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Pethealth Inc. announced today that is has formed a strategic alliance that calls for it to be the exclusive provider of pet insurance to customers of PETCO Animal Supplies, Inc. in the United States. Pethealth's pet insurance products for dogs and cats will be available for sign up and purchase at www.petco.com next month and will be promoted in PETCO stores with signage and brochures shortly thereafter. Targeted print advertising will also be used to promote the pet insurance program to potential customers.

The agreement also calls for Pethealth to provide pet insurance to customers in Canada subject to certain conditions when PETCO enters the Canadian market. The terms of the 3-year-agreement, which is subject to renewal, were not disclosed.

The agreement with PETCO marks Pethealth's second major arrangement to offer pet insurance in the United States. Last October Pethealth announced an alliance with Reader's Digest to be the exclusive provider of pet insurance to its customers beginning in the U.S. in May 2001.

Pethealth began negotiations with PETCO after PETCO acquired selected assets of Petopia.com Inc., an Internet pet e-commerce website, late last year. Petopia and Pethealth had previously announced an agreement whereby Pethealth would sell its pet insurance products through the Petopia.com website.

"Consumer research among our customers indicates a high degree of interest in pet insurance," said Mike Woodard, PETCO's Senior Vice President, Business Development. "After talking to a number of prospective pet insurance strategic partners, we're confident that Pethealth's products and services are best suited to our customers. Through our alliance with Pethealth we will be able to offer our customers high quality, affordable pet insurance for their dogs and cats," Woodard added.

Mark Warren, President and Chief Executive Officer of Pethealth, said, "We are extremely fortunate to transfer what we started with Petopia.com into a much broader based alliance with PETCO. We expect to begin offering four of our pet insurance products online at http://www.petco.com/ next month. Shortly thereafter, the marketing effort will be expanded into PETCO stores and then more broadly through PETCO's monthly advertising circulars and other targeted print advertising. This program will be able to reach pet owners in a manner most comfortable to them, whether that be on the Internet, in PETCO stores or print advertising."

Under a separate agreement Pethealth and PETCO signed a licensing agreement whereby Pethealth will be licensed to use the PetCare name in the United States. PetCare is a registered trademark of PETCO in the U.S.

About Pethealth

Pethealth, through its subsidiary PetCare Insurance Brokers Ltd. currently offers pet insurance products to owners of dogs and cats in Canada. ING Wellington, a member of the ING Group, and CGU Elite Insurance Company, a member of CGU Group Canada Ltd., underwrites PetCare products in Canada. PetCare has the endorsement of a number of industry leaders, including veterinary medical associations representing approximately four out of five practicing veterinarians in Canada. Pethealth was founded in February 1998 and is based in Oakville, Ontario. Institutional investors include the VC Advantage Fund and Dynamic Mutual Funds, through its Dynamic Venture Opportunities Fund.

About PETCO

PETCO, based in San Diego, California, is a leading pet specialty retailer, which surpassed $1 billion in sales while opening 52 new superstores in fiscal year 2000. PETCO, which has enjoyed great success over the last several years, has been increasing its number of new store openings, with plans for 50-55 new superstores in 2001. The company currently operates 536 stores in 41 states and the District of Columbia. PETCO is a private company backed by Leonard Green & Partners, L.P., a private Los Angeles-based merchant banking firm, and Texas Pacific Group, a private investment partnership based in Fort Worth, Texas.

SOURCE: PETCO Animal Supplies, Inc.