&Pet of the purchase price therefor; and provided, further that (1) no Person
                                           --------  -------
whose Capital Stock is so acquired shall become a Borrower hereunder without
Lender's prior written consent, and (2) Lender shall be entitled to conduct such
due diligence concerning the assets, liabilities and business so purchased and,
if applicable, assets, liabilities and business of the Person whose Capital
Stock is so acquired and its Subsidiaries, as Lender shall require before
determining whether to approve any request that any Person whose Capital Stock
is so acquired or any of its Subsidiaries become a Borrower hereunder and/or
whether, and to what extent, the newly acquired assets, or any future assets
arising from the conduct of the businesses so acquired, or, if added as
Borrowers, of the Person whose Capital Stock is acquired or its Subsidiaries,
shall be deemed to be Eligible Accounts or Eligible Inventory under the
Financing Agreements, and, if so, the lending formulas and sublimits applicable
thereto.

     1.50 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Internal Revenue Code of 1986, as amended), limited liability
company, limited liability partnership, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.

     1.51 "Prime Rate" shall mean the rate from time to time publicly announced
by First Union National Bank, or its successors, as its prime rate, whether or
not such announced rate is the best rate available at such bank.

     1.52 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.

     1.53 "Raw Materials Loan Limit" shall mean the amount of $25,000,000.

     1.54 "Real Property" shall mean, as to each Borrower, all now owned and
hereafter acquired real property of such Borrower, including leasehold
interests, together with all

                                       13
<PAGE>

buildings, structures and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.

     1.55 "Real Property Loan" shall have the meaning set forth in Section 5.2
hereof.

     1.56 "Records" shall mean, as to each Borrower, all of such Borrower's
present and future books of account of every kind or nature, purchase and sale
agreements, invoices, ledger cards, bills of lading and other shipping evidence,
statements, correspondence, memoranda, credit files and other data relating to
the Collateral or any account debtor, together with the tapes, disks, diskettes
and other data and software storage media and devices, file cabinets or
containers in or on which the foregoing are stored (including any rights of such
Borrower with respect to the foregoing maintained with or by any other person).

     1.57 "Reference Bank" shall mean First Union National Bank, or such other
bank as Lender may from time to time designate.

     1.58 "Revolving Loans" shall mean the loans now or hereafter made by Lender
to or for the benefit of Borrowers on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 2.1 hereof.

     1.59 "Solaris" shall mean The Solaris Group, a business unit of Monsanto
Company, a Delaware corporation, and its successors and assigns.

     1.60 "Subsidiary" or "subsidiary" of a Person shall mean any other Person
as to which more than fifty (50%) percent of the outstanding voting stock or
shares or interests of such other Person shall now or hereafter be owned or
controlled, directly or indirectly by such Person, any Subsidiary of such other
Person, or any Subsidiary of such Subsidiary.

     1.61 "SunTrust Credit Agreement" shall mean the Credit Agreement, dated as
of September 30, 1998, by and among Pennington, SunTrust Bank ("SunTrust"), Bank
of America, N.A. ("BofA", and together with SunTrust, collectively, "SunTrust
Lenders") and SunTrust Bank, in its capacity as collateral agent and
administrative agent for the benefit of the Lenders ("SunTrust Agent"), as
amended.

     1.62 "SunTrust Financing Agreements" shall mean the SunTrust Credit
Agreement, the SunTrust Guarantee and all agreements, documents and instruments
executed and/or delivered in connection therewith, as all of the foregoing now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.

     1.63 "SunTrust Guarantee" shall mean the Parent Guarantee Agreement, dated
as of September 30, 1998, by CG&Pet in favor of SunTrust Lenders and SunTrust
Agent for the obligations of Pennington.

                                       14
<PAGE>

     1.64 "T.F.H." shall mean T.F.H. Publications, Inc. a Delaware corporation,
and its successors and assigns.

     1.65 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.

     1.66 "Wellmark" means, Wellmark International, a California corporation and
its successors and assigns.

 SECTION 2.  CREDIT FACILITIES
             -----------------

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

          (a) Subject to, and upon the terms and conditions contained herein,
except as to Revolving Loans made pursuant to Section 2.1(a)(iii) below, if any,
which loans, if any, shall be made in Lender's discretion and at Lender's
option, Lender agrees to make Revolving Loans to each Borrower from time to time
in amounts requested by such Borrower (or by CG&Pet on behalf of such Borrower),
up to the amount equal to the sum of:

               (i) eighty-five (85%) percent of the Net Amount of Eligible
Accounts of such Borrower, plus

               (ii) the lesser of: (A) the sum of sixty-five (65%) percent of
the Value of Eligible Inventory of such Borrower consisting of finished goods in
the categories of lawn and garden products, plus fifty-five (55%) percent of the
Value of Eligible Inventory of such Borrower consisting of finished goods in the
category of pet products, or (B) the Inventory Loan Limit applicable to such
Borrower, plus
          ----

               (iii) the lesser of: (A) the sum not to exceed eighty-five (85%)
percent of the orderly liquidation Value of Eligible Inventory consisting of raw
materials for finished goods which are part of Eligible Inventory, as determined
by Lender based on the results of the Raw Materials Appraisal, or (B) the Raw
Materials Loan Limit, less
                      ----

               (iv) any Availability Reserves.

          (b) Each Borrower hereby acknowledges and agrees that the Inventory
and Accounts of Kaytee shall not constitute Eligible Inventory or Eligible
Accounts for lending purposes under the Financing Agreements unless and until
each of the following conditions has satisfied:

                                       15
<PAGE>

               (1) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements (including, but not limited to, Intercreditor Agreements, Collateral
Access Agreements, consents, waivers, acknowledgments and other agreements in
connection with the existing mortgages on the Chilton, Wisconsin and Rialto,
California Real Property of Kaytee and the existing industrial revenue bond
arrangements with the Chilton, Wisconsin and Cressona, Pennsylvania Real
Property of Kaytee) from third persons which Lender may deem necessary or
desirable in order to permit, protect and perfect its security interests in and
liens upon the Collateral or to effectuate the provisions of this Amendment and
the other Financing Agreements; and

               (2) Lender shall have received Uniform Commercial Code
termination statements executed by each of Bank One, Wisconsin and Firstar Bank
Wisconsin with respect to all Uniform Commercial Code financing statements filed
against Kaytee by each of Bank One, Wisconsin and Firstar Bank Wisconsin;

          (c) Lender may, in its discretion, from time to time, upon not less
than five (5) days prior notice to CG&Pet (on behalf of Borrowers), (i) reduce
the lending formula with respect to Eligible Accounts of one or more Borrowers
to the extent that Lender determines in good faith that: (A) the dilution with
respect to the Accounts of such Borrower or Borrowers for any period (based on
the ratio of (1) the aggregate amount of reductions in Accounts other than as a
result of payments in cash to (2) the aggregate amount of total sales) has
increased in any material respect or may be reasonably anticipated to increase
in any material respect above historical levels, or (B) the general
creditworthiness of account debtors of such Borrower or Borrowers has declined
or (ii reduce the lending formula(s) with respect to Eligible Inventory of one
or more Borrowers to the extent that Lender determines that: (A) the number of
days of the turnover of the Inventory of such Borrower or Borrowers for any
period has changed in any material respect or (B) the liquidation value of the
Eligible Inventory of such Borrower or Borrowers, or any category thereof, has
decreased, or (C) the nature and quality of the Inventory of such Borrower or
Borrowers has deteriorated. In determining whether to reduce the lending
formula(s), Lender may consider events, conditions, contingencies or risks which
are also considered in determining Eligible Accounts, Eligible Inventory or in
establishing Availability Reserves.

          (d) Without limiting the other eligibility criteria for Eligible
Inventory as set forth in or determined from time to time by Lender as provided
herein, no portion of Borrowers' Inventory which is subject to a security
interest or lien or other secured or title retention claim in favor of any other
vendor or any consignor, shall at any time be deemed Eligible Inventory, but all
Inventory of Borrowers, whether or not deemed Eligible Inventory, shall, at all
times, remain part of the Collateral and secure payment and performance of all
Obligations.

          (e) Except in Lender's discretion (i) the aggregate amount of Loans
and Letter of Credit Accommodations outstanding at any time shall not exceed the
Maximum Credit and (ii the aggregate amount of Loans and Letter of Credit
Accommodations outstanding at any time to a Borrower shall not exceed the
Inventory Loan Limit as to such Borrower. In the event that the outstanding
amount of any component of the Loans, or the aggregate amount of the outstanding

                                       16
<PAGE>

Loans and Letter of Credit Accommodations, exceed the amounts available under
the lending formulas, the Inventory Loan Limit as to any Borrower, the sublimits
for Letter of Credit Accommodations set forth in Section 2.2(d) or the Maximum
Credit, as applicable, such event shall not limit, waive or otherwise affect any
rights of Lender in that circumstance or on any future occasions and Borrowers
shall, upon demand by Lender, which may be made at any time or from time to
time, immediately repay to Lender the entire amount of any such excess(es) for
which payment is demanded.

          (f) For purposes of applying the sublimit set forth in Section
2.1(a)(ii)(B) hereof, Lender may treat the amount of its reliance on Eligible
Inventory to be purchased under outstanding Letter of Credit Accommodations as a
Revolving Loan based on Eligible Inventory pursuant to Section 2.1(a)(ii). In
determining the amount of such reliance, the outstanding Revolving Loans and
Availability Reserves shall first be attributed to any components of the lending
formulas in Section 2.1(a) that are not subject to such sublimit, before being
attributed to components of the lending formulas subject to such sublimit.

     2.2  Letter of Credit Accommodations.
          -------------------------------

          (a) Subject to, and upon the terms and conditions contained herein, at
the request of a Borrower, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of such Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
such Borrower pursuant to this Section 2.

          (b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, each Borrower
shall pay to Lender a letter of credit fee at a rate equal to two and one-
quarter (2.25%) percent per annum on the daily outstanding balance of the Letter
of Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month, except that
such Borrower shall pay to Lender such letter of credit fee, at Lender's option,
without notice, at a rate equal to four and one-quarter (4.25%) percent per
annum on such daily outstanding balance for: (i) the period from and after the
date of termination or non-renewal hereof until Lender has received full and
final payment of all Obligations (notwithstanding entry of a judgment against
any Borrower) and (ii the period from and after the date of the occurrence of an
Event of Default and for so long as such Event of Default is continuing as
determined by Lender. Such letter of credit fee shall be calculated on the basis
of a three hundred sixty (360) day year and actual days elapsed and the
obligation of such Borrower to pay such fee shall survive the termination or
non-renewal of this Agreement.

        (c) No Letter of Credit Accommodations shall be available to a Borrower
unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Revolving Loans available to such Borrower (subject to the
Maximum Credit, the Inventory Loan Limit as to such Borrower, and any
Availability Reserves) are equal to or greater than:  (i) if the proposed Letter

                                       17
<PAGE>

of Credit Accommodation is for the purpose of purchasing Eligible Inventory, the
sum of (A) the percentage equal to one hundred (100%) percent minus the then
applicable percentage set forth in Section 2.1(a)(ii)(A) above of the Value of
such Eligible Inventory, plus (B) freight, taxes, duty and other amounts which
Lender estimates must be paid in connection with such Inventory upon arrival and
for delivery to one of such Borrower's locations for Eligible Inventory within
the United States of America and (ii if the proposed Letter of Credit
Accommodation is for any other purpose, an amount equal to one hundred (100%)
percent of the face amount thereof and all other commitments and obligations
made or incurred by Lender with respect thereto.  Effective on the issuance of
each Letter of Credit Accommodation, an Availability Reserve shall be
established in the applicable amount set forth in Section 2.2(c)(i) or Section
2.2(c)(ii).

          (d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$10,000,000. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrowers will either furnish cash collateral
to secure the reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations, and in either case, the Revolving Loans
otherwise available to Borrowers shall not be reduced as provided in Section
2.2(c) to the extent of such cash collateral.

          (e) Borrowers shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation. Borrowers assume all risks with respect to the acts or
omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
the agent of Borrowers. Borrowers assume all risks for, and agree to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder. Borrowers hereby release and hold Lender harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
any Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation, except for those directly caused
by Lender's own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction. The provisions of
this Section 2.2(e) shall survive the payment of Obligations and the termination
or non-renewal of this Agreement.

          (f) Nothing contained herein shall be deemed or construed to grant any
Borrower any right or authority to pledge the credit of Lender in any manner.
Lender shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrowers shall be bound by any interpretation made in good faith by Lender, or
any other issuer

                                       18
<PAGE>

or correspondent under or in connection with any Letter of Credit Accommodation
or any documents, drafts or acceptances thereunder, notwithstanding that such
interpretation may be inconsistent with any instructions of any Borrower. Lender
shall have the sole and exclusive right and authority to, and no Borrower shall:
(i) at any time an Event of Default exists or has occurred and is continuing,
(A) approve or resolve any questions of non-compliance of documents, (B) give
any instructions as to acceptance or rejection of any documents or goods or (C)
execute any and all applications for steamship or airway guaranties, indemnities
or delivery orders, and (ii at all times, (A) grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents, and (B) agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letter of Credit Accommodations, or
documents, drafts or acceptances thereunder or any letters of credit included in
the Collateral. Lender may take such actions either in its own name or in any
Borrower's name.

          (g) Any rights, remedies, duties or obligations granted or undertaken
by any Borrower to any issuer or correspondent in any application for any Letter
of Credit Accommoda tion, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by such Borrower to Lender. Any duties or
obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by the applicable
Borrower to Lender and to apply in all respects to such Borrower.

     2.3  Availability Reserves.  All Revolving Loans otherwise available to
          ---------------------
Borrowers pursuant to the lending formulas and subject to the Maximum Credit,
the Inventory Loan Limit as to each Borrower and other applicable limits
hereunder shall be subject to Lender's continuing right to establish and revise
Availability Reserves. Without limiting any other Availability Reserves from
time to time established by Lender, Lender shall have the right, prior to an
Event of Default, to establish Availability Reserves in an amount equal to the
amount of any actual or potential landlord's, warehouseman's or other similar
lien upon any of the Collateral, plus ninety (90) days' rent, storage and
warehouse service charges and other occupancy expenses that may, in Lender's
good faith determination, be required to be paid by Lender in order to gain
access to any Collateral or services with respect thereto, and/or to use or
occupy the premises upon which any Collateral may be located in connection with
Lender's realization on the Collateral.  Upon and after an Event of Default,
Lender may establish and increase such Availability Reserves in such amounts as
Lender shall determine.

     2.4  Joint and Several Liability.  Borrowers shall be liable for all
          ---------------------------
amounts due to Lender under this Agreement, regardless of which Borrower
actually receives the Loans or other extensions of credit hereunder or the
amount of such Loans received or the manner in which Lender accounts for such
Loans, Letter of Credit Accommodations or other extensions of credit on its
books and records.  The Obligations with respect to Loans made to a Borrower,
and the Obligations arising as a result of the joint and several liability of a
Borrower hereunder, with

                                       19
<PAGE>

respect to Loans made to the other Borrower hereunder, shall be separate and
distinct obligations, but all such other Obligations shall be primary
obligations of all Borrowers. The Obligations arising as a result of the joint
and several liability of a Borrower hereunder with respect to Loans, Letter of
Credit Accommodations or other extensions of credit made to the other Borrower
hereunder shall, to the fullest extent permitted by law, be unconditional
irrespective of (a) the validity or enforceability, avoidance or subordination
of the Obligations of the other Borrower or of any promissory note or other
document evidencing all or any part of the Obligations of the other Borrowers,
(b) the absence of any attempt to collect the Obligations from the other
Borrower, any Obligor or any other security therefor, or the absence of any
other action to enforce the same, (c) the waiver, consent, extension,
forbearance or granting of any indulgence by Lender with respect to any
provisions of any instrument evidencing the Obligations of the other Borrower,
or any part thereof, or any other agreement now or hereafter executed by the
other Borrower and delivered to Lender, (d) the failure by Lender to take any
steps to perfect and maintain its security interest in, or to preserve its
rights and maintain its security or collateral for the Obligations of the other
Borrower, (e) the election of Lender in any proceeding instituted under the
Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy
Code, (f) the disallowance of all or any portion of the claim(s) of Lender for
the repayment of the Obligations of the other Borrower under Section 502 of the
Bankruptcy Code, or (g) any other circumstances which might constitute a legal
or equitable discharge or defense of any Obligor or of the other Borrower, other
than the wilful misconduct, gross negligence or bad faith of Lender as
determined pursuant to a final, non-appealable order of a court of competent
jurisdiction. With respect to the Obligations arising as a result of the joint
and several liability of a Borrower hereunder with respect to Loans, Letter of
Credit Accommodations or other extensions of credit made to any other Borrower
hereunder, each Borrower waives, until the Obligations shall have been paid in
full and this Agreement shall have been terminated, any right to enforce any
right of subrogation or any remedy which Lender now has or may hereafter have
against Borrowers, any endorser or any guarantor of all or any part of the
Obligations, and any benefit of, and any right to participate in, any security
or collateral given to Lender. Upon any Event of Default and for so long as the
same is continuing, Lender may proceed directly and at once, without notice,
against any Borrower to collect and recover the full amount, or any portion of
the Obligations, without first proceeding against the other Borrower or any
other Person, or against any security or collateral for the Obligations. Each
Borrower consents and agrees that Lender shall be under no obligation to
marshall any assets in favor of Borrower(s) or against or in payment of any or
all of the Obligations.

     2.5  Reduction of Maximum Credit.  Intentionally Deleted.
          ---------------------------

     2.6  Loan Reporting.  Each Borrower shall provide Lender, in a form
          --------------
satisfactory to Lender, on a monthly basis, a certificate signed by the
[officer] of each Borrower representing that the aggregate amount of Loans and
Letter of Credit Accommodations provided by Lender to each Borrower does not
exceed the maximum amount of Loans and Letter of Credit Accommodations available
to each such Borrower pursuant to the applicable advance rates for each Borrower
and the other terms of this Agreement.

                                       20
<PAGE>

SECTION 3.   INTEREST AND FEES
             -----------------

     3.1  Interest
          --------

          (a) Borrowers shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the Interest Rate. All
interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.

          (b) Borrowers (or CG&Pet on behalf of Borrowers) may from time to time
request that Prime Rate Loans be converted to Eurodollar Rate Loans or that any
existing Eurodollar Rate Loans continue for an additional Interest Period. Such
request from or on behalf of Borrowers shall specify the amount of the Prime
Rate Loans which will constitute Eurodollar Rate Loans (subject to the limits
set forth below) and the Interest Period to be applicable to such Eurodollar
Rate Loans. Subject to the terms and conditions contained herein, three (3)
Business Days after receipt by Lender of such a request from Borrowers, such
Prime Rate Loans shall be converted to Eurodollar Rate Loans or such Eurodollar
Rate Loans shall continue, as the case may be, provided, that, (i) no Event of
                                               --------  ----
Default, or event which with notice or passage of time or both would constitute
an Event of Default exists or has occurred and is continuing, (ii) no party
hereto shall have sent any notice of termination or non-renewal of this
Agreement, (iii) such Borrowers shall have complied with such customary
procedures as are established by Lender and specified by Lender to Borrowers
from time to time for requests by Borrowers for Eurodollar Rate Loans, (iv) no
more than four (4) Interest Periods may be in effect at any one time, (v) the
amount of each Eurodollar Rate Loan must be in an amount not less than
$5,000,000 or an integral multiple of $1,000,000 in excess thereof, (vi) the
maximum amount of the Eurodollar Rate Loans at any time requested by any
Borrower shall not exceed the amount equal to eighty (80%) percent of the lowest
principal amount of the Revolving Loans to such Borrower which it is anticipated
will be outstanding during the applicable Interest Period, in each case as
determined by Lender (but with no obligation of Lender to make such Revolving
Loans) and (vii) Lender shall have determined that the Interest Period or
Adjusted Eurodollar Rate is available to Lender through the Reference Bank and
can be readily determined as of the date of the request for such Eurodollar Rate
Loan by Borrower.  Any request by Borrowers to convert Prime Rate Loans to
Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable.  Notwithstanding anything to the contrary contained herein, Lender
and Reference Bank shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions hereof shall be
deemed to apply as if Lender and Reference Bank had purchased such deposits to
fund the Eurodollar Rate Loans.

          (c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Lender
has received and approved a request to continue such Eurodollar Rate Loan at
least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrowers (or to CG&Pet on behalf of Borrowers), convert to Prime

                                       21
<PAGE>

Rate Loans in the event that (i) an Event of Default or event which, with the
notice or passage of time, or both, would constitute an Event of Default, shall
exist, (ii) this Agreement shall terminate or not be renewed, or (iii) the
aggregate principal amount of the Prime Rate Loans which have previously been
converted to Eurodollar Rate Loans or existing Eurodollar Rate Loans continued,
as the case may be, at the beginning of an Interest Period shall at any time
during such Interest Period exceed either (A) the aggregate principal amount of
the Loans then outstanding, or (B) the Revolving Loans then available to the
applicable Borrowers under Section 2 hereof. Borrowers shall pay to Lender, upon
demand by Lender (or Lender may, at its option, charge any loan accounts of
Borrowers) any amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any loss (including loss of anticipated profits),
cost or expense incurred by such person, as a result of the conversion of
Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.

          (d) Interest shall be payable by Borrowers to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrowers to Lender exceed the maximum amount
or the rate permitted under any applicable law or regulation, and if any such
part or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.

     3.2  Intentionally Deleted.

     3.3  Intentionally Deleted.

     3.4  Servicing Fee.  Borrowers shall pay to Lender monthly a servicing fee
          -------------
in an amount equal to $10,000 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each month
hereafter.

     3.5  Unused Line Fee.  Borrowers shall pay to Lender monthly an unused
          ---------------
line fee at a rate equal to one-half of one (.5%) percent per annum calculated
upon the amount by which fifty (50%) percent of the Maximum Credit as in effect
in the immediately preceding month (or part thereof) exceeds the average daily
principal balance of the outstanding Revolving Loans and Letter of Credit
Accommodations during such immediately preceding month (or part thereof) while
this Agreement is in effect and for so long thereafter as any of the Obligations
are outstanding, which fee shall be payable on the first day of each month in
arrears.

     3.6  Changes in Laws and Increased Costs of Loans.
          --------------------------------------------

                                       22
<PAGE>

          (a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrowers (or to CG&Pet on
behalf of Borrowers), convert to Prime Rate Loans in the event that (i) any
change in applicable law or regulation (or the interpretation or administration
thereof) shall either (A) make it unlawful for Lender, Reference Bank or any
participant to make or maintain Eurodollar Rate Loans or to comply with the
terms hereof in connection with the Eurodollar Rate Loans, or (B) shall result
in the increase in the costs to Lender, Reference Bank or any participant of
making or maintaining any Eurodollar Rate Loans by an amount deemed by Lender to
be material, or (C) reduce the amounts received or receivable by Lender in
respect thereof, by an amount deemed by Lender to be material or (ii) the cost
to Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans shall otherwise increase by an amount deemed by Lender to
be material. Borrowers shall pay to Lender, upon demand by Lender (or Lender
may, at its option, charge any loan accounts of Borrowers) any amounts required
to compensate Lender, the Reference Bank or any participant with Lender for any
loss (including loss of anticipated profits), cost or expense incurred by such
person as a result of the foregoing, including, without limitation, any such
loss, cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or maintain the
Eurodollar Rate Loans or any portion thereof. A certificate of Lender setting
forth the basis for the determination of such amount necessary to compensate
Lender as aforesaid shall be delivered to Borrowers (or CG&Pet on behalf of
Borrowers) and shall be conclusive, absent manifest error.

          (b) If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral, Borrowers shall
pay to Lender upon demand by Lender (or Lender may, at its option, charge any
loan accounts of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any additional loss (including
loss of anticipated profits), cost or expense incurred by such person as a
result of such prepayment or payment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.

 SECTION 4.  CONDITIONS PRECEDENT
             --------------------

     4.1  Conditions Precedent to Initial Loans and Letter of Credit
          ----------------------------------------------------------
Accommodations. Each of the following is a condition precedent to Lender making
--------------
Loans and providing the Letter of Credit Accommodations hereunder:

          (a) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the

                                       23
<PAGE>

liability of any Obligor in respect thereof, subject only to the security
interests and liens permitted herein or in the other Financing Agreements;

          (b) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities;

          (c) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from third
persons which Lender may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including acknowledgements by lessors, mortgagees and warehousemen
of Lender's security interests in the Collateral, waivers by such persons of any
security interests, liens or other claims by such persons to the Collateral and
agreements permitting Lender access to, and the right to remain on, the premises
to exercise its rights and remedies and otherwise deal with the Collateral;

          (d) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee and additional insured;

          (e) Lender shall have received, in form and substance satisfactory to
Lender (i) a guarantee of payment by each Guarantor in favor of Lender of all
Obligations, secured by a first and only security interest in favor of Lender
granted by each Guarantor in all of its existing and future assets, and (ii) a
guarantee of payment by each Borrower in favor of Lender of all Obligations of
each other Borrower to Lender, secured by all Collateral;

          (f) Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrowers and Guarantors with respect
to the Financing Agreements and such other matters as Lender may request; and

          (g) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.

     4.2  Conditions Precedent to All Loans and Letter of Credit
          ------------------------------------------------------
Accommodations.  Each of the following is an additional condition precedent to
--------------
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrowers:

                                       24
<PAGE>

          (a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto; and

          (b) no Event of Default and no event or condition which, with notice
or passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be continuing on and as of the date of the making of such Loan
or providing each such Letter of Credit Accommodation and after giving effect
thereto.

     4.3  Waiver of Existing Events of Defaults.
          -------------------------------------

          (a) Lender shall waive the Existing Events Default upon the
satisfaction of each of the following conditions precedent:

               (i) the satisfaction by Borrowers of each of the conditions
precedent set forth in Section 4.1 of this Agreement, as determined by Lender;
and

               (ii) by no later than December 31, 2000, Lender shall have
received evidence, each in form and substance satisfactory to Lender, that (i)
the SunTrust Guarantee has been cancelled and is no longer in force and effect
and (ii CG&Pet has been released from all of its obligations arising out of the
SunTrust Financing Agreements, including, but not limited to, the SunTrust
Guarantee.

          (b) In the event that the conditions set forth in Section 4.3(a) above
shall not be satisfied, Lender reserves the right, in its discretion, to
exercise any or all of its rights and remedies arising under the terms of the
Existing Financing Agreements as a result of any Existing Events of Default and
no delay on its part in exercising any such rights or remedies should be
construed as a waiver of any such rights or remedies.

SECTION 5.   GRANT OF SECURITY INTEREST
             --------------------------

     5.1 To secure payment and performance of all Obligations, each Borrower
hereby confirms, reaffirms and restates its prior grant to Lender of, a
continuing security interest in, a lien upon, and a right of set off against,
and hereby assigns to Lender as security, the following property and interests
in property of such Borrower, whether now owned or hereafter acquired or
existing, and wherever located (collectively, the "Collateral"):

          (a) Accounts;

          (b) all present and future contract rights, general intangibles
(including tax and duty refunds, registered and unregistered patents,
trademarks, service marks, copyrights, trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer

                                       25
<PAGE>

lists, licenses, whether as licensor or licensee, choses in action and other
claims and existing and future leasehold interests in equipment, real estate and
fixtures), chattel paper, documents, instruments, securities and other
investment property, letters of credit, bankers' acceptances and guaranties;

          (c) all present and future monies, securities, credit balances,
deposits, deposit accounts and other property of such Borrower now or hereafter
held or received by or in transit to Lender or its affiliates or at any other
depository or other institution from or for the account of such Borrower,
whether for safekeeping, pledge, custody, transmission, collection or otherwise,
and all present and future liens, security interests, rights, remedies, title
and interest in, to and in respect of Accounts and other Collateral, including
(i) rights and remedies under or relating to guaranties, contracts of
suretyship, letters of credit and credit and other insurance related to the
Collateral, (ii rights of stoppage in transit, replevin, repossession,
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, (ii goods described in invoices, documents, contracts or instruments with
respect to, or otherwise representing or evidencing, Accounts or other
Collateral, including returned, repossessed and reclaimed goods, and (iv
deposits by and property of account debtors or other persons securing the
obligations of account debtors;

          (d)  Inventory;

          (e)  Equipment;

          (f)  Real Property;

          (g)  Records; and

          (h) all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of any or all of the foregoing.

     5.2  Financing or Sale of Real Property.
          ----------------------------------

          (a) Upon not less than thirty (30) days' prior written notice to
Lender from Borrowers and provided that Lender has not accelerated the
Obligations, and no material Event of Default has occurred which is continuing,
and no event or condition, which, upon notice or passage of time or both, would
constitute a material Event of Default exists or has occurred and is continuing,
Lender agrees to subordinate its Mortgages on a Borrower's Real Property in
favor of any Person, not an affiliate of Borrowers, that provides at least
$500,000 of new cash financing to such Borrower in an arm's length loan
transaction secured by such Borrower's Real Property (a "Real Property Loan");
provided, that the following additional terms and conditions are, in Lender's
--------  ----
commercially reasonable discretion, satisfied and/or complied with: (i) the
indebtedness in respect of such Real Property Loan is permitted under Section
9.9(e) and the Real Property Loan shall be secured only by such Borrower's Real
Property and (ii) Lender shall

                                       26
<PAGE>

receive, in form and substance satisfactory to Lender, waivers by the lender
making the Real Property Loan of any security interests, liens or other claims
by such lender with respect to any Collateral, other than such Borrower's Real
Property, and permitting Lender use of and access to such Borrower's Real
Property securing such Real Property Loan for purposes of Lender's preserving,
protecting, realizing upon and/or otherwise dealing with any Collateral (other
than such Real Property), all without charge, for such period of time and upon
such terms as shall be satisfactory to Lender in its discretion. If the lender
providing the Real Property Loan does not agree to Borrowers' good faith request
that such lender permit Lender to retain a subordinate Mortgage upon the Real
Property securing the Real Property Loan, Lender will release its Mortgage on
such Real Property to the extent securing the Real Property Loan,
contemporaneously with the closing thereof, subject to satisfaction of the other
conditions stated in this Section 5.1(a).

          (b) Upon not less than thirty (30) days' prior written notice to
Lender from Borrowers, and provided that Lender has not accelerated the
Obligations, and no material Event of Default has occurred which is continuing,
and no event or condition, which, upon notice or passage of time or both, would
constitute a material Event of Default, exists or has occurred and is
continuing, Lender agrees to release from its Mortgages, any Real Property of a
Borrower which is sold to a Person, not an affiliate of Borrowers, who pays a
cash consideration at least equal to seventy-five (75%) percent of the fair
market value of the Real Property so sold, as shown on an appraisal report
obtained by Borrowers at their expense by an appraiser satisfactory to Lender,
dated not more than nine (9) months prior to the proposed sale; provided,
                                                                --------
however, that arrangements for the removal of any Inventory or other Collateral
-------
located on the Real Property to be sold are made to the satisfaction of Lender,
or if any such Collateral will remain on the Real Property to be sold, Lender
shall have received from the new owner and any mortgagee, in form and substance
satisfactory to Lender, a written waiver of any security interests, liens or
other claims by such owner or mortgagee with respect to any Collateral from time
to time located on such Real Property, and permitting Lender use of and access
to the Real Property for purposes of Lender's preserving, protecting, realizing
upon and/or otherwise dealing with Lender's Collateral, all without charge, for
such period of time and upon such terms as shall be satisfactory to Lender in
its discretion.

 SECTION 6.  COLLECTION AND ADMINISTRATION
             -----------------------------

     6.1  Borrowers' Loan Accounts.  Lender shall maintain one or more loan
          ------------------------
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrowers and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest.  All entries in the loan account(s) shall be made in accordance
with Lender's customary practices as in effect from time to time.

     6.2  Statements.  Lender shall render to CG&Pet (on behalf of Borrowers)
          ----------
each month a statement setting forth the balance in the Borrowers' loan
account(s) maintained by Lender for Borrowers pursuant to the provisions of this
Agreement, including principal, interest, fees, costs

                                       27
<PAGE>

and expenses. Each such statement shall be subject to subsequent adjustment by
Lender but shall, absent manifest errors or omissions, be considered correct and
deemed accepted by Borrowers and conclusively binding upon Borrowers as an
account stated except to the extent that Lender receives a written notice from a
Borrower of any specific exceptions of such Borrower thereto within thirty (30)
days after the date such statement has been mailed by Lender. Until such time as
Lender shall have rendered to Borrowers a written statement as provided above,
the balance in Borrowers' loan account(s) shall be presumptive evidence of the
amounts due and owing to Lender by Borrowers.

     6.3  Collection of Accounts.
          ----------------------

          (a) Each Borrower shall establish and maintain, at its expense,
deposit account arrangements and merchant payment arrangements with the banks
set forth on Schedule 6.3 hereto and after prior written notice to Lender,
subject to Section 9.13, such other banks as Borrower may hereafter select as
are acceptable to Lender. The banks set forth on Schedule 6.3 constitute all of
the banks with whom each Borrower has deposit account arrangements and merchant
payment arrangements as of the date hereof and identifies each of the deposit
accounts at such banks to a location of such Borrower or otherwise describes the
nature of the use of such deposit account by such Borrower.

               (i) Each Borrower shall deposit all proceeds from sales of
Inventory in every form, including, without limitation, cash, checks, credit
card sales drafts, credit card sales or charge slips or receipts and other forms
of daily store receipts, from each location of such Borrower on each Business
Day into the deposit accounts of Borrower used solely for such purpose and
identified to each location as set forth on Schedule 6.3 (together with any
other deposit accounts at any time established or used by Borrower for receiving
such proceeds from any location, collectively, the "Local Bank Accounts") or as
otherwise provided in Section 6.3(a)(ii) below. Each Borrower shall, on each
Business Day, authorize and direct, and shall use its best efforts to cause, all
available funds deposited into the Local Bank Accounts to be sent by wire
transfer or by transfer using the automated clearinghouse network ("ACH
transfer") not less frequently than on each Business Day, and all other proceeds
of Collateral to be sent by wire transfer or by ACH transfer, to the Blocked
Account as provided in Section 6.3(a)(ii) below (except nominal amounts which
are required to be maintained in such Local Bank Accounts under the terms of
such Borrower's arrangements with the bank at which such Local Bank Accounts are
maintained as in effect on the date hereof[, not to exceed $500,000, in the
aggregate in all such deposit accounts at any time)]. Each Borrower shall
irrevocably authorize and direct in writing, in form and substance satisfactory
to Lender, each of the banks into which proceeds from sales of Inventory from
each location of such Borrower are at any time deposited as provided above to
(a) honor all wire or ACH transfer requests, provided that any and all amounts
released and/or transferred by such bank pursuant to such requests are sent to
the Blocked Account and (b) follow any contrary instructions sent to such banks
by Lender. Such authorization and direction shall not be rescinded, revoked or
modified without the prior written consent of Lender. In the event any of such
banks fails to send such funds to the Blocked Account as provided herein, such
Borrower shall pursue all of its rights and remedies, as

                                       28
<PAGE>

requested by Lender, as a result of such failure. Notwithstanding the foregoing,
for those Local Bank Accounts that transfer funds daily by ACH transfer
initiated by any Borrower notifying a third party processor, such Borrower shall
irrevocably authorize and direct in writing, in form and substance satisfactory
to Lender, the third party processor that establishes the routing and executes
the ACH transfer to send funds only to the Blocked Accounts and to agree to do
so at any time upon Lender's request and Lender shall receive an agreement from
such third party processor confirming its agreement to do so. Such authorization
and direction shall not be rescinded, revoked or modified without the prior
written consent of Lender.

               (ii) CG& Pet shall establish and maintain, at its expense,
deposit accounts with such banks as are acceptable to Lender (the "Blocked
Accounts") into which all Borrowers shall promptly either cause all amounts on
deposit in their respective Local Bank Accounts to be sent as provided in
Section 6.3(a)(i) above or shall itself deposit or cause to be deposited all
proceeds from sales of Inventory, and all other proceeds of Collateral. The
banks at which the Blocked Accounts are established shall enter into an
agreement, in form and substance satisfactory to Lender, providing that all
items received or deposited in the Blocked Accounts are the property of Lender,
that the depository bank has no lien upon, or right of setoff against, the
Blocked Accounts, the items received for deposit therein, or the funds from time
to time on deposit therein and that the depository bank will wire, or otherwise
transfer, in immediately available funds, on a daily basis, all funds received
or deposited into the Blocked Accounts to such bank account of Lender as Lender
may from time to time designate for such purpose ("Payment Account"). Each
Borrower agrees that all amounts deposited in such Blocked Accounts or in the
Local Bank Accounts or other funds received and collected by Lender, whether as
proceeds of Inventory or other Collateral or otherwise shall be treated as
payments to Lender in respect of the Obligations and therefore shall constitute
property of Lender to the extent of the then outstanding Obligations.

          (b) For purposes of calculating the amount of the Loans available to
Borrowers, such payments will be applied (conditional upon final collection) to
the Obligations on the business day of receipt by Lender of immediately
available funds in the Payment Account provided such payments and notice thereof
are received in accordance with Lender's usual and customary practices as in
effect from time to time and within sufficient time to credit Borrowers' loan
accounts on such day, and if not, then on the next business day. For the
purposes of calculating interest on the Obligations, such payments or other
funds received will be applied (conditional upon final collection) to the
Obligations one (1) business day following the date of receipt of immediately
available funds by Lender in the Payment Account, provided such payments or
other funds and notice thereof are received in accordance with Lender's usual
and customary practices as in effect from time to time and within sufficient
time to credit Borrowers' loan accounts on such day, and if not, then on the
next business day.

          (c) Intentionally Deleted.

          (d) Borrowers and all of their affiliates, Subsidiaries, shareholders,
directors, employees or agents shall, acting as trustee for Lender, receive, as
the property of Lender, any

                                       29
<PAGE>

monies, checks, notes, drafts or any other payment relating to and/or proceeds
of Accounts or other Collateral which come into their possession or under their
control and immediately upon receipt thereof, shall deposit or cause the same to
be deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be commingled with
Borrowers' own funds. Borrowers agree to reimburse Lender on demand for any
amounts owed or paid to any bank at which a Blocked Account is established or
any other bank or person involved in the transfer of funds to or from the
Blocked Accounts arising out of Lender's payments to or indemnification of such
bank or person. The Obligations of Borrowers to reimburse Lender for such
amounts pursuant to this Section 6.3 shall survive the termination or
non-renewal of this Agreement.

     6.4  Payments.  All Obligations shall be payable to the Payment Account as
          --------
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender may apply payments received or collected from Borrowers or for the
account of Borrowers (including the monetary proceeds of collections or of
realization upon any Collateral) to such of the Obligations, whether or not then
due, in such order and manner as Lender determines. At Lender's option, all
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement or the other Financing Agreements may be charged directly to the
loan account(s) of Borrowers. Borrowers shall make all payments to Lender on the
Obligations free and clear of, and without deduction or withholding for or on
account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,
fees, deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Lender is required to surrender or return such payment
or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Lender. Borrowers shall be liable to pay to Lender, and
Borrowers hereby indemnify and hold Lender harmless for the amount of any
payments or proceeds surrendered or returned. This Section 6.4 shall remain
effective notwithstanding any contrary action which may be taken by Lender in
reliance upon such payment or proceeds. This Section 6.4 shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.

     6.5  Authorization to Make Loans.  Lender is authorized to make the Loans
          ---------------------------
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of a Borrower (or
CG&Pet on behalf of a Borrower) and whose name has been designated for such
purposes in a writing purportedly signed by an authorized officer of a Borrower
(or CG&Pet), or other authorized person or, at the discretion of Lender, if such
Loans are necessary to satisfy any Obligations. All requests for Loans or Letter
of Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which day
shall be a business day) and the amount of the requested Loan. Requests received
after 11:00 a.m. Los Angeles, California time on any day shall be deemed to have
been made as of the opening of business on the immediately following business
day. All Loans and Letter of Credit Accommodations under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for

                                       30
<PAGE>

the benefit of, a Borrower when deposited to the credit of any Borrower or
otherwise disbursed or established in accordance with the instructions of a
Borrower (or CG&Pet on behalf of a Borrower) or in accordance with the terms and
conditions of this Agreement.

     6.6  Use of Proceeds.  Borrowers shall use the proceeds of the Loans
          ---------------
provided by Lender to Borrowers hereunder or Letter of Credit Accommodations
provided by Lender to Borrowers pursuant to the provisions hereof only for
general operating, working capital and other proper corporate purposes of
Borrowers not otherwise prohibited by the terms hereof. None of the proceeds
will be used, directly or indirectly, for the purpose of purchasing or carrying
any margin security or for the purposes of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the Loans to be considered a "purpose
credit" within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System, as amended.

     6.7  Appointment of CG&Pet as Agent for Borrowers.  Each Borrower hereby
         --------------------------------------------
irrevocably appoints CG&Pet, and each officer thereof, as its agent and
attorney-in-fact to request Loans and Letter of Credit Accommodations on its
behalf, to receive disbursements of Loans on its behalf (which may be made to
the same account of CG&Pet to which disbursements of Loans to CG&Pet are made)
to make requests relating to Eurodollar Rate Loans on its behalf, to receive
notices and statements of account from Lender, to take such other actions on its
behalf as is provided hereunder or under any of the other Financing Agreements
and generally to deal with Lender on its behalf, for all matters pertaining to
the financing arrangements under this Agreement.

 SECTION 7.  COLLATERAL REPORTING AND COVENANTS
             ----------------------------------

     7.1  Collateral Reporting.  Borrowers shall provide Lender with the
          --------------------

following documents in a form satisfactory to Lender: (a) on a weekly or more
frequent basis as required by Lender, a schedule of Accounts, sales made,
credits issued and cash received; (b) on a monthly basis or more frequently as
Lender may request, (i) perpetual inventory reports, (ii inventory reports by
category and (ii agings of accounts payable, (c) upon Lender's request, (i)
copies of customer statements and credit memos, remittance advices and reports,
and copies of deposit slips and bank statements, (ii copies of shipping and
delivery documents, and (ii copies of purchase orders, invoices and delivery
documents for Inventory and Equipment acquired by each Borrower; (d) agings of
accounts receivable on a monthly basis or more frequently as Lender may request;
(e) on a monthly basis , or more frequently as Lender may request, a schedule of
Accounts of each Borrower setting forth those owed by Distributor/Agents; and
(f) such other reports as to the Collateral as Lender shall request from time to
time. If any of Borrowers' records or reports of the Collateral are prepared or
maintained by an accounting service, contractor, shipper or other agent,
Borrowers hereby irrevocably authorize such service, contractor, shipper or
agent to deliver such records, reports, and related documents to Lender and to
follow Lender's instructions with respect to further services at any time that
an Event of Default exists or has occurred and is continuing.

                                       31
<PAGE>

     7.2  Accounts Covenants.
          ------------------

          (a) Borrowers shall notify Lender promptly of: (i) any material delay
in any Borrower's performance of any of its obligations to any material account
debtor or the assertion of any claims, offsets, defenses or counterclaims by any
material account debtor, or any material disputes with account debtors, or any
settlement, adjustment or compromise thereof, (ii all material adverse
information relating to the financial condition of any account debtor and (ii
any event or circumstance which, to any Borrower's knowledge would cause Lender
to consider any then existing Accounts as no longer constituting Eligible
Accounts. No credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted by any Borrower to any account debtor without
Lender's consent, except in the ordinary course of such Borrower's business in
accordance with practices and policies previously disclosed in writing to
Lender. So long as no Event of Default exists or has occurred and is continuing,
Borrowers shall settle, adjust or compromise any claim, offset, counterclaim or
dispute with any account debtor. At any time that an Event of Default exists or
has occurred and is continuing, Lender shall, at its option, have the exclusive
right to settle, adjust or compromise any claim, offset, counterclaim or dispute
with account debtors or grant any credits, discounts or allowances.

          (b) Without limiting the obligation of Borrowers to deliver any other
information to Lender, Borrowers shall promptly report to Lender any return of
Inventory by any one account debtor if the Inventory so returned in such case
has a value in excess of $250,000. At any time that Inventory is returned,
reclaimed or repossessed, the Account (or portion thereof) which arose from the
sale of such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible Account. In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrowers shall, upon
Lender's request, (i) hold the returned Inventory in trust for Lender, (ii
segregate all returned Inventory from all of its other property, (ii dispose of
the returned Inventory solely according to Lender's instructions, and (iv not
issue any credits, discounts or allowances with respect thereto without Lender's
prior written consent.

          (c) With respect to each Account: (i) the amounts shown on any invoice
delivered to Lender or schedule thereof delivered to Lender shall be true and
complete, (ii no payments shall be made thereon except payments deposited and/or
transferred to the Blocked Accounts or immediately delivered to Lender pursuant
to the terms of this Agreement, (ii no credit, discount, allowance or extension
or agreement for any of the foregoing shall be granted by any Borrower to any
account debtor except as reported to Lender in accordance with this Agreement
and except for credits, discounts, allowances or extensions made or given in the
ordinary course of such Borrower's business in accordance with practices and
policies previously disclosed to Lender, (iv there shall be no setoffs,
deductions, contras, defenses, counterclaims or disputes existing or asserted
with respect thereto except as reported to Lender in accordance with the terms
of this Agreement, (v) none of the transactions giving rise thereto will violate
any applicable State or Federal laws or regulations, all documentation relating
thereto will be legally sufficient under such laws and regulations and all such
documentation will be legally enforceable in accordance with its terms.

                                       32
<PAGE>

          (d) Lender shall have the right at any time or times, in Lender's name
or in the name of a nominee of Lender, to verify the validity, amount or any
other matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.

          (e) Each Borrower shall deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment, with full recourse to such
Borrower, all chattel paper and instruments which such Borrower now owns or may
at any time acquire immediately upon such Borrower's receipt thereof, except as
Lender may otherwise agree.

          (f) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, (i) notify any or all account debtors that
the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (ii demand, collect or enforce
payment of any Accounts or such other obligations, but without any duty to do
so, and Lender shall not be liable for its failure to collect or enforce the
payment thereof nor for the negligence of its agents or attorneys with respect
thereto and (iv take whatever other action Lender may deem necessary or
desirable for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Lender and are payable directly
and only to Lender and Borrowers shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Lender may require.

     7.3  Inventory Covenants.  With respect to the Inventory: (a) each
          -------------------
Borrower shall at all times maintain inventory records reasonably satisfactory
to Lender, keeping correct and accurate records itemizing and describing the
kind, type, quality and quantity of Inventory, such Borrower's cost therefor and
daily withdrawals therefrom and additions thereto; (b) each Borrower shall
conduct a physical count of the Inventory at least once each year, but at any
time or times as Lender may request on or after an Event of Default, and
promptly following such physical inventory shall supply Lender with a report in
the form and with such specificity as may be reasonably satisfactory to Lender
concerning such physical count; (c) no Borrower shall remove any Inventory from
the locations set forth or permitted herein, without the prior written consent
of Lender, except for sales of Inventory by a Borrower in the ordinary course of
such Borrower's business and except to move Inventory directly from one location
set forth or permitted herein to another such location; (d) upon Lender's
request, Borrowers shall, at their expense, no more than once in any twelve (12)
month period, but at any time or times as Lender may request on or after an
Event of Default, deliver or cause to be delivered to Lender written reports or
appraisals as to the Inventory in form, scope and methodology acceptable to
Lender and by an appraiser acceptable to Lender, addressed to Lender or upon
which Lender is expressly permitted to rely; (e) Borrowers shall produce, use,
store and maintain the Inventory with all

                                       33
<PAGE>

reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (f) Borrowers assume all responsibility
and liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (g) Borrowers shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate any Borrower to repurchase such Inventory, except, sales to
Distributor/Agents on consignment in the ordinary course of business of such
Borrower consistent with current practices as of the date hereof, provided,
                                                                  --------
that, (i) such Inventory is identified in a report provided by Borrowers to
----
Lender pursuant to Section 7.1 hereof and (ii) in no event shall the aggregate
dollar amount of all Inventory sold to Distributor/Agents exceed $250,000 at any
time; (h) Borrowers shall keep the Inventory in good and marketable condition;
(i) Borrowers shall not, without prior written notice to Lender, acquire or
accept any Inventory on consignment or approval; and (j) Schedule 7.3(j) hereto
sets forth a true and complete list of all Distributor/Agents who have been
appointed as of the date hereof. No Borrower shall appoint any new
Distributor/Agents except upon not less than ten (10) days prior written notice
to Lender. Not less frequently than annually, Borrowers shall provide Lender
with an updated Schedule 7.3(j) hereto, showing all changes to the list of
Distributor/Agents shown on the previous Schedule 7.3(j).

     7.4  Equipment Covenants.  With respect to the Equipment: (a) upon
          -------------------
Lender's request, each Borrower shall, at its expense, at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Equipment in form,
scope and methodology acceptable to Lender and by an appraiser acceptable to
Lender; (b) each Borrower shall keep the Equipment in good order, repair,
running and marketable condition (ordinary wear and tear excepted); (c) each
Borrower shall use the Equipment with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with all
applicable laws; (d) the Equipment is and shall be used in each Borrower's
business and not for personal, family, household or farming use; (e) no Borrower
shall remove any Equipment from the locations set forth or permitted herein,
except to the extent necessary to have any Equipment repaired or maintained in
the ordinary course of the business of such Borrower or to move Equipment
directly from one location set forth or permitted herein to another such
location and except for the movement of motor vehicles used by or for the
benefit of such Borrower in the ordinary course of business; (f) the Equipment
is now and shall remain personal property and no Borrower shall permit any of
the Equipment to be or become a part of or affixed to real property; and (g)
Borrowers assume all responsibility and liability arising from the use of their
Equipment.

     7.5  Power of Attorney.  Each Borrower hereby irrevocably designates and
          -----------------
appoints Lender (and all persons designated by Lender) as such Borrower's true
and lawful attorney-in-fact, and authorizes Lender, in such Borrower's or
Lender's name, to: (a) at any time an Event of Default or event which with
notice or passage of time or both would constitute an Event of Default exists or
has occurred and is continuing (i) demand payment on Accounts or other proceeds
of Inventory or other Collateral, (ii) enforce payment of Accounts by legal
proceedings or otherwise, (iii) exercise all of such Borrower's rights and
remedies to collect any Account or

                                       34
<PAGE>

other Collateral, (iv) sell or assign any Account upon such terms, for such
amount and at such time or times as the Lender deems advisable, (v) settle,
adjust, compromise, extend or renew an Account, (vi discharge and release any
Account, (vii) prepare, file and sign such Borrower's name on any proof of claim
in bankruptcy or other similar document against an account debtor, (viii) notify
the post office authorities to change the address for delivery of such
Borrower's mail to an address designated by Lender, and open and dispose of all
mail addressed to such Borrower, and (ix) do all acts and things which are
necessary, in Lender's determination, to fulfill such Borrower's Obligations
under this Agreement and the other Financing Agreements and (b) at any time to
(i) subject to the provisions of Sections 6.3(a) hereof, take control in any
manner of any item of payment or proceeds thereof, (ii) have access to any
lockbox or postal box into which such Borrower's mail is deposited, (iii)
endorse such Borrower's name upon any items of payment or proceeds thereof and
deposit the same in the Lender's account for application to the Obligations,
(iv) endorse such Borrower's name upon any chattel paper, document, instrument,
invoice, or similar document or agreement relating to any Account or any goods
pertaining thereto or any other Collateral, (v) sign such Borrower's name on any
verification of Accounts and notices thereof to account debtors and (vi) execute
in such Borrower's name and file any UCC financing statements or amendments
thereto. Each Borrower hereby releases Lender and its officers, employees and
designees from any liabilities arising from any act or acts under this power of
attorney and in furtherance thereof, whether of omission or commission, except
as a result of Lender's own gross negligence or wilful misconduct as determined
pursuant to a final non-appealable judgment of a court of competent
jurisdiction.

     7.6  Right to Cure.  Lender may, at its option, and, in Lender's
          -------------
discretion, upon one (1) Business Day notice only when the giving of such notice
would not, in any way, interfere with the ability of Lender to protect,
preserve, insure or maintain the Collateral and the rights of Lender with
respect thereto, (a) cure any default by any Borrower or Obligor under any
agreement with a third party or pay or bond on appeal any judgment entered
against any Borrower, (b) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and (c) pay any amount, incur any expense or perform any act which, in Lender's
judgment, is necessary or appropriate to preserve, protect, insure or maintain
the Collateral and the rights of Lender with respect thereto. Lender may add any
amounts so expended to the Obligations and charge Borrowers' accounts therefor,
such amounts to be repayable by Borrowers on demand. Lender shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of Borrowers. Any payment
made or other action taken by Lender under this Section shall be without
prejudice to any right to assert an Event of Default hereunder and to proceed
accordingly.

     7.7  Access to Premises.  From time to time as requested by Lender, at the
          ------------------
cost and expense of Borrowers, (a) Lender or its designee shall have complete
access to all of Borrowers' premises during normal business hours and after
notice to Borrowers (or to CG&Pet on behalf of Borrowers), or at any time and
without notice to any Borrower if an Event of Default exists or has occurred and
is continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of Borrowers' books and records, including the Records, and
(b) Borrowers

                                       35
<PAGE>

shall promptly furnish to Lender such copies of such books and records or
extracts therefrom as Lender may request, and (c) use during normal business
hours such of Borrowers' personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default exists or has
occurred and is continuing for the collection of Accounts and realization of
other Collateral.

    7.9   Stock Repurchase Reporting.  CG&Pet shall provide Lender, on the tenth
          --------------------------
(10/th/) day of each calendar month, a report setting forth (i) the dollar
amount of all repurchases of its publicly traded common stock made during the
calendar month just ended and (ii) the aggregate dollar amount of all
repurchases of its publicly traded common stock since the date of this
Agreement.

 SECTION 8.  REPRESENTATIONS AND WARRANTIES
             ------------------------------

     Borrowers hereby, jointly and severally, represent and warrant to Lender
the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of the
making of Loans and providing Letter of Credit Accommodations by Lender to
Borrowers:

     8.1  Corporate Existence, Power and Authority; Subsidiaries.  Each
          ------------------------------------------------------
Borrower is a corporation duly organized and in good standing under the laws of
its state of incorporation and is duly qualified as a foreign corporation and in
good standing in all states or other jurisdictions where the nature and extent
of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on any Borrower's financial
condition, results of operation or business or the rights of Lender in or to any
of the Collateral. The execution, delivery and performance of this Agreement,
the other Financing Agreements and the transactions contemplated hereunder and
thereunder are all within each Borrower's corporate powers, have been duly
authorized and are not in contravention of law or the terms of any Borrower's
certificate of incorporation, by-laws, or other organizational documentation, or
any indenture, agreement or undertaking to which any Borrower is a party or by
which any Borrower or its property are bound. This Agreement and the other
Financing Agreements constitute legal, valid and binding obligations of each
Borrower enforceable in accordance with their respective terms. No Borrower has
any subsidiaries except as set forth on the Information Certificate.

     8.2   Financial Statements; No Material Adverse Change.  All financial
           ------------------------------------------------
statements relating to Borrowers which have been or may hereafter be delivered
by Borrowers to Lender have been prepared in accordance with GAAP and fairly
present the financial condition and the results of operation of Borrowers as at
the dates and for the periods set forth therein.  Except as disclosed in any
interim financial statements furnished by Borrowers to Lender prior to the date
of this Agreement, there has been no material adverse change in the assets,
liabilities, properties and condition, financial or otherwise, of any Borrower,
since the date of the most recent audited financial statements furnished by
Borrowers to Lender prior to the date of this Agreement.

                                       36
<PAGE>

     8.3  Chief Executive Office; Collateral Locations.  The chief executive
          --------------------------------------------
office of each Borrower and each Borrower's Records concerning Accounts are
located only at the address(es) set forth below and its only other places of
business and the only other locations of Collateral, if any, are the addresses
set forth in the Information Certificate, subject to the right of Borrowers to
establish new locations in accordance with Section 9.2 below. The Information
Certificate correctly identifies any of such locations which are not owned by
Borrowers and sets forth the owners and/or operators thereof.

     8.4  Priority of Liens; Title to Properties.  The security interests and
          --------------------------------------
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Each Borrower
has good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.

     8.5  Tax Returns.  Each Borrower has filed, or caused to be filed, in a
          -----------
timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to Lender).  All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
has paid or caused to be paid all taxes due and payable or claimed due and
payable in any assessment received by it, except taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower and with respect to which adequate reserves have been
set aside on its books.  Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.

     8.6  Litigation. Except as set forth on the Information Certificates,
          ----------
there is no present investigation by any governmental agency pending, or to the
best of any Borrower's knowledge threatened, against or affecting any Borrower,
its assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of any Borrower's knowledge threatened, against
any Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against any
Borrower would result in any material adverse change in the assets, business or
prospects of any Borrower or would impair the ability of any Borrower to perform
its Obligations hereunder or under any of the other Financing Agreements to
which it is a party or of Lender to enforce any Obligations or realize upon any
Collateral.

     8.7  Compliance with Other Agreements and Applicable Laws.  No Borrower is
          ----------------------------------------------------
in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and each Borrower is in compliance in all material respects

                                       37
<PAGE>

with all applicable provisions of laws, rules, regulations, licenses, permits,
approvals and orders of any foreign, Federal, State or local governmental
authority.

     8.8  Environmental Compliance.
          ------------------------

          (a) Except as set forth on Schedule 8.8 hereto, no Borrower or, to
Borrowers' knowledge, any predecessor of a Borrower, has generated, used,
stored, treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off its premises (whether or not owned by it) in any
manner which at any time violates or has violated any applicable Environmental
Law or any license, permit, certificate, approval or similar authorization
thereunder and the operations of each Borrower comply in all material respects
with all Environmental Laws and all licenses, permits, certificates, approvals
and similar authorizations thereunder.

          (b) Except as set forth on Schedule 8.8 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of Borrowers' knowledge threatened, with respect to any non-
compliance with or violation of the requirements of any Environmental Law by any
Borrower or any predecessor of a Borrower, or the release, spill or discharge,
threatened or actual, of any Hazardous Material or the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials or any other environmental, health or safety matter, which
affects any Borrower or its business, operations or assets or any properties at
which any Borrower or predecessor of a Borrower has transported, stored or
disposed of any Hazardous Materials.

          (c) No Borrower has any material liability (contingent or otherwise)
in connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.

          (d) Each Borrower has all licenses, permits, certificates, approvals
or similar authorizations required to be obtained or filed in connection with
the operations of such Borrower under any Environmental Law and all of such
licenses, permits, certificates, approvals or similar authorizations are valid
and in full force and effect.

     8.9  Employee Benefits.
          -----------------

          (a) No Borrower has engaged in any transaction in connection with
which any Borrower or any of its ERISA Affiliates could be subject to either a
civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, including any accumulated funding deficiency described
in Section 8.9(c) hereof and any deficiency with respect to vested accrued
benefits described in Section 8.9(d) hereof.

                                       38
<PAGE>

          (b) No liability to the Pension Benefit Guaranty Corporation has been
or is expected by any Borrower to be incurred with respect to any employee
benefit plan of any Borrower or any of its ERISA Affiliates. There has been no
reportable event (within the meaning of Section 4043(b) of ERISA) or any other
event or condition with respect to any employee pension benefit plan of any
Borrower or any of its ERISA Affiliates which presents a risk of termination of
any such plan by the Pension Benefit Guaranty Corporation.

          (c) Full payment has been made of all amounts which Borrowers or any
of their ERISA Affiliates are required under Section 302 of ERISA and Section
412 of the Code to have paid under the terms of each employee benefit plan as
contributions to such plan as of the last day of the most recent fiscal year of
such plan ended prior to the date hereof, and no accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, exists with respect to any employee benefit plan, including any penalty
or tax described in Section 8.9(a) hereof and any deficiency with respect to
vested accrued benefits described in Section 8.9(d) hereof.

          (d) The current value of all vested accrued benefits under all
employee benefit plans maintained by Borrowers that are subject to Title IV of
ERISA does not exceed the current value of the assets of such plans allocable to
such vested accrued benefits, including any penalty or tax described in Section
8.9(a) hereof and any accumulated funding deficiency described in Section 8.9(c)
hereof. The terms "current value" and "accrued benefit" have the meanings
specified in ERISA.

          (e) None of Borrowers or any of their ERISA Affiliates is or has ever
been obligated to contribute to any "multiemployer plan" (as such term is
defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.

     8.10 Bank Accounts.  All of the deposit accounts, investment accounts or
          -------------
other accounts in the name of or used by Borrowers maintained at any bank or
other financial institution are set forth on Schedule 8.10 hereto, subject to
the right of Borrowers to establish new accounts in accordance with Section 9.13
below.

     8.11 Accuracy and Completeness of Information.  All information furnished
          ----------------------------------------
by or on behalf of any Borrower in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate, is true and correct in all material respects on the date as of
which such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading.  No event or
circumstance has occurred which has had or could reasonably be expected to have
a material adverse affect on the business, assets or prospects of any Borrower,
which has not been fully and accurately disclosed to Lender in writing.

     8.12 Interrelated Business.  CG&Pet is the direct and beneficial owner and
          ---------------------
holder of all of the issued and outstanding shares of Capital Stock of the other
Borrowers. Borrowers share an

                                       39
<PAGE>

identity of interests such that any benefit received by any Borrower benefits
the others. CG&Pet (a) renders services to or for the benefit of the other
Borrowers, (b) makes loans and advances and provides other financial
accommodations to or for the benefit of the other Borrowers (including, inter
                                                                        -----
alia, the payment and or guaranties of indebtedness of the other Borrowers),
----
and (c) provides administrative, marketing, payroll and management services to
or for the benefit of the other Borrowers. Borrowers have centralized
purchasing, collection, distribution, accounting, legal and other services.

     8.13 Capitalization.  Each of the Borrowers is solvent and will continue
          --------------
to be solvent after the creation of the Obligations, the security interests of
Lender and the other transactions contemplated hereunder, is able to pay its
debts as they mature and has (and has reason to believe it will continue to
have) sufficient capital (and not unreasonably small capital) to carry on its
business and all businesses in which it is engaged and proposes to engage.  The
assets and properties of each Borrower at a fair valuation and at their present
fair salable value are, and will be, greater than the indebtedness of such
Borrower, and including subordinated and contingent liabilities computed at the
amount which, to the best of such Borrower's knowledge, represents an amount
which can reasonably be expected to become an actual or matured liability.

     8.14 Accounts Purchase Agreements.    The Purchase Agreements, Bills of
          -----------------------------
Sale and Assignment of Accounts Receivable, dated as of January 21, 2000, by and
between, CG&P, as Buyer, and each of Kaytee, Norcal, Wellmark and TFH, as
Sellers, have been terminated and are no longer in full force and effect.

     8.15 Survival of Warranties; Cumulative.  All representations and
          ----------------------------------
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender.  The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
any Borrower shall now or hereafter give, or cause to be given, to Lender.

 SECTION 9.  AFFIRMATIVE AND NEGATIVE COVENANTS
             ----------------------------------

     9.1  Maintenance of Existence.  Each Borrower shall at all times preserve,
          ------------------------
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted.  Each Borrower shall give Lender thirty (30) days prior written
notice of any proposed change in its corporate name, which notice shall set
forth the new name and such Borrower shall deliver to Lender a copy of the
amendment to the Certificate of Incorporation of such Borrower providing for the
name change certified by the Secretary of State of the jurisdiction of
incorporation of such Borrower as soon as it is available.

                                       40
<PAGE>

     9.2  New Collateral Locations.  Any Borrower may open any new location
          ------------------------
within the continental United States provided such Borrower (a) gives Lender
thirty (30) days prior written notice of the intended opening of any such new
location and (b) executes and delivers, or causes to be executed and delivered,
to Lender such agreements, documents, and instruments as Lender may deem
reasonably necessary or desirable to protect its interests in the Collateral at
such location, including UCC financing statements.

    9.3   Compliance with Laws, Regulations, Etc.
          ---------------------------------------

          (a) Each Borrower shall, at all times, comply in all material respects
with all laws, rules, regulations, licenses, permits, approvals and orders
applicable to it and duly observe all requirements of any Federal, State or
local governmental authority, including the Employee Retirement Security Act of
1974, as amended, the Occupational Safety and Health Act of 1970, as amended,
the Fair Labor Standards Act of 1938, as amended, and all statutes, rules,
regulations, orders, permits and stipulations relating to environmental
pollution and employee health and safety, including all of the Environmental
Laws.

          (b) Each Borrower shall establish and maintain, at its expense, a
system to assure and monitor its continued compliance with all Environmental
Laws in all of its operations, which system shall include annual reviews of such
compliance by employees or agents of such Borrower who are familiar with the
requirements of the Environmental Laws. Copies of all environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by Borrowers to Lender.
Each Borrower shall take prompt and appropriate action to respond to any non-
compliance with any of the Environmental Laws and shall regularly report to
Lender on such response.

          (c) Each Borrower shall give both oral and written notice to Lender
immediately upon such Borrower's receipt of any notice of, or such Borrower's
otherwise obtaining knowledge of, (i) the occurrence of any event involving the
release, spill or discharge, threatened or actual, of any Hazardous Material or
(ii) any investigation, proceeding, complaint, order, directive, claims,
citation or notice with respect to: (A) any non-compliance with or violation of
any Environmental Law by any Borrower or any predecessor of a Borrower or (B)
the release, spill or discharge, threatened or actual, of any Hazardous Material
or (C) the generation, use, storage, treatment, transportation, manufacture,
handling, production or disposal of any Hazardous Materials or (D) any other
environmental, health or safety matter, which affects any Borrower or its
business, operations or assets or any properties at which any Borrower or any
predecessor of a Borrower transported, stored or disposed of any Hazardous
Materials.

          (d) Without limiting the generality of the foregoing, whenever Lender
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of any Borrower in order to avoid any
material non-compliance, with any Environmental Law, Borrowers shall, at
Lender's request and Borrowers' expense: (i) cause an independent environmental
engineer acceptable to Lender to conduct such tests of the site where such
Borrower's non-compliance or alleged non-compliance with such Environmental Laws
has

                                       41
<PAGE>

occurred as to such non-compliance and prepare and deliver to Lender a report as
to such non-compliance setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof and (ii) provide to Lender a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrowers' response
thereto or the estimated costs thereof, shall change in any material respect.

          (e) Borrowers shall indemnify and hold harmless Lender, its directors,
officers, employees, agents, invitees, representatives, successors and assigns,
from and against any and all losses, claims, damages, liabilities, costs, and
expenses (including reasonable attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property
and the preparation and implementation of any closure, remedial or other
required plans. All representations, warranties, covenants and indemnifications
in this Section 9.3 shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.

     9.4  Payment of Taxes and Claims.  Each Borrower shall duly pay and
          ---------------------------
discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower and with respect to which adequate reserves have
been set aside on its books.  Borrowers shall be liable for any tax or penalties
imposed on Lender as a result of the financing arrangements provided for herein
and Borrowers agree to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrowers such amount shall be added and deemed part of the Loans; provided,
                                                                      --------
that, nothing contained herein shall be construed to require Borrowers to pay
----
any income or franchise taxes attributable to the income of Lender from any
amounts charged or paid hereunder to Lender. The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.

     9.5  Insurance.  Borrowers shall, at all times, maintain with financially
          ---------
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated.  Said policies
of insurance shall be satisfactory to Lender as to form, amount and insurer.
Borrowers shall furnish certificates, policies or endorsements to Lender as
Lender shall require as proof of such insurance, and, if Borrowers fail to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrowers.  All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for each Borrower in obtaining, and at any time
an Event of Default exists or has occurred and is continuing, adjusting,
settling, amending and canceling such insurance. Borrowers shall cause Lender to
be named as a loss payee and an additional insured (but without any liability
for any premiums) under such insurance policies and Borrowers shall obtain non-
contributory lender's loss payable endorsements to all insurance policies in
form and substance

                                       42
<PAGE>

satisfactory to Lender. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Lender as its interests
may appear and further specify that Lender shall be paid regardless of any act
or omission by any Borrower or any of its affiliates. At its option, Lender may
apply any insurance proceeds received by Lender at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as Lender may determine
or hold such proceeds as cash collateral for the Obligations.

     9.6  Financial Statements and Other Information.
          ------------------------------------------

          (a) Each Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of such Borrower and its
subsidiaries (if any) in accordance with GAAP and Borrowers shall furnish or
cause to be furnished to Lender: (i) within forty-five (45) days after the end
of each fiscal month, monthly unaudited consolidated financial statements
(including in each case balance sheets, statements of income and loss,
statements of cash flow, and statements of shareholders' equity), all in
reasonable detail, fairly presenting the financial position and the results of
the operations of such Borrower and its subsidiaries as of the end of and
through such fiscal month and (ii within ninety (90) days after the end of each
fiscal year, audited consolidated and consolidating financial statements of
CG&Pet and its subsidiaries (including in the case of consolidated financial
statements, balance sheets, statements of income and loss, statements of cash
flow and statements of shareholders' equity), and the accompanying notes
thereto, all in reasonable detail, fairly presenting the financial position and
the results of the operations of CG&Pet and its subsidiaries as of the end of
and for such fiscal year, together with the unqualified opinion of independent
certified public accountants, which accountants shall be an independent
accounting firm selected by Borrowers and reasonably acceptable to Lender, that
such financial statements have been prepared in accordance with GAAP, and
present fairly the results of operations and financial condition of CG&Pet and
its subsidiaries as of the end of and for the fiscal year then ended.

          (b) Each Borrower shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in such
Borrower's business, properties, assets, goodwill or condition, financial or
otherwise and (ii the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would constitute an Event of
Default.

          (c) Each Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which such
Borrower sends to its stockholders generally and copies of all reports and
registration statements which such Borrower files with the Securities and
Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.

                                       43
<PAGE>

          (d) Borrowers shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of CG&Pet and its subsidiaries, as Lender may, from time to
time, reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of any
Borrower to any court or other government agency or to any participant or
assignee or prospective participant or assignee. Each Borrower hereby
irrevocably authorizes and directs all accountants or auditors to deliver to
Lender, at Borrowers' expense, copies of the financial statements of Borrowers
and any reports or management letters prepared by such accountants or auditors
on behalf of Borrowers and to disclose to Lender such information as they may
have regarding the business of Borrowers. Any documents, schedules, invoices or
other papers delivered to Lender may be destroyed or otherwise disposed of by
Lender one (1) year after the same are delivered to Lender, except as otherwise
designated by CG&Pet (on behalf of Borrowers) to Lender in writing.

     9.7  Sale of Assets, Consolidation, Merger, Dissolution, Etc.  No Borrower
          --------------------------------------------------------
shall directly or indirectly,

          (a) merge into or with or consolidate with any other Person or permit
any other Person to merge into or with or consolidate with it, or

          (b) sell, assign, lease, transfer, abandon or otherwise dispose of any
stock or indebtedness to any other Person or any of its assets to any other
Person (except for (i) sales of Inventory in the ordinary course of business and
(ii the disposition of worn-out or obsolete Equipment or Equipment no longer
used in the business of such Borrower so long as (A) if an Event of Default
exists or has occurred and is continuing, any proceeds are paid to Lender and
(B) such sales do not involve Equipment having an aggregate fair market value in
excess of $1,000,000 for all such Equipment disposed of in any fiscal year of
Borrower), or

          (c) form or acquire any Subsidiaries, except acquisition of
Subsidiaries pursuant to Permitted Acquisitions, or

          (d) wind up, liquidate or dissolve, or

          (e) agree to do any of the foregoing.

     9.8  Encumbrances.  No Borrower shall create, incur, assume or suffer to
          ------------
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including the
Collateral, except:
            ------

          (a) liens and security interests of Lender;

          (b) liens securing the payment of taxes, either not yet overdue or the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued and

                                       44
<PAGE>

available to such Borrower and with respect to which adequate reserves have been
set aside on its books;

          (c) non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of such Borrower's business to
the extent: (i) such liens secure indebtedness which is not overdue or (ii such
liens secure indebtedness relating to claims or liabilities which are fully
insured and being defended at the sole cost and expense and at the sole risk of
the insurer or being contested in good faith by appropriate proceedings
diligently pursued and available to such Borrower, in each case prior to the
commencement of foreclosure or other similar proceedings and with respect to
which adequate reserves have been set aside on its books;

          (d) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of real property which do not interfere in any
material respect with the use of such real property or ordinary conduct of the
business of such Borrower as presently conducted thereon or materially impair
the value of the real property which may be subject thereto;

          (e) purchase money security interests in Equipment (including capital
leases) and purchase money mortgages on real estate not to exceed $8,000,000 in
the aggregate at any time outstanding for all Borrowers, so long as such
security interests and mortgages do not apply to any property of any Borrower
other than the Equipment or real estate so acquired, and the indebtedness
secured thereby does not exceed the cost of the Equipment or real estate so
acquired, as the case may be;

          (f) liens on Real Property of Borrowers securing Real Property Loans
permitted under Section 9.9(e) and meeting the requirements of Section 5.2(a);
and

          (g) the security interests and liens set forth on Schedule 8.4 hereto.

     9.9  Indebtedness.  No Borrower shall incur, create, assume, become or be
          ------------
liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except:
              ------

          (a) the Obligations;

          (b) trade obligations and normal accruals in the ordinary course of
business not yet due and payable, or with respect to which such Borrower is
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued and available to such Borrower, and with respect
to which adequate reserves have been set aside on its books;

          (c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement;

          (d) indebtedness of one Borrower to another Borrower for intercompany
loans permitted under Section 9.10(c) hereof;

                                       45
<PAGE>

          (e) indebtedness in respect of Real Property Loans not to exceed the
aggregate principal amount of $5,000,000 borrowed after the date hereof; and

          (f) the indebtedness set forth on Schedule 9.9 hereto; provided, that,
                                                                 --------  ----
in the case of the indebtedness under Section 9.9(e) and (f) hereof (i) a
Borrower may only make regularly scheduled payments of principal and interest in
respect of such indebtedness in accordance with the terms of the agreement or
instrument evidencing or giving rise to such indebtedness of such Borrower as in
effect on the date hereof, (ii Borrowers shall not, directly or indirectly, (A)
amend, modify, alter or change the terms of such indebtedness or any agreement,
document or instrument related thereto as in effect on the date hereof, or (B)
redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set
aside or otherwise deposit or invest any sums for such purpose, and (ii
Borrowers shall furnish to Lender all notices or demands in connection with such
indebtedness either received by a Borrower or on its behalf, promptly after the
receipt thereof, or sent by a Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.  Borrowers and Lender hereby expressly
designate the Obligations of CG&Pet to be "Designated Senior Indebtedness" for
purposes of the Indenture governing the 6% Convertible Subordinated Notes due
2003 of CG&Pet.

     9.10 Loans, Investments, Guarantees, Etc.  No Borrower shall, directly or
          ------------------------------------
indirectly, make any loans or advance money or property to any Person, or invest
in (by capital contribution, dividend or otherwise) or purchase or repurchase
the Capital Stock or indebtedness or all or a substantial part of the assets or
property of any Person, or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly) the indebtedness, performance,
obligations or dividends of any Person or agree to do any of the foregoing,
except:
------

          (a) the endorsement of instruments for collection or deposit in the
ordinary course of business;

          (b) investments in: (i) short-term direct obligations of the United
States Government, (ii negotiable certificates of deposit issued by any bank
satisfactory to Lender, payable to the order of a Borrower or to bearer and
delivered to Lender, and (ii commercial paper rated A1 or P1; provided, that, as
                                                              --------  ----
to any of the foregoing, unless waived in writing by Lender, Borrowers shall
take such actions as are deemed necessary by Lender to perfect the security
interest of Lender in such investments,

          (c) short-term intercompany loans by one Borrower to another Borrower
in the ordinary course of business, not to exceed $5,000,000 in principal amount
owed by any one Borrower for such loans made by another Borrower, or $30,000,000
in the aggregate at any time outstanding for all intercompany loans between
Borrowers on a combined basis,

          (d) Permitted Acquisitions, and

          (e) the loans, advances and guarantees set forth on Schedule 9.10
hereto; provided, that, as to such loans, advances and guarantees, (i) Borrowers
        --------  ----
shall not, directly or indirectly, (A)

                                       46
<PAGE>

amend, modify, alter or change the terms of such loans, advances or guarantees
or any agreement, document or instrument related thereto, or (B) as to such
guarantees, redeem, retire, defease, purchase or otherwise acquire the
obligations arising pursuant to such guarantees, or set aside or otherwise
deposit or invest any sums for such purpose, and (ii Borrowers shall furnish to
Lender all notices or demands in connection with such loans, advances or
guarantees or other indebtedness subject to such guarantees either received by a
Borrower or on its behalf, promptly after the receipt thereof, or sent by a
Borrower or on its behalf, concurrently with the sending thereof, as the case
may be.

     9.11 Dividends and Redemptions.  No Borrower shall, directly or
          -------------------------
indirectly, declare or pay any dividends on account of any shares of class of
Capital Stock of any Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing; except that CG&Pet may, out of
legally available funds therefor, repurchase from non-affiliated Persons, for
consideration consisting solely of cash, and hold as treasury stock, its
publicly traded common stock; provided, that: (i) the amount from time to time
                              --------  ----
paid by CG&Pet in respect of all such permitted repurchases does not exceed
$50,000,000 in the aggregate for the period commencing the date hereof and
ending on the termination or non-renewal of this Agreement; (ii) no Event of
Default, or event which with notice or passage of time or both would constitute
an Event of Default, exists or has occurred and is continuing at the time of any
such repurchase or would result therefrom; and (iii) Excess Availability, as
determined by Lender, shall not be less than $20,000,000 after giving effect to
each payment in respect of such permitted repurchases.

     9.12 Transactions with Affiliates.  No Borrower shall, directly or
          ----------------------------
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director, agent or other person
affiliated with any Borrower, except in the ordinary course of and pursuant to
the reasonable requirements of such Borrower's business and upon fair and
reasonable terms no less favorable to such Borrower than such Borrower would
obtain in a comparable arm's length transaction with an unaffiliated person or
(b) make any payments of management, consulting or other fees for management or
similar services, or of any indebtedness owing to any officer, employee,
shareholder, director or other person affiliated with any Borrower except
reasonable compensation to officers, employees and directors for services
rendered to such Borrower in the ordinary course of business.

     9.13 Additional Bank Accounts.  No Borrower shall, directly or indirectly,
          ------------------------
open, establish or maintain any deposit account, investment account or any other
account with any bank or other financial institution, other than the Blocked
Accounts and the accounts set forth in Schedule 8.10 hereto, except:  (a) as to
any new or additional Blocked Accounts and other such new or additional accounts
which contain any Collateral or proceeds thereof, with the prior written consent
of Lender and subject to such conditions thereto as Lender may establish and (b)
as to

                                       47
<PAGE>

any accounts used by any Borrower to make payments of payroll, taxes or other
obligations to third parties, after prior written notice to Lender.

     9.14 Compliance with ERISA.
          ---------------------

          (a) No Borrower shall, with respect to any "employee benefit plans"
maintained by any Borrower or any of its ERISA Affiliates: (i) terminate any of
such employee benefit plans so as to incur any liability to the Pension Benefit
Guaranty Corporation established pursuant to ERISA, (ii) allow or suffer to
exist any prohibited transaction involving any of such employee benefit plans or
any trust created thereunder which would subject any Borrower or any such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA, (iii) fail to pay to any such
employee benefit plan any contribution which it is obligated to pay under
Section 302 of ERISA, Section 412 of the Code or the terms of such plan, (iv)
allow or suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such employee benefit plan, (v) allow or suffer to
exist any occurrence of a reportable event or any other event or condition which
presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any such employee benefit plan that is a single employer plan,
which termination could result in any liability to the Pension Benefit Guaranty
Corporation or (vi) incur any withdrawal liability with respect to any
multiemployer pension plan.

          (b) As used in this Section 9.14, the terms "employee benefit plans",
"accumulated funding deficiency" and "reportable event" shall have the
respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Section 4975 of the Code
and ERISA.

     9.15 Consolidated Net Worth.  Borrowers shall, at all times, on a
          ----------------------
consolidated basis for CG&Pet and its subsidiaries, maintain Consolidated Net
Worth of not less than $250,000,000.

     9.16 Costs and Expenses.  Borrowers shall pay to Lender on demand all
          ------------------
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including:  (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) all insurance premiums,
environmental audits, surveys, assessments, engineering reports and inspections,
appraisal fees and search fees; (c) costs and expenses of remitting loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining the Blocked Accounts, together with Lender's customary charges and
fees with respect thereto; (d) charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations; (e) costs and
expenses of preserving and protecting the Collateral; (f) costs and expenses
paid or

                                       48
<PAGE>

incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (g)
all out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Lender during the course of periodic field examinations of the
Collateral and Borrowers' and any Obligors' operations; and (h) the reasonable
fees and disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing.

     9.17 Further Assurances.  (a) At the request of Lender at any time and
          ------------------
from time to time, each Borrower shall, at its expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements.  Lender may at any time and from time to time request a certificate
from an officer of any or all Borrowers (as Lender shall determine) representing
that all conditions precedent to the making of Loans and providing Letter of
Credit Accommodations contained herein are satisfied.  In the event of such
request by Lender, Lender may, at its option, cease to make any further Loans or
provide any further Letter of Credit Accommodations until Lender has received
such certificate(s) and, in addition, Lender has determined that such conditions
are satisfied.  Where permitted by law, each Borrower hereby authorizes Lender
to execute and file one or more UCC financing statements signed only by Lender.

 SECTION 10.  EVENTS OF DEFAULT AND REMEDIES
              ------------------------------

     10.1 Events of Default.  The occurrence or existence of any one or more of
          -----------------
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":

          (a) (i) any Borrower fails to pay any of its Obligations after the
same becomes due and payable or (ii) any Borrower or any Obligor fails to
perform any of the terms, covenants, conditions or provisions contained in this
Agreement or any of the other Financing Agreements other than as described in
Section 10.1(a)(i) and such failure shall continue for fifteen (15) days;
provided, that, such fifteen (15) day period shall not apply in the case of: (A)
--------  ----
any failure to observe any such term, covenant, condition or provision which is
not capable of being cured at all or within such fifteen (15) day period or
which has been the subject of a prior failure within a six (6) month period or
(B) an intentional breach by any Borrower or any Obligor of any such term,
covenant, condition or provision, or provisions contained in Section 6.3, 6.4,
6.6, 7.1, 7.1, 7.3, 7.8, 9.1, 9.2, 9.5, 9.7, 9.8, 9.9, 9.10, 9.11, 9.12 or 9.13
of this Agreement or any covenants or agreements covering substantially the same
matter as such sections in any of the other Financing Agreements;

                                       49
<PAGE>

          (b) any representation, warranty or statement of fact made by any
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;

          (c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;

          (d) any judgment for the payment of money is rendered against any
Borrower or any Obligor in excess of $250,000 in any one case or in excess of
$500,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against any
Borrower or any Obligor or any of their assets;

          (e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or any Borrower or any Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;

          (f) any Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;

          (g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within
forty-five (45) days after the date of its filing or any Borrower or any Obligor
shall file any answer admitting or not contesting such petition or application
or indicates its consent to, acquiescence in or approval of, any such action or
proceeding or the relief requested is granted sooner;

          (h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or any Obligor or for all or any part of its
property; or

          (i) any default by any Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other

                                       50
<PAGE>

than Lender, in any case in an amount in excess of $100,000, which default
continues for more than the applicable cure period, if any, with respect
thereto, or any default by any Borrower or any Obligor under any material
contract, lease, license or other obligation to any person other than Lender,
which default continues for more than the applicable cure period, if any, with
respect thereto;

          (j) any change in the controlling ownership of CG&Pet or any change in
the ownership of any other Borrower or Guarantor, unless Lender shall have
provided its prior written consent thereto;

          (k) the indictment or threatened indictment of any Borrower or any
Obligor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against any Borrower or any Obligor, pursuant
to which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of such Borrower or such Obligor;

          (l) there shall be a material adverse change in the business, assets
or prospects of any Borrower or any Obligor after the date hereof; or

          (m) there shall be an event of default under any of the other
Financing Agreements.

     10.2 Remedies.
          --------

          (a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by any Borrower or any Obligor, except as such notice or consent
is expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by any Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against any Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.

          (b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
                                     --------  ----
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing,

                                       51
<PAGE>

manufacturing and repair of all or any portion of the Collateral, (ii require
any or all Borrowers, at Borrowers' expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender, (iv collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (v) remove any or all of the Collateral from any
premises on or in which the same may be located for the purpose of effecting the
sale, foreclosure or other disposition thereof or for any other purpose, (vi
sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including entering into contracts with respect thereto, public or
private sales at any exchange, broker's board, at any office of Lender or
elsewhere) at such prices or terms as Lender may deem reasonable, for cash, upon
credit or for future delivery, with the Lender having the right to purchase the
whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of Borrowers, which
right or equity of redemption is hereby expressly waived and released by each
Borrower and/or (vi terminate this Agreement. If any of the Collateral is sold
or leased by Lender upon credit terms or for future delivery, the Obligations
shall not be reduced as a result thereof until payment therefor is finally
collected by Lender. If notice of disposition of Collateral is required by law,
five (5) days prior notice by Lender to Borrowers (or to CG&Pet on behalf of
Borrowers) designating the time and place of any public sale or the time after
which any private sale or other intended disposition of Collateral is to be
made, shall be deemed to be reasonable notice thereof and each Borrower waives
any other notice. In the event Lender institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of prejudgment remedy,
each Borrower waives the posting of any bond which might otherwise be required.

          (c) Lender may apply the cash proceeds of Collateral actually received
by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrowers shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including reasonable attorneys' fees and legal expenses.

          (d) Without limiting the foregoing, upon the occurrence of an Event of
Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations to any or
all Borrowers or reduce the lending formulas or amounts of Revolving Loans and
Letter of Credit Accommodations available to any or all Borrowers and/or (ii
terminate any provision of this Agreement providing for any future Loans or
Letter of Credit Accommodations to be made by Lender to any or all Borrowers.

 SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
             AND CONSENTS; GOVERNING LAW
             --------------------------------

     11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
          ---------------------------------------------------------------------

                                       52
<PAGE>

          (a) The validity, interpretation and enforcement of this Agreement and
the other Financing Agreements and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of California (without
giving effect to principles of conflicts of law).

          (b) Each Borrower and Lender irrevocably consents and submits to the
non-exclusive jurisdiction of the Superior Court of Los Angeles County,
California and the United States District Court for the Central District of
California and waive any objection based on venue or forum non conveniens with
                                                     ----- --- ----------
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against any or all
Borrowers or its or their property in the courts of any other jurisdiction which
Lender deems necessary or appropriate in order to realize on the Collateral or
to otherwise enforce its rights against any or all Borrowers or its or their
property).

          (c) EACH BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH BORROWER AND
LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY
BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

          (d) Lender shall not have any liability to any Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by any Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and non-
appealable judgment binding on Lender, that the losses were the result of acts
or omissions constituting gross negligence or willful misconduct of Lender. In
any such litigation, Lender shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement.

                                       53
<PAGE>

     11.2 Waiver of Notices.  Each Borrower hereby expressly waives demand,
          -----------------
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on any Borrower which Lender may elect to give shall entitle such
Borrower or any other Borrower to any other or further notice or demand in the
same, similar or other circumstances.

     11.3 Amendments and Waivers.  Neither this Agreement nor any provision
          ----------------------
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of each
Borrower to be bound thereby.  Lender shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its rights,
powers and/or remedies unless such waiver shall be in writing and signed by an
authorized officer of Lender.  Any such waiver shall be enforceable only to the
extent specifically set forth therein.  A waiver by Lender of any right, power
and/or remedy on any one occasion shall not be construed as a bar to or waiver
of any such right, power and/or remedy which Lender would otherwise have on any
future occasion, whether similar in kind or otherwise.

     11.4 Waiver of Counterclaims.  Each Borrower waives all rights to
          -----------------------
interpose any claims, deductions, setoffs or counterclaims of any nature (other
then compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.

     11.5 Indemnification.  Borrowers shall indemnify and hold Lender, and its
          ---------------
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the reasonable fees and
expenses of counsel.  To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public policy, Borrowers shall pay the maximum portion which they are
permitted to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section.  The foregoing indemnity shall survive the payment
of the Obligations and the termination or non-renewal of this Agreement.

 SECTION 12.   TERM OF AGREEMENT; MISCELLANEOUS
               --------------------------------

                                       54
<PAGE>

     12.1 Term.
          ----

          (a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page thereof and shall continue
in full force and effect for a term ending on July 12, 2002 (the "Renewal
Date"), and from year to year thereafter, unless sooner terminated pursuant to
the terms hereof. Upon the effective date of termination or non-renewal of the
Financing Agreements, Borrowers shall pay to Lender, in full, all outstanding
and unpaid Obligations and shall furnish cash collateral to Lender in such
amounts as Lender determines are reasonably necessary to secure Lender from
loss, cost, damage or expense, including reasonable attorneys' fees and legal
expenses, in connection with any contingent Obligations, including issued and
outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Lender has not yet
received final and indefeasible payment. Such payments in respect of the
Obligations and cash collateral shall be remitted by wire transfer in Federal
funds to such bank account of Lender, as Lender may, in its discretion,
designate in writing to Borrowers for such purpose. Interest shall be due until
and including the next business day, if the amounts so paid by Borrowers to the
bank account designated by Lender are received in such bank account later than
12:00 noon, Los Angeles, California time.

          (b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge any Borrower of its respective duties, obligations
and covenants under this Agreement or the other Financing Agreements until all
Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender hereunder, under the other Financing Agreements and applicable law, shall
remain in effect until all such Obligations have been fully and finally
discharged and paid.

          (c) If for any reason this Agreement is terminated prior to the end of
the then current term or renewal term of this Agreement, as a fee for any such
termination by Borrowers, or, in the event of termination by Lender by reason of
an Event of Default, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender's lost profits as a result thereof, Borrowers
agree to pay to Lender, upon the effective date of such termination, an early
termination fee in the amount set forth below if such termination is effective
in the period indicated:

--------------------------------------------------------------------------------
                       Amount                    Period
--------------------------------------------------------------------------------
                      $187,500           From the date hereof  to, but not
                                         including, the Renewal Date, or, if
                                         later, the last day of the then-current
                                         renewal year.
--------------------------------------------------------------------------------

Such early termination fee is the agreed upon fee for any early termination by
Borrowers, or, in the event of termination by reason of an Event of Default,
shall be presumed to be the amount of lost profits sustained by Lender as a
result of such early termination and Borrowers agree that it

                                       55
<PAGE>

is reasonable under the circumstances currently existing. In addition, Lender
shall be entitled to such early termination fee upon the occurrence of any Event
of Default described in Sections 10.1(g) and 10.1(h) hereof, even if Lender does
not exercise its right to terminate this Agreement, but elects, at its option,
to provide financing to any or all Borrowers or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.

     12.2 Notices.  All notices, requests and demands hereunder shall be in
          -------
writing and (a) made to Lender at its address set forth below and to any or all
Borrowers c/o CGPet at its chief executive office set forth below, or to such
other address as either party may designate by written notice to the other in
accordance with this provision, and (b) deemed to have been given or made: if
delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next business day, one (1) business day after sending; and if by
certified mail, return receipt requested, five (5) days after mailing.

     12.3 Partial Invalidity.  If any provision of this Agreement is held to be
          ------------------
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.

     12.4 Successors.  This Agreement, the other Financing Agreements and any
          ----------
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrowers and their respective
successors and assigns, except that no Borrower may assign its rights under this
Agreement, the other Financing Agreements and any other document referred to
herein or therein without the prior written consent of Lender.  Lender may,
after notice to Borrowers (or CG&Pet on behalf of Borrowers), assign its rights
and delegate its obligations under this Agreement and the other Financing
Agreements and further may assign, or sell participations in, all or any part of
the Loans, the Letter of Credit Accommodations or any other interest herein to
another financial institution or other person, in which event, the assignee or
participant shall have, to the extent of such assignment or participation, the
same rights and benefits as it would have if it were the Lender hereunder,
except as otherwise provided by the terms of such assignment or participation.

     12.5 Entire Agreement.  This Agreement, the other Financing Agreements,
          ----------------
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.  In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.

                                       56
<PAGE>

 SECTION 13.  ACKNOWLEDGMENT AND RESTATEMENT
              ------------------------------

     13.1 Existing Obligations.  Borrowers hereby, jointly and severally,
          --------------------
acknowledge, confirm and agree that Borrowers are indebted to Lender for loans
and advances to Borrowers under the Existing Agreements, as of the close of
business on November 30, 2000 in the aggregate principal amount of $120,774,042,
together with all interest accrued and accruing thereon (to the extent
applicable), and all fees, costs, expenses and other charges relating thereto,
all of which are unconditionally owing by Borrower to Lender, without offset,
defense or counterclaim of any kind, nature or description whatsoever.

     13.2 Acknowledgment of Security Interests.
          ------------------------------------

          (a) Each Borrower hereby acknowledges, confirms and agrees that Lender
has and shall continue to have a security interest in and lien upon the
Collateral heretofore granted to Lender pursuant to the Existing Agreements to
secure the Obligations, as well as any Collateral granted under this Agreement
or under any of the other Financing Agreements or otherwise granted to or held
by any Lender.

          (b) The liens and security interests of Lender in the Collateral shall
be deemed to be continuously granted and perfected from the earliest date of the
granting and perfection of such liens and security interests, whether under the
Existing Agreements, this Agreement or any of the other Financing Agreements.

     13.3 Existing Agreements.  Each Borrower hereby acknowledges, confirms and
          -------------------
agrees that: (a) each of the Existing Agreements has been duly executed and
delivered by such Borrower and is in full force and effect as of the date hereof
and (b) the agreements and obligations of such Borrower contained in the
Existing Agreements constitute the legal, valid and binding obligations of such
Borrower enforceable against it in accordance with their respective terms and
such Borrower has no valid defense to the enforcement of such obligations and
(c) Lender is entitled to all of the rights and remedies provided for in the
Existing Agreements.

     13.4 Restatement.
          -----------

          (a) Except as otherwise stated in Section 13.2 hereof and this Section
13.4, as of the date hereof, the terms, conditions, agreements, covenants,
representations and warranties set forth in the Existing Agreements are hereby
amended and restated in their entirety, and as so amended and restated, replaced
and superseded, by the terms, conditions, agreements, covenants, representations
and warranties set forth in this Agreement and the other Financing Agreements,
except that nothing herein or in the other Financing Agreements shall impair or
------
adversely affect the continuation of the joint and several liability of
Borrowers for the Obligations heretofore granted, pledged and/or assigned to
Lender.  The amendment and restatement contained herein shall not, in any
manner, be construed to constitute payment of, or impair, limit, cancel or
extinguish, or constitute a novation in respect of, the indebtedness and other
obligations and liabilities of Borrowers evidenced by or arising under the
Existing Agreements, and the liens and

                                       57
<PAGE>

security interests securing such indebtedness and other obligations and
liabilities, which shall not in any manner be impaired, limited, terminated,
waived or released.

          (b) The principal amount of the loans and letter of credit
accommodations outstanding as of the date hereof under the Existing Agreements
shall be allocated to the Loans hereunder in such manner and in such amounts as
Lender shall determine.

               [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       58
<PAGE>

    IN WITNESS WHEREOF, Lender and Borrowers have caused these presents to be
duly executed as of the day and year first above written.

LENDER                              BORROWERS
------                              ---------

CONGRESS FINANCIAL                  CENTRAL GARDEN & PET COMPANY
CORPORATION (WESTERN)

By: /s/ Gary Whitaker               By: /s/ Lee D. Hines, Jr.
   -----------------------             -------------------------------

Title: Vice President               Title: Chief Financial Officer
      --------------------                ----------------------------

Address:                            Chief Executive Office:
--------                            -----------------------
251 South Lake Avenue               3697 Mount Diablo Boulevard
9th Floor                           Suite 310
Pasadena, California 91101          Lafayette, California 94549

                                    MATTHEWS REDWOOD AND   NURSERY SUPPLY, INC.
                                    ------------------------------------------

                                    By: /s/ Lee D. Hines, Jr.
                                       -------------------------------

                                    Title: Vice President
                                          ----------------------------

                                    Chief Executive Office:
                                    ----------------------
                                    6665 Hardaway Road
                                    Stockton, California 95215

                       [SIGNATURES CONTINUE ON NEXT PAGE]

                                       59
<PAGE>

                   [SIGNATURES CONTINUED FROM PREVIOUS PAGE]

                                    FOUR PAWS PRODUCTS, LTD.

                                    By: /s/ Lee D. Hines, Jr.
                                       -------------------------------

                                    Title: Vice President
                                          ----------------------------

                                    Chief Executive Office:
                                    ----------------------
                                    50 Wireless Boulevard
                                    Hauppauge, New York 11788

                                    EZELL NURSERY SUPPLY, INC.

                                    By: /s/ Lee D. Hines, Jr.
                                       -------------------------------

                                    Title: Vice President
                                          ----------------------------

                                    Chief Executive Office:
                                    ----------------------
                                    15620 Shoemaker Drive
                                    Santa Fe Springs, California 90670

                                    KAYTEE PRODUCTS INCORPORATED

                                    By: /s/ Lee D. Hines, Jr.
                                       -------------------------------

                                    Title: Vice President
                                          ----------------------------

                                    Chief Executive Office:
                                    ----------------------
                                    521 Clay Street
                                    Chilton, Wisconsin 53014

                   [SIGNATURES CONTINUED FROM PREVIOUS PAGE]

                                       60
<PAGE>

                   [SIGNATURES CONTINUED FROM PREVIOUS PAGE]

                                    T.F.H. PUBLICATIONS, INC.

                                    By: /s/ Lee D. Hines, Jr.
                                       ------------------------------

                                    Title: Vice President
                                          ---------------------------

                                    Chief Executive Office:
                                    ----------------------
                                    1 T.F.H. Plaza
                                    3rd Avenue and Union Avenue
                                    Neptune, New Jersey 07753

                                    NORCAL POTTERY PRODUCTS, INC.

                                    By: /s/ Lee D. Hines, Jr.
                                       ------------------------------

                                    Title: Vice President
                                          ---------------------------

                                    Chief Executive Office:
                                    ----------------------
                                    2091 Williams Street
                                    San Leandro, California 94577

                                    WELLMARK INTERNATIONAL

                                    By: /s/ Lee D. Hines, Jr.
                                       ------------------------------

                                    Title: Vice President
                                          ---------------------------

                                    Chief Executive Office:
                                    ----------------------
                                    1100 East Woodfield Road
                                    Suite 500
                                    Schaumburg, Illinois 60173

                                       61<PAGE>

                                                                     Exhibit 4.3
                                                                  Execution Copy

THE SECURITIES REPRESENTED BY THIS WARRANT CERTIFICATE AND THE SHARES OF STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
                                                                   ---
SECURITIES LAWS OF A STATE OR OTHER JURISDICTION AND MAY NOT UNDER ANY
CIRCUMSTANCES BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF (OTHER THAN TO AN
AFFILIATE OR AS OTHERWISE PERMITTED BY THIS WARRANT CERTIFICATE PURSUANT TO
WHICH THEY WERE ISSUED) EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, OR
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER
THE ACT RELATING TO THE DISPOSITION OF SECURITIES) TOGETHER WITH AN OPINION OF
COUNSEL SATISFACTORY TO INCARA PHARMACEUTICALS CORPORATION THAT REGISTRATION IS
NOT REQUIRED UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.

                      INCARA PHARMACEUTICALS CORPORATION

                          WARRANT TO PURCHASE SHARES
                          OF SERIES B PREFERRED STOCK

          THIS CERTIFIES THAT, for value received, Elan International Services,
Ltd., a Bermuda exempted limited liability company, or its permitted transferees
and successors as provided herein (each, a "Holder"), is entitled to subscribe
                                            ------
for and purchase up to 22,191 shares, as adjusted pursuant to Section 4 (the
"Shares"), of the fully paid and nonassessable Series B Convertible Preferred
 ------
Stock, par value U.S.$0.01 per share (the "Series B Preferred Stock"), of Incara
                                           ------------------------
Pharmaceuticals Corporation, a Delaware corporation (the "Company"), at the
                                                          -------
price of U.S.$72.12 per share (such price, and such other prices that shall
result from time to time, from the adjustments specified in Section 4, the
"Warrant Price"), subject to the provisions and upon the terms and conditions
 -------------
hereinafter set forth.

          1.   Term. Subject to the limitations set forth in Sections 3 and 4,
               ----
the purchase right represented by this Warrant is exercisable, in whole or in
part, at any time, and from time to time, from and after the date hereof and
until 5:00 p.m. Eastern Standard Time, December 21, 2005.  To the extent not
exercised at 5:00 p.m. Eastern Standard Time on December 21, 2005, this Warrant
shall completely and automatically terminate and expire, and thereafter it shall
be of no force or effect.
<PAGE>

          2.   Method of Exercise; Payment; Issuance of New Warrant. (a) The
               ----------------------------------------------------
purchase right represented by this Warrant may be exercised by the Holder, in
whole or in part and from time to time, by the surrender of this Warrant (with
the notice of exercise form attached hereto as Annex A duly executed) at the
                                               -------
principal office of the Company and by the payment to the Company of an amount,
at the option of the Holder, (i) in cash or other immediately available funds,
(ii) by the surrender of this Warrant (or a portion hereof) in accordance with
the terms hereof but without payment in cash (a "Cashless Exercise") or (iii)
                                                 -----------------
with any combination of (i) and (ii). The number of shares of Series B Preferred
Stock issuable in respect of a Cashless Exercise shall be computed using the
following formula:

                    X = Y (A-B)
                        -------
                           A

     Where:                        X =  the number of shares of Series B
                              Preferred Stock to be issued to the Holder in
                              respect of a Cashless Exercise

                                   Y =  the number of shares of Series B
                              Preferred Stock purchasable under the Warrant or,
                              if only a portion of the Warrant is being
                              exercised, the portion of the Warrant being
                              canceled in connection with such Cashless Exercise
                              (at the date of such calculation)

                                   A =  the Fair Market Value (as defined below)
                              of one share of the Company's Series B Preferred
                              Stock (at the date of such calculation)

                                   B =  Warrant Price (as adjusted to the date
                              of such calculation)

          The "Fair Market Value" of one share of Series B Preferred Stock shall
               -----------------
be equal to 10 times the closing sale price for the Company's common stock the
day prior to exercise, adjusted appropriately to reflect the then-current
conversion ratio of the Series B Preferred Stock pursuant to the Certificate of
Incorporation of the Company (which conversion ratio is equal to 10 shares of
common stock of the Company for each share of Series B Preferred Stock on the
date hereof); provided, however, that if the Company's common stock is no longer
traded on a securities exchange, the Nasdaq National Market or the Nasdaq
SmallCap Market the Fair Market Value shall be determined  by the Company's
Board of Directors in good faith and reasonably agreed to by the holders of the
Series B Preferred Stock.

          (b)  The persons or entities in whose name(s) any certificate(s)
representing Shares shall be issuable upon exercise of this Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the Shares represented thereby (and such
Shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is properly exercised and
full payment for the Shares acquired pursuant to such exercise is made. Upon any
exercise of the rights represented by this Warrant, certificates for the Shares
purchased

                                       2
<PAGE>

shall be delivered to the holder hereof as soon as possible and in any event
within 30 days of receipt of such notice and payment, and unless this Warrant
has been fully exercised or expired, a new Warrant representing the portion of
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such 30-day period.

          3.   Stock Fully Paid, Reservation of Shares. All Shares that may be
               ---------------------------------------
issued upon the exercise of this Warrant will, upon issuance, be duly and
validly authorized and issued, fully paid and nonassessable, and will be free
from all transfer taxes, liens and charges with respect to the issue thereof and
assuming payment of the Warrant Price for all Shares so purchased, legally and
validly owned by the Holder. During the period within which this Warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of the issue upon the exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of Series B Preferred Stock to provide
for the exercise of the rights represented by this Warrant.

          4.   Adjustment of Warrant Price and Number of Shares. The number and
               ------------------------------------------------
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to the adjustment from time to time upon the occurrence
of certain events, as follows:

          (a)  Reclassification, Etc.  In case of (i) any reclassification,
               ---------------------
reorganization, change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value) into other shares or securities of the Company, or (ii) any
consolidation of the Company with or into another entity (other than a merger or
consolidation with another entity in which the Company is the acquiring and the
surviving entity and that does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or (iii) any
sale of all or substantially all the assets of the Company, then the Company, or
such successor or purchasing entity, as the case may be, shall duly execute and
deliver to the holder of this Warrant a new Warrant or a supplement hereto (in
form and substance reasonably satisfactory to the holder of this Warrant), so
that the Holder shall have the right to receive, at a total purchase price not
to exceed that payable upon the exercise of the unexercised portion of this
Warrant, and in lieu of the shares of Series B Preferred Stock theretofore
issuable upon the exercise of this Warrant, the kind and amount of shares of
stock and other securities, receivable upon such reclassification,
reorganization, change or conversion by a holder of the number of shares of
Series B Preferred Stock then purchasable under this Warrant. Such new Warrant
shall provide for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4. The provisions of
this Section 4(a) shall similarly attach to successive reclassifications,
reorganizations, changes, and conversions.

          (b)  Splits; Subdivisions. (i) If at any time prior to the earlier of
               --------------------
     the exercise or expiration hereof the Company shall fix a record date for
     the effectuation of a split or subdivision of the outstanding shares of
     Series B Preferred Stock or the determination of holders of Series B
     Preferred Stock entitled to receive a dividend or other distribution
     payable in additional shares of Series B Preferred Stock or other
     securities or property or rights convertible into, or entitling the holder
     thereof to receive directly

                                       3
<PAGE>

     or indirectly, any of the foregoing (hereinafter referred to as "Series B
                                                                      --------
     Stock Equivalents") without payment of any consideration by such holder for
     -----------------
     the additional shares of Series B Preferred Stock or the Series B Preferred
     Stock Equivalents (including the additional shares of Series B Preferred
     Stock issuable upon conversion or exercise thereof) then, this Warrant
     shall be adjusted for, in addition to the number of shares of the Series B
     Preferred Stock otherwise deliverable upon exercise of this Warrant, and
     without adjustment to the Warrant Price, the amount of such additional
     shares of Series B Preferred Stock and any Series B Preferred Stock
     Equivalents that the holder hereof would have received or become entitled
     to receive on the same terms and conditions as if such holder had been a
     holder of record of such Series B Preferred Stock as shall have been
     deliverable immediately prior to such record date pursuant to the terms of
     this Section 4; or

          (ii) If the Company at any time during which this Warrant remains
     outstanding and unexpired shall subdivide or combine its Series B Preferred
     Stock, (A) in the case of a subdivision, the Warrant Price shall be
     proportionately decreased and the number of Shares purchasable hereunder
     shall be proportionately increased, and (B) in the case of a combination,
     the Warrant Price shall be proportionately increased and the number of
     Shares purchasable hereunder shall be proportionately decreased.

               (iii) The following provisions shall apply for purposes of this
     Section 4:

               (A)   the aggregate maximum number of shares of Series B
          Preferred Stock or other securities or property deliverable upon
          conversion or exercise of Series B Preferred Stock Equivalents
          (assuming the satisfaction of any conditions to convertibility or
          exercisability, including, without limitation, the passage of time,
          but without taking into account potential antidilution adjustments)
          shall be deemed to have been issued at the time such Series B
          Preferred Stock Equivalents were issued;

               (B)  in the event of any change in the number of shares of Series
          B Preferred Stock deliverable or in the consideration payable to the
          Company upon conversion or exercise of such Series B Preferred Stock
          Equivalents including, but not limited to, a change resulting from the
          antidilution provisions thereof, the Warrant Price, to the extent in
          any way affected by or computed using such Series B Preferred Stock
          Equivalents, shall be recomputed to reflect such change, but no
          further adjustment shall be made for the actual issuance of Series B
          Preferred Stock or any payment of such consideration upon the exercise
          of any such options or rights or the conversion or exchange of such
          securities; and

               (C)  upon the termination or expiration of the convertibility or
          exercisability of any such Series B Preferred Stock Equivalents, the
          Warrant Price, to the extent in any way affected by or computed using
          such Series B Preferred Stock Equivalents, shall be recomputed to
          reflect the issuance of only the

                                       4
<PAGE>

          number of shares of Series B Preferred Stock (and Series B Preferred
          Stock Equivalents which remain convertible or exercisable) actually
          issued upon the conversion or exercise of such Series B Preferred
          Stock Equivalents.

          (c)  No Impairment. The Company will not, by amendment of its
               -------------
Certificate of Incorporation or bylaws or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder against impairment.

          (d)  Notice of Adjustments. Whenever the Warrant Price or the number
               ---------------------
of Shares purchasable hereunder shall be adjusted pursuant to this Section 4,
the Company shall prepare a certificate setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated.  Such certificate shall be signed by its
chief financial officer and shall be delivered to the Holder.

          (e)  Fractional Shares. No fractional shares of Series B Preferred
               -----------------
Stock will be issued in connection with any exercise hereunder, but in lieu of
such fractional shares the Company shall make a cash payment therefor based on
the fair market value of the Series B Preferred Stock on the date of exercise as
reasonably determined in good faith by the Company's Board of Directors.

          (f)  Cumulative Adjustments. No adjustment in the Warrant Price shall
               ----------------------
be required under this Section 4 until cumulative adjustments result in a
concomitant change of 1% or more of the Warrant Price or in the number of shares
of Series B Preferred Stock purchasable upon exercise of this Warrant as in
effect prior to the last such adjustment; provided, however, that any adjustment
                                          --------  -------
that by reason of this Section 4 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.  All calculations
under this Section 4 shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be.

          5.   Compliance with Securities Act; Disposition of Warrant or Shares
               ----------------------------------------------------------------
of Series B Preferred Stock.
---------------------------

          (a)  The Holder, by acceptance hereof, agrees that this Warrant and
the Shares to be issued upon exercise hereof are being acquired for investment
and that such holder will not offer, sell or otherwise dispose of this Warrant
or any Shares to be issued upon exercise hereof except under circumstances which
will not result in a violation of applicable securities laws.  Upon exercise of
this Warrant, unless the Shares being acquired are registered under the
Securities Act of 1933, as amended (the "Act"), or an exemption from the
                                         ---
registration requirements of such Act is available, the Holder shall confirm in
writing, by executing an instrument in form reasonably satisfactory to the
Company, that the Shares so purchased are being acquired for investment and not
with a view toward distribution or resale. This Warrant

                                       5
<PAGE>

and all Shares issued upon exercise of this Warrant (unless registered under the
Act) shall be stamped or imprinted with a legend in substantially the following
form:

     "THE SECURITIES REPRESENTED BY THIS WARRANT CERTIFICATE AND THE
     SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN ACQUIRED
     FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
     ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY SECURITIES LAWS OF A
                                   ---
     STATE OR OTHER JURISDICTION AND MAY NOT UNDER ANY CIRCUMSTANCES
     BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF (OTHER THAN TO AN
     AFFILIATE OR AS OTHERWISE PERMITTED BY THIS WARRANT CERTIFICATE
     PURSUANT TO WHICH THEY WERE ISSUED) EXCEPT PURSUANT TO (i) AN
     EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE
     STATE SECURITIES OR BLUE SKY LAWS, OR (ii) TO THE EXTENT
     APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE
     ACT RELATING TO THE DISPOSITION OF SECURITIES) TOGETHER WITH AN
     OPINION OF COUNSEL SATISFACTORY TO INCARA PHARMACEUTICALS
     CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR
     APPLICABLE STATE SECURITIES LAWS."

          (b)

               (i)   This Warrant may be transferred or assigned, in whole or in
     part, by EIS to its affiliates and subsidiaries, including any special
     purpose financing or similar vehicle affiliate. Other than as set forth in
     the preceding sentence, this Warrant may not be transferred or assigned by
     either party without the prior written consent of the other. Subject to the
     foregoing, this Warrant and all of the provisions hereof shall be binding
     upon and inure to the benefit of the parties hereto and their respective
     successors and permitted assigns; provided, however, that the transferor
                                       --------  -------
     and the Company shall continue to be liable and obligated for their
     respective obligations hereunder after any such assignment.

               (ii)  With respect to any offer, sale or other disposition of
     this Warrant or any Shares acquired pursuant to the exercise of this
     Warrant prior to registration of such Shares, the Holder shall give written
     notice to the Company prior thereto, describing briefly the manner thereof,
     together with a written opinion of such Holder's counsel, if requested by
     the Company, to the effect that such offer, sale or other disposition may
     be effected without registration or qualification (under the Securities Act
     as then in effect or any federal or state law then in effect) of this
     Warrant or such Shares and indicating whether or not under the Act
     certificates for this Warrant or such Shares to be sold or otherwise
     disposed of require any restrictive legend as to applicable restrictions on
     transferability in order to ensure compliance with the Act. Promptly upon

                                       6
<PAGE>

     receiving such written notice and reasonably satisfactory opinion, if so
     requested, the Company, as promptly as practicable, shall notify such
     Holder that such Holder may sell or otherwise dispose of this Warrant or
     such Shares, all in accordance with the terms of the notice delivered to
     the Company. Each certificate representing this Warrant or the Shares thus
     transferred shall bear a legend as to the applicable restrictions on
     transferability in order to insure compliance with the Securities Act,
     unless in the aforesaid opinion of counsel for the Holder such legend is
     not required in order to insure compliance with the Securities Act. The
     Company may issue stop transfer instructions to its transfer agent in
     connection with such restrictions.

               (iii) The shares of Series B Preferred Stock for which this
     Warrant is exercisable are entitled to the benefit of certain registration
     rights as set forth in that certain Registration Rights Agreement dated as
     of the date hereof between the Company and the initial Holder named herein.

          6.   Rights as Shareholders. No Holder, as such, shall be entitled to
               ----------------------
vote or receive dividends or be deemed the holder of Shares or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the Holder, as such, any right to vote for the election of directors
or upon any matter submitted to shareholders at any meeting thereof, or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise until this Warrant is exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.

          7.   Representations and Warranties. The Company represents and
               ------------------------------
warrants to the Holder as follows:

          (a)  The Company has all requisite corporate power and authority to
authorize and execute this Warrant and the certificates evidencing the Shares
and to perform all obligations and undertakings under this Warrant and the
certificates evidencing the Shares;

          (b)  This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms;

          (c)  The Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable; and

          (d)  The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Certificate of
Incorporation or bylaws, as amended, and do not and will not constitute a
default under, any indenture, mortgage, contract or other instrument of which
the Company is a party or by which it is bound.

          8.   Miscellaneous. (a) This Warrant may not be modified or amended,
               -------------
or any provisions hereof waived, except by written agreement of the Company and
the Holder.

                                       7
<PAGE>

          (b)  All notices, demands and requests of any kind to be delivered to
any party in connection with this Note shall be in writing and shall be deemed
to have been duly given if personally or hand delivered or if sent by an
internationally-recognized overnight delivery courier or by registered or
certified mail, return receipt requested and postage prepaid, or by facsimile
transmission addressed as follows:

     (i)  if to the Company, to:

               Incara Pharmaceuticals Corporation
               Post Office Box 14287
               3200 East Highway 54
               Cape Fear Building, Suite 300
               Research Triangle Park, North Carolina 27709
               Attention:  Chief Executive Officer
               Facsimile:  (919) 544-1245

               with a copy to:

               Wyrick Robbins Yates & Ponton LLP
               4101 Lake Boone Trail
               Suite 300
               Raleigh, North Carolina 27607
               Attention:  Larry Robbins
               Facsimile:  (919) 781-4865

     (ii) if to EIS, to:

               Elan International Services, Ltd.
               102 St. James Court
               Flatts, Smiths Parish
               Bermuda FL 04
               Attention:  Chief Executive Officer
               Facsimile:  (441) 292-2224

          with a copy to:

               Brock Silverstein LLC
               800 Third Avenue
               21/st/ Floor
               New York, New York 10022
               Attention:  Kim E. Lefkowitz
               Facsimile:  (212) 371-5500

          (c)  The Company covenants to the Holder that upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon receipt of a bond or indemnity

                                       8
<PAGE>

reasonably satisfactory to the Company, or in the case of any such mutilation
upon surrender and cancellation of such Warrant, the Company will make and
deliver a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant.

          (d)  The descriptive headings of the several sections and paragraphs
contained in this Warrant are for reference purposes only and shall not affect
in anyway the meaning or interpretation of this Warrant.

          (e)  This Warrant shall be governed by and construed in accordance
with the internal laws of the State of New York, without giving effect to the
principles of conflicts of laws.  Any dispute under this Warrant that is not
settled by mutual consent may be finally adjudicated by any federal or state
court sitting in the City, County and State of New York, and the Company
consents to the non-exclusive jurisdiction of such courts (or any appellate
court therefrom) over any such dispute. Nothing contained in this Section shall
prevent the adjudication of any dispute under this Warrant by any other state or
federal court, regardless of location, so long as such court has jurisdiction
and is located in a proper venue.

          (f)  This Warrant may be signed and delivered to the other party by a
facsimile transmission; such transmission shall be deemed a valid signature.

          (g)  Each of the parties shall be responsible for its own costs and
expenses incurred in connection with the transactions contemplated hereby.

                           [Signature page follows]

                                       9
<PAGE>

          IN WITNESS WHEREOF, the Company has executed this Warrant as of the
21st day of December, 2000

                               INCARA PHARMACEUTICALS CORPORATION

                               By: /s/ Clayton I. Duncan
                                   ---------------------
                                   Name:  Clayton I. Duncan
                                   Title:  President and Chief Executive Officer
<PAGE>

                                                                         Annex A
                                                                         -------
NOTICE OF EXERCISE
------------------

To:  Incara Pharmaceuticals Corporation

          1.   The undersigned hereby elects to purchase _______ shares of
Series B Preferred Stock of Incara Pharmaceuticals Corporation pursuant to the
terms of the attached Warrant, and tenders herewith full payment of the purchase
price of such shares, in cash or other immediately available funds.

          2.   Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or names as are
specified below:

____________________________________  (Name)

____________________________________

____________________________________  (Address)

          3.   The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.

Signature: ____________________________

Name:      ____________________________

Address:   ____________________________

           ____________________________

           ____________________________

Social Security or taxpayer identification number:

_______________________________________

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00020-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00020-of-00352.parquet"}]]