Exhibit 10.1
PETSMART, INC.
EXECUTIVE SHORT-TERM INCENTIVE PLAN
Originally Adopted effective: February 4, 2002
Originally Approved by the Stockholders: June 27, 2002
Amended and Restated effective: March 24, 2009
Amendment Approved by the Stockholders: June 17, 2009
Section 1 — Purposes.
          This PetSmart Executive Short-Term Incentive Plan (the “Plan”)
provides for incentive compensation to those key officers and employees of
PetSmart, Inc. or any affiliated entity (collectively, the “ Company ”), who,
from time to time may be selected for participation. The Plan is intended to
provide incentives and rewards for the contributions of such employees toward
the successful achievement of the Company’s financial and business goals
established for the applicable performance period. The Company’s policy is to
have a significant portion of a participant’s total compensation tied to the
Company’s performance. Payments pursuant to the Plan are intended to qualify as
“performance-based compensation” within the meaning of Section 162(m) of the
Internal Revenue Code (“ Section 162(m) ”).
Section 2 – Administration.
          The Plan shall be administered by the committee (the “Committee”) of
the Board of Directors of PetSmart, Inc. (“ PetSmart ”) that has been designated
to administer programs intended to qualify as “performance-based compensation”
within the meaning of Section 162(m). The Committee shall have authority to make
rules and adopt administrative procedures in connection with the Plan and shall
have discretion to provide for situations or conditions not specifically
provided for herein consistent with the purposes of the Plan. The Committee
shall determine the beginning and ending dates for each performance period.
Unless otherwise determined by the Committee, the performance period shall
correspond to PetSmart’s fiscal year. Notwithstanding any other provision of the
Plan to the contrary, the Plan shall be administered and its provisions
interpreted so that payments pursuant to the Plan qualify as “performance-based
compensation” within the meaning of Section 162(m). Determinations by the
Committee shall be final and binding on the Company and all participants.
Section 3 – Selection of Participants.
          The executive officers of the Company as well as those other key
employees of the Company who, in the opinion of the Committee, may become
executive officers of the Company or who otherwise may make comparable
contributions to the Company shall be eligible to participate in the Plan. Each
performance period, the Committee may designate from among those employees who
are eligible to participate in the Plan those employees who shall participate in
the Plan for such performance period. In the event an individual is selected to
participate in the Plan, such individual shall not also participate in the
Company’s regular Short-Term Incentive Plan.
Section 4 – Establishing Performance Objectives.
          During the first ninety (90) days of each performance period the
Committee shall establish one or more performance objectives, at least one of
which shall be based on a shareholder approved business criteria. The Committee
shall have discretion to establish objectives that are not based on shareholder
approved business criteria, including objectives the achievement of which may
require subjective assessments by the Committee. Notwithstanding the foregoing,
the maximum possible payout shall be based solely on shareholder approved
business criteria. The use of non-shareholder approved business criteria shall
be used solely to reduce an award. The shareholder approved business criteria
are as follows:

  •   Net income of PetSmart as set forth in PetSmart’s audited financial
statements       •   Earning per share of PetSmart as set forth in PetSmart’s
audited financial statements 

 

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  •   Customer satisfaction as determined by an independent professional survey
research firm     •   Increase in the trading price of PetSmart’s stock above
the trading price at the time the criteria is established     •   Return on
equity, including return on invested capital as calculated from PetSmart’s
audited financial statements     •   Return on assets as calculated from
PetSmart’s audited financial statements     •   Return on investments as
calculated from PetSmart’s audited financial statements     •   Increase in
sales, including sales growth as calculated from PetSmart’s audited financial
statements     •   end-of-year net cash (cash, restricted cash and cash
equivalents, less outstanding debt on PetSmart’s revolving credit agreement) as
calculated from PetSmart’s audited financial statements

          All criteria that are based on PetSmart’s audited financial statements
may be modified by the Committee at the time the specific criteria are selected
to take into consideration one or more of the following: (1) changes in
accounting principles that become effective during the performance period,
(2) extraordinary, unusual or infrequently occurring events, (3) the disposition
of a business or significant assets, (4) gains or losses from all or certain
claims and/or litigation and insurance recoveries, (5) the impact of impairment
of intangible assets, (6) restructuring activities, (7) the impact of
investments or acquisitions, (8) changes in corporate capitalization such as
stock splits and certain reorganizations (9) changes in PetSmart’s dividend
policy, (10) common share repurchases, (10) changes in capital expenditures,
and/or (11) changes to PetSmart’s accounts payable policies relative to payment
terms. Notwithstanding the foregoing, the Committee must select criteria that
collectively satisfy the requirements of performance-based compensation for the
purposes of Section 162(m), including by establishing the targets at a time when
the performance relative to such targets is substantially uncertain.
Section 5 – Establishing Target Awards.
          During the first ninety (90) days of each performance period the
Committee shall establish a target award for each participant in the Plan.
Individual participants may earn an award payout ranging from zero percent to a
maximum of five hundred percent of their target award. The Committee will
establish an award payout schedule based upon the extent to which the Company
performance objectives and/or other performance objectives are or are not
achieved or exceeded. Pursuant to Section 4, entitlement to an award shall be
based solely on shareholder approved business criteria; however, non-shareholder
approved criteria may be used to reduce the amount of an award payable to one or
more participants. Notwithstanding the foregoing, no participant shall receive a
payment pursuant to the Plan that exceeds $5 million for any twelve (12) month
period. To the extent that a target award is expressed by reference to a number
of shares of the Company’s common stock, for the purpose of applying the
limitations on a maximum award as set forth in this Section 5, unless otherwise
determined by the Committee when determining the target award, the value of such
stock shall be determined as follows: (a) if the Company’s common stock is
listed on any established stock exchange or national market system, by reference
to the closing sales price of the Company’s common stock as quoted on such
exchange or system (or the exchange with the greatest volume of trading in the
Company’s common stock) on the date the target award is determined by the
Committee as reported in The Wall Street Journal or such other source as the
Committee deems reliable; and (b) if there is no closing sales price for the
Company’s common stock on the date the target award is determined by the
Committee, the closing sales price on the last preceding day for which such
quotation exists.
Section 6 – Determining Final Awards.
          No later than thirty (30) days after the receipt by the Committee of
the audited financial statements for a performance period, the Committee shall
determine whether the established performance objectives for each participant in
the Plan were achieved. The Committee shall have discretion to reduce final
awards from the target award depending on (a) the extent to which the Company
performance objective(s) is either exceeded or not met, and (b) the extent to
which other objectives, e.g. subsidiary, division, department, unit or other
performance objectives

 

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are attained. The Committee shall have full discretion to reduce individual
final awards based on individual performance as it considers appropriate in the
circumstances. The Committee shall not have discretion to increase awards for
the performance period.
Section 7 – Termination of Employment.
          Participants whose employment by the Company is terminated for any
reason other than death or disability during any performance period will receive
no payment under the Plan for such performance period. Participants who die or
become totally and permanently disabled during any performance period will
receive prorated payments under the Plan based on the number of whole months of
employment completed during the performance period. Except as provided in
Section 9, participants whose employment by the Company is terminated for any
reason after the close of the performance period but before the distribution of
payments under the Plan will be paid all amounts applicable under this Plan for
such performance period.
Section 8 – Time of and Payment of Awards.
          Payment of awards shall be made within thirty (30) days following the
later of (a) the receipt by the Committee of the audited financial statements
for the applicable performance period or (b) the certification by the Committee
that the performance and other criteria for payment have been satisfied (the “
Certification Date ”). The Committee shall have the discretion to pay awards in
the form of (i) cash, (ii) Common Stock, (iii) Restricted Stock, (iv) Stock
Units, (v) Restricted Stock Units, or (vi) a combination of the foregoing.
Payroll and other taxes shall be withheld as determined by the Company.
Notwithstanding the foregoing, the Committee, in its sole discretion, may
provide the participants the opportunity to elect to defer any payments pursuant
to the Plan under a nonqualified deferred compensation plan. In the case of any
such deferred payment, the terms of such deferred compensation plan shall
control; provided, however, that, unless the Committee determines that the
alternative deferred payment does not have to comply with the following
limitations in order to avoid the application of Section 162(m), any amount
payable pursuant to such deferred compensation plan in excess of the amount
otherwise payable pursuant to this Plan shall not exceed, as determined by the
Committee, either (a) an amount based on either Moody’s Average Corporate Bond
Yield (or such other rate of interest that is deemed to constitute a “reasonable
rate of interest” for the purpose of Section 162(m)) over the deferral period or
(b) the return over the deferral period of one or more predetermined actual
investments, as determined by the Committee, such that the amount payable at the
later date will be based upon actual returns, including any decrease or increase
in the value of the investment(s).
          For the purposes of this Section 8, the following definitions shall
apply:
“Common Stock” shall mean common stock of the Company.
“Restricted Stock” shall mean Common Stock that is subject to Vesting as set
forth in the Restricted Stock Agreement adopted by the Committee.
“Stock Units” shall mean an unfunded, unsecured commitment by the Company to
deliver a pre-determined number of shares of Common Stock (or the cash
equivalent of such Common Stock) to a participant at a future time in accordance
with the terms and conditions of a Stock Unit Agreement adopted by the
Committee.
“Restricted Stock Unit” shall mean a Stock Unit that is subject to Vesting as
set forth in the Restricted Stock Unit Agreement adopted by the Committee.
“Vesting” shall mean a requirement that a participant remain an employee of the
Company, or an affiliate of the Company, for an additional period of time in
order to retain the Common Stock (in the case of Restricted Stock) or the Stock
Unit (in the case of a Restricted Stock Unit).
“Value of Common Stock” shall mean: (a) if the Common Stock is listed on any
established stock exchange or a national market system, the closing sales price
of the Common Stock as quoted on such exchange or system (or the exchange with
the greatest volume of trading in the Common Stock) on the day of valuation, as
reported in The Wall Street Journal or such other source as the Committee deems
reliable; and (b) if there is no closing

 

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sales price for the Common Stock on the day of valuation, the closing sales
price on the last preceding day for which such quotation exists. Vesting shall
not be taken into account in determining the Value of Common Stock for this
purpose.
          In the event the Committee does not specify the form of the payment at
the time the Committee establishes the target award, the form of payment shall
be in the form of cash unless the Committee determines (a “ Retroactive
Determination ”) on or before the Certification Date that the form of payment
will include some non-cash consideration. In the event the Committee makes a
Retroactive Determination, the total value of the payment shall not exceed the
value if the payment were made only in cash. The Committee shall be deemed to be
in compliance with the preceding sentence if the sum of (i) the Value of Common
Stock, (ii) the Value of Common Stock that is Restricted Stock, (iii) the Value
of Common Stock that is subject to Stock Units or Restricted Stock Units, and
(iv) the cash in the payment pursuant to the Retroactive Determination would be
less than or equal to an all-cash payment on both the last day of the
performance period and the Certification Date.
          Shares of Common Stock issued directly or as Restricted Stock or
pursuant to Stock Units or Restricted Stock Units shall be issued pursuant to
the 2006 Equity Incentive Plan unless otherwise determined by the Committee.
Section 9 – Forfeiture.
          It shall be an overriding precondition to the payment of any award
(a) that the participant not engage in any activity that, in the opinion of the
Committee, is in competition with any activity of the Company or any affiliated
entity or otherwise inimical to the best interests of the Company and (b) that
the participant furnish the Committee with all such information confirming
satisfaction of the foregoing condition as the Committee shall reasonably
request. If the Committee makes a determination that a participant has engaged
in any such competitive or otherwise inimical activity, such determination shall
operate to immediately cancel all then unpaid award amounts.
Section 10 – Death.
          Any award remaining unpaid, in whole or in part, at the death of a
participant shall be paid to the participant’s legal representative or to a
beneficiary designated by the participant in accordance with the rules
established by the Committee.
Section 11 – No Right to Employment or Award.
          No person shall have any claim or right to receive an award, and
selection to participate in the Plan shall not confer upon any employee any
right with respect to continued employment by the Company or continued
participation in the Plan. Further the Company reaffirms its at-will
relationship with its employees and expressly reserves the right at any time to
dismiss a participant free from any liability or claim for benefits pursuant to
the Plan, except as provided under this Plan or other written plan adopted by
the Company or written agreement between the Company and the participant.
Section 12 – Discretion of Company, Board of Directors and Committee.
          Any decision made or action taken by the Company or by the Board of
Directors of PetSmart or by the Committee arising out of or in connection with
the creation, amendment, construction, administration, interpretation or effect
of the Plan shall be within the absolute discretion of the Company, the Board of
Directors, or the Committee, as the case may be, and shall be conclusive and
binding upon all persons. To the maximum extent possible, no member of the
Committee shall have any liability for actions taken or omitted under the Plan
by such member or any other person.
Section 13 – No Funding of Plan.
          The Company shall not be required to fund or otherwise segregate any
cash or any other assets which may at any time be paid to participants under the
Plan. The Plan shall constitute an “unfunded” plan of the Company. The Company
shall not, by any provisions of the Plan, be deemed to be a trustee of any
property, and any rights of any participant or former participant shall be no
greater than those of a general unsecured creditor or shareholder of the
Company, as the case may be.

 

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Section 14 – Non-Transferability of Benefits and Interests.
          Except as expressly provided by the Committee, no benefit payable
under the Plan shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, any such attempted action
shall be void, and no such benefit shall be in any manner liable for or subject
to debts, contracts, liabilities, engagements or torts of any participant or
former participant. This Section 14 shall not apply to an assignment of a
contingency or payment due (i) after the death of a participant to the deceased
participant’s legal representative or beneficiary or (ii) after the disability
of a participant to the disabled participant’s personal representative.
Section 15 – Law to Govern.
          All questions pertaining to the construction, regulation, validity and
effect of the provisions of the Plan shall be determined in accordance with the
laws of the State of Arizona.
Section 16 – Non-Exclusivity.
          The Plan does not limit the authority of the Company, the Board of
Directors or the Committee, or any current or future subsidiary of the Company
to grant awards or authorize any other compensation to any person under any
other plan or authority, other than that specifically prohibited herein.
Section 17 – Section 162(m) Conditions; Bifurcation of Plan.
          It is the intent of the Company that the Plan and all payments made
hereunder satisfy and be interpreted in a manner that, in the case of
participants who are persons whose compensation is subject to Section 162(m),
satisfies any applicable requirements as performance-based compensation. Any
provision, application or interpretation of the Plan inconsistent with this
intent to satisfy the standards in Section 162(m) shall be disregarded.
Notwithstanding anything to the contrary in the Plan, the provisions of the Plan
may at any time be bifurcated by the Board of Directors or the Committee in any
manner so that certain provisions of the Plan or any payment intended (or
required in order) to satisfy the applicable requirements of Section 162(m) are
only applicable to persons whose compensation is subject to Section 162(m).
Section 18 – Arbitration of Disputes.
          The Federal Arbitration Act shall apply to and govern all disputes
arising under or pursuant to the Plan. Any disputes with respect to the terms of
this Plan or any rights granted hereunder, including, without limitation, the
scope of this arbitration, shall be subject to arbitration pursuant to the rules
of the American Arbitration Association governing commercial disputes.
Arbitration shall occur in Phoenix, Arizona. Judgment on any arbitration award
may be entered in any court having jurisdiction. A single arbitrator shall be
used unless the amount in dispute exceeds $200,000 and a party to the
arbitration proceeding requests that the arbitration be heard by a panel of
three arbitrators. If a panel of three arbitrators is used, the arbitration
decision shall be made by a majority of the three arbitrators. By electing to
participate in the Plan, the Company and each participant EXPRESSLY AGREE TO
ARBITRATION AND WAIVE ANY RIGHT TO TRIAL BY JURY, JUDGE, OR ADMINISTRATIVE
PROCEEDING. An arbitrator shall have the same powers that a judge for a United
States District Court located in the State of Arizona may exercise in comparable
circumstances. Nothing in this Plan shall limit or restrict any right of offset
a party may have.

 

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Section 19 – Amendment or Termination.
          The Board of Directors of the Company and the Committee each reserves
the right at any time to make any changes in the Plan as it may consider
desirable or may suspend, discontinue or terminate the Plan at any time.

              PetSmart, Inc.,      a Delaware corporation 
 
       
 
       
 
       
 
  By:    
 
  Name:   
 
 Philip L. Francis 
 
  Its:         Chief Executive Officer 
 
       
 
       
 
       
 
  By:    
 
  Name:   
 
  Scott Crozier 
 
  Its:         Secretary