exv10w1






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 




 









 












	 	•	 	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



 









 







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



 









 







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.



 









 





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.



 









 





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