Pethealth Inc. and Petcetera Enter into Strategic Alliance to Offer PetCare Insurance to Petcetera Customers

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OAKVILLE, ON, August 23, 2001 – PETHEALTH INC. (“Pethealth”) (CDNX: PTZ),
the parent company of PetCare Insurance Brokers Ltd.
(PetCare”), the leading provider of pet insurance to owners of dogs and cats in
Canada, announced today that it has entered into a strategic alliance with Canadian
Petcetera Limited Partnership (“Petcetera”) that calls for Pethealth to become
the exclusive provider of pet insurance to Petcetera customers in Canada.

PetCare’s pet insurance products will be available at beginning in September and will be
promoted in Petcetera stores with signage and brochures shortly thereafter. Also in
September, a direct mail campaign to members of the Petcetera Plus program will commence
with other print advertising to follow. Terms of the three-year agreement, which is
subject to renewal, were not disclosed.

The agreement with Petcetera marks another milestone in
Pethealth’s plan to establish a distribution network through top retail partners for
its pet insurance programs in North America. Earlier today, Pethealth announced a
strategic alliance to be the exclusive provider of pet insurance to Transcontinental Media
Inc (“Transcontinental Media”), Canada’s largest publisher of consumer
magazines. Under the terms of the agreement, PetCare pet insurance will be exclusively
endorsed by Transcontinental Media properties – Canadian Living and Le Bel Age. The
program is to commence in September. Last October, Pethealth announced an alliance with
The Reader’s Digest Association, Inc. (“Reader’s Digest”) to be the
exclusive provider of pet insurance to its customers in the United States. That program
commenced in May 2001. In April 2001, Pethealth also announced that it had entered into a
three-year agreement with Petco Animal Supplies, Inc. (“Petco”), a leading U.S.
pet specialty retailer. Under the agreement, PetCare Pet Insurance Programs are the
exclusive program of pet insurance offered to Petco customers in the United States. That
program commenced in June 2001.

Mark Warren, President and Chief Executive Officer of
Pethealth, said, “We are extremely pleased to be able to make this announcement with
Petcetera. Under the leadership of Dan Urbani, the company has in a very short time become
a leading pet specialty retailer in Canada. Petcetera already holds the dominant position
in Western Canada and its aggressive expansion plans for Ontario and the rest of the
country have been exciting to watch. We are delighted with the opportunity to grow with
them as they continue to launch their plans. The program begins in September when
Petcetera’s customers will be able to buy our pet insurance programs on-line, through
our call centre, or through targeted print materials, thus allowing Petcetera customers to
buy pet insurance for their dogs and cats in a manner most comfortable for them.”

The three-year agreement with Petcetera was made possible
following Pethealth’s earlier announcement that it had acquired certain assets of
PAWS Health Plans Inc. (“PAWS Health Plans”). Previously PAWS Health Plans had
been the exclusive provider of pet insurance to Petcetera customers through All-West
Insurance Services Ltd.

Dan Urbani, Founder, President and Chief Executive Officer
of Petcetera, said, “Our own research indicated that Pethealth has quickly become the
leading provider of pet insurance in Canada using an aggressive strategy not dissimilar to
our own. We believe that PetCare pet insurance programs will better meet the needs of our
customers and that Pethealth’s service standards, which we believe to be the best in
the industry, will ensure that our customers receive high quality service in addition to
affordable pet insurance for their dogs and cats”.

About Pethealth Inc.

Founded in February 1998, Pethealth is the leading provider
of pet insurance in Canada and one of the fastest growing providers of pet insurance in
North America, currently offering its PetCare Pet Insurance Programs in 9 provinces, 35
states and Washington, D.C. In Canada, the company’s pet insurance is offered to
owners of dogs and cats through its wholly owned subsidiary, PetCare Insurance Brokers
Ltd. ING Wellington, a member of the ING Group, and CGU Elite Insurance Company, a member
of CGU Group Canada Ltd., underwrite PetCare products in Canada. The PetCare programs also
carry the exclusive endorsements of a number of industry leaders, including veterinary
medical associations representing approximately four out of five practicing veterinarians.
Pethealth is based in Oakville, Ontario. Institutional investors include the VC Advantage
Fund and Dynamic Mutual Funds, through its Dynamic Venture Opportunities Fund.

About Petcetera

Petcetera is a leading and rapidly expanding Canadian
specialty retailer of pet-related products and services. Based in Vancouver, British
Columbia, it offers pet owners over 10,000 pet-related products, unique pet care programs
and services including grooming salons, pet photography studios, doggy daycare, obedience
classes, pet hospitals and adoption centres. Founded in November 1997 with one store,
Petcetera has grown to 32 Pet Superstore locations spanning from B.C. to Ontario.
Currently Petcetera, which is privately owned and operated, is focused on consolidating
its leadership position in the Canadian pet food and supply industry.

The Canadian Venture Exchange Inc. has not reviewed and
does not accept responsibility for the adequacy or accuracy of this release.

Statements contained in this news release, if not
historical, are forward-looking statements, which involve risks and uncertainties that
could cause actual results to differ materially from the results described in forward-looking statements.

Not for dissemination in the United States of America or to United States news wire services.

For further information: contact E. Mark Warren, President
and Chief Executive Officer of Pethealth or Glen H. Tennison, Chief Financial Officer of
Pethealth at (905) 842-2615
or Dan Urbani, Founder, President and Chief Executive Officer of Petcetera at (604) 526-4180.