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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
December 18, 1996
------------------------------------------------
Date of Report (Date of earliest event reported)
PETsMART, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-21888 94-3024325
- -------------- ----------- --------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
10000 N. 31st Avenue, Suite C-100, Phoenix, Arizona 85051
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(Address of principal executive offices)
(602) 944-7070
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 18, 1996, Pet City Holdings plc, a public limited
company incorporated in England and Wales ("Pet City Holdings") was acquired
(the "Acquisition") by PETsMART, Inc. pursuant to a Merger Agreement dated
October 24, 1996 (the "Merger Agreement") by and among PETsMART and Pet City
Holdings, in connection with a Scheme of Arrangement approved by the High
Court of England and Wales on December 18, 1996, as provided for by Section
425 of the Companies Act 1985. See Exhibit 2.1 hereto. Upon consummation of
the Acquisition, Pet City Holdings became a wholly-owned subsidiary of
PETsMART. The Acquisition is intended to be a tax-free reorganization
accounted for as a pooling of interests.
Pet City Holdings, based in Swindon, England, is a pet industry
specialist retailer and operates more than fifty pet superstores located
throughout the United Kingdom. The superstores sell a range of pet food,
accessories, medicines and other items for companion animals, birds, fish,
horses and reptiles. Pet City Holdings also sells pets, but not dogs or cats.
Pursuant to the Merger Agreement, PETsMART issued a total of
approximately 7,800,000 shares of Common Stock, $.0001 par value, of PETsMART
(the "Common Stock") to the shareholders of Pet City Holdings. As of
December 18, 1996 (the "Effective Time"), each of the 24,270,659 ordinary
shares of Pet City Holdings which was outstanding immediately prior to the
Effective Time was converted into the right to receive .3214 of a share of
Common Stock. At the election of each Pet City Holdings optionholder, each
of the 1,233,541 options to purchase ordinary shares of Pet City Holdings
which was outstanding immediately prior to the Effective Time may either be:
(1) held and exercised for ordinary shares of Pet City Holdings; (2)
exchanged for an option to purchase .3214 of a share of Common Stock at an
exercise price equal to the former exercise price divided by .3214 and
otherwise on substantially the same terms (including vesting) as the original
Pet City Holdings option; or (3) cancelled in exchange for Common Stock equal
in value to the market value of the Common Stock at the Effective Time that
would be acquired upon the exercise of such option, net of the option price.
Up to 396,460 shares of Common Stock will be issued upon exercise of the
former Pet City Holdings options.
The aggregate number of shares of Common Stock of PETsMART issued to
the shareholders of Pet City Holdings was determined through arms' length
negotiations between PETsMART and Pet City Holdings. There was no material
relationship between Pet City Holdings and PETsMART or any of PETsMART's
affiliates, any director or officer of PETsMART, or any associate of any such
director or officer. The Common Stock of PETsMART used to acquire Pet City
Holdings was not registered under the Securities Act of 1933, as amended (the
"1933 Act"), in reliance upon the exemption from the registration
requirements of the 1933 Act provided by Section 3(a)(10) thereof. Holders
of approximately 4,397,788 ordinary shares of Pet City Holdings have signed
affiliate agreements with PETsMART under which they have agreed not to sell
any of the PETsMART shares they receive in the transaction prior to the
release of PETsMART's fiscal year end results. Upon completion of the
acquisition, Richard Northcott, Chairman of Pet City Holdings, became a
director of PETsMART and Giles Clarke, Chief Executive Officer of Pet City
Holdings, became Executive Vice President - Europe of PETsMART. Mr. Clarke
has entered into a two year employment contract with PETsMART and Pet City
Holdings which provides for a salary of L180,000 per year, as well as bonus,
pension contribution, insurance and other compensation. Both Mr. Clarke and
Mr. Northcott have entered into agreements restricting their ability to
compete with Pet City Holdings for five years from the date of the
Acquisition.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS
Not required pursuant to Rule 3-05(b)(2)(i) of Regulation S-X.
(c) EXHIBITS
2.1 Merger Agreement by and among PETsMART and Pet City
Holdings, dated as of October 24, 1996 with selected
exhibits.
10.1 Employment Agreement between Giles Clarke, PETsMART and Pet
City Holdings dated as of October 23, 1996.
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
PETsMART, INC.
December 26, 1996 By: /s/ C. Donald Dorsey
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C. Donald Dorsey
Executive Vice President and
Chief Financial Officer
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Exhibit 2.1
Dated 24 October 1996
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PET CITY HOLDINGS PLC
- and -
PETsMART, INC.
- --------------------------------------------------------------------------------
MERGER AGREEMENT
relating to
PET CITY HOLDINGS PLC
- --------------------------------------------------------------------------------
TAYLOR JOHNSON GARRETT
Carmelite
50 Victoria Embankment
Blackfriars
London EC4Y ODX
Tel No: 0171 353 1234
Fax No: 0171 936 2666
Ref: GAJ/PSB
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INDEX
CLAUSE NO. HEADING PAGE NO.
1. Definitions and Interpretaiton
2. Share Transfer
3. Share exchange
4. Conditions
5. Consideration
6. Completion
7. PETsMART Obligations
8. Publicity
9. Notices
10. Termination
11. Miscellaneous
12. Law and Jurisdiction
SCHEDULES
1. Specimen explanatory letter to option holders
SIGNING PAGE
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THIS AGREEMENT is made the 24 day of October 1996
BETWEEN
(1) PET CITY HOLDINGS PLC (registered number:2342109) whose registered office
is at Block E, The Dorcan Complex, Faraday Road, Swindon SN3 5HQ ("Pet
City"); and
(2) PETSMART, INC. of 10000 North 31st Street, Suite C-100, Phoenix AZ 85051,
USA ("PETsMART").
AGREED TERMS
1. DEFINITIONS AND INTERPRETATION
1.1 In this agreement and the schedule the following words and expressions have
the meanings set out opposite them:
"ACT" means the Companies Act 1985 as amended;
"BUSINESS DAY" means a day (excluding Saturdays and public holidays) on
which banks are open for business in London;
"CIRCULAR" means the circular substantially in the form of the draft
annexed hereto to be issued by Pet City to Pet City Shareholders regarding,
inter alia, the allotment of New Pet City Shares to PETsMART pursuant to
this agreement and the allotment of Consideration Common Stock to Pet City
Shareholders;
"CODE" means the City Code on Takeovers and Mergers;
"COMPLETION" means completion of this agreement in accordance with its
terms;
"CONSIDERATION COMMON STOCK" means PETsMART Common Stock to be issued to
Pet City Shareholders as consideration under the Scheme;
"COURT" means the High Court of Justice in England and Wales;
"COURT MEETING" means the meeting of Pet City Shareholders to be held on 22
November 1996 and to be convened by order of the Court pursuant to the
Scheme;
"EFFECTIVE DATE" means the date on which the Scheme becomes effective in
accordance with its terms;
"ENCUMBRANCE" means any charge, mortgage, lien, hypothecation, judgment,
encumbrance, easement, security, title retention, preferential right, trust
arrangement or any other security interest or any other agreement or
arrangement having a commercial effect analogous to the conferring of
security or similar right in favour of any person;
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"EXTRAORDINARY GENERAL MEETING" means the extraordinary general meeting of
Pet City Shareholders to be held on 22 November 1996;
"LISTING" means the listing of the Consideration Common Stock on the Nasdaq
National Market;
"MEETINGS" means the Court Meeting and the Extraordinary General Meeting;
"MERGER" means the proposed merger of PETsMART and Pet City pursuant to the
Scheme;
"NASDAQ NATIONAL MARKET" means the National Market System on which PETsMART
Common Stock is listed and traded;
"NEW PET CITY SHARES" means the ordinary shares of 5 pence each in the
capital of Pet City to be allotted and issued to PETsMART pursuant to the
Scheme;
"PETsMART COMMON STOCK" means shares of common stock of US$0.0001 par value
each in the capital of PETsMART;
"PETsMART GROUP" means PETsMART and any subsidiary of PETsMART;
"RECORD DATE" means close of business on the Business Day immediately
preceding the Effective Date;
"RESOLUTIONS" means the resolution to be proposed at the Court Meeting and
the resolutions to be proposed at the Extraordinary General Meeting;
"SCHEME" means the proposed scheme of arrangement under section 425 of the
Act as set out in the Circular with any modification, addition or condition
approved or imposed by the Court and approved by PETsMART and Pet City;
"SHARE OPTION SCHEMES" means the Pet City 1993 Employee Share Option
Scheme, the Pet City 1995 Savings-Related Share Option Scheme and the Pet
City 1996 Unapproved Employee Share Option Scheme;
"SPECIAL OPTIONS" means the arrangements under which options over Pet City
Shares have been granted to F R Northcott and C G Clarke pursuant to
agreements dated 9 March 1995 and 16 November 1995 respectively and the
options over Pet City Shares granted to R Bunce by Pet City (ESOT Trustee)
Limited;
"EXISTING PET CITY SHARES" means the Pet City Shares, other than any Pet
City Shares held by PETsMART, at the date hereof, together with any Pet
City Shares (a) in issue at the close of business on the last Business Day
prior to the Court Meeting (or, if such meeting shall be adjourned to a
later date, on the last Business Day prior to that later date) and (b) if
any, issued thereafter and prior to 5pm on the day two Business Days before
the drawing up and perfecting of the court order to sanction the Scheme in
respect of which the original or any subsequent holder thereof is bound by
the Scheme;
"STOCK EXCHANGE" means London Stock Exchange Limited;
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"SUBSIDIARY" means a subsidiary company as defined in section 736 of the
Act;
"SUBSIDIARY UNDERTAKING" means a subsidiary undertaking as defined in the
Act;
"SUBSIDIARIES" means the wholly owned subsidiaries of Pet City, namely Pet
City Limited, Pet City (ESOT Trustee) Limited and Pet City Resources
Limited;
"PET CITY GROUP" means Pet City and any subsidiary undertaking of Pet City;
"PET CITY SHARES" means the ordinary shares of five pence each in the
capital of Pet City;
"PET CITY SHAREHOLDERS" means the holders of the Existing Pet City Shares
at the Record Date other than PETsMART.
1.2 In this agreement and the schedule:
(a) reference to any statute or statutory provision includes a reference
to that statute or statutory provision as amended, extended or re-
enacted and to any regulation, order, instrument or subordinate
legislation under the relevant statute or statutory
provision;
(b) reference to the singular includes a reference to the plural and vice
versa;
(c) reference to any clause, sub-clause or schedule is to a clause, sub-
clause or schedule (as the case may be) of or to this agreement;
(d) reference to any gender includes a reference to all other genders;
(e) references to persons include bodies corporate, unincorporated
associations and partnerships and any reference to any party who is an
individual is also deemed to include their respective legal personal
representative(s);
(f) references to documents in the agreed form are to documents in the
form of the draft agreed between the parties and initialled by the
parties for the purposes of identification.
2. SHARE TRANSFER
2.1 PETsMART hereby agrees with and undertakes to Pet City that it will accept
the transfer of and apply for registration as a holder of one issued share
in Pet City as soon as possible after the issue of the press release
announcing the Scheme.
2.2 Pet City agrees that it will as soon as practicable procure that PETsMART
shall become the registered holder of the Pet City share referred to in
clause 2.1 and in any event by no later than 30 October 1996.
3. SHARE EXCHANGE
3.1 Pet City agrees to instruct its registrars to despatch to Pet City
Shareholders notices convening the Court Meeting (subject to obtaining the
requisite court order) and the
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Extraordinary General Meeting and, in the event of the Resolutions being
passed by the requisite majorities, will apply to the Court for its
sanction of the cancellation of the Existing Pet City Shares, and the issue
of the New Pet City Shares to PETsMART free of any Encumbrance and credited
as fully paid.
3.2 (a) In consideration of the agreement set out in clause 3.1 PETsMART
shall, subject to the Scheme becoming effective, allot to the Pet City
Shareholders credited as fully paid the Consideration Common Stock on
the basis of 3,214 shares of new PETsMART Common Stock for every
10,000 Existing Pet City Shares held by each Pet City Shareholder as
at the Record Date and so in proportion for any other number of Pet
City Shares held.
(b) No fractions of PETsMART Common Stock will be issued to Pet City
Shareholders who will instead receive cash from PETsMART in respect of
their fractional entitlements. The value of such fractional
entitlements shall be determined by reference to the closing price of
PETsMART Common Stock on Nasdaq on the Effective Date. Pet City
Shareholders will receive cheques denominated in sterling with such
sterling amounts calculated by reference to the relevant amount of US
dollars at the spot buying rate for the purchase of sterling as quoted
by the Royal Bank of Scotland PLC at the close of business on the
Effective Date.
(c) If, in respect of any holder of Existing Pet City Shares with a
registered address outside the United Kingdom, PETsMART is advised
that the allotment or issue of PETsMART Common Stock pursuant to
clause 2.1 of the Scheme would infringe the laws of any jurisdiction
outside the United Kingdom or would require PETsMART to observe any
governmental or other consent or any registration, filing or other
formality, PETsMART may determine that no PETsMART Common Stock shall
be allotted or issued to such holder under clause 2.1 of the Scheme
but shall instead be allotted or issued to a nominee appointed by
PETsMART, as trustee for such holder, on terms that the nominee shall,
as soon as practicable following the Effective Date, sell the PETsMART
Common Stock so allotted or issued at the best price which can
reasonably be obtained and shall account by cheque for the net
proceeds of such sale (after the deduction of all expenses and
commissions, including any sales tax payable thereon) by sending a
cheque to the holder of such Scheme Shares in accordance with the
provisions of clause 2.3 of the Scheme.
3.3 Pet City and PETsMART agree that, subject to the requirements of the Inland
Revenue (where applicable) each option over Pet City Shares granted prior
to the Record Date under the terms of any of the Share Option Schemes shall
be dealt with in accordance with the explanatory letter to option holders
pursuant to the Share Option Schemes set out in schedule 1.
3.4 Pet City and PETsMART shall each use all reasonable endeavours to ensure
that all amendments that are required to be made to the Share Option
Schemes in order to facilitate options being dealt with as described in
clause 3.3 are made and that (where applicable) Inland Revenue consent is
obtained to such amendments and all other requisite Inland Revenue
approvals granted.
3.5 Pet City and PETsMART shall each-use all reasonable endeavours to ensure
that all
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holders of Special options agree to exchange their options over Pet City
Shares for options over paris Common Stock of equivalent value (equivalence
shall be determined in the same manner as for options exchanged under the
Share Option Schemes) and that the Special Options are not exercised either
in whole or in part at any time between 5pm on the day two Business Days
before the drawing up and perfecting of the court order to sanction the
Scheme and the Effective Date.
4. CONDITIONS
4.1 The office copy of the court order sanctioning the Scheme will only be
delivered for registration to the Registrar of Companies for England and
Wales if the conditions specified in paragraph 2 of Appendix 1 to the
explanatory statement in the Circular have been satisfied or, where
applicable, waived in full. At the hearing of the petition to sanction the
Scheme each party will instruct its counsel to confirm whether or not the
conditions have been satisfied or (where applicable) waived and PETsMART
agrees to observe the provisions of note 2 to rule 13 of the Code.
4.2 Pet City and PETsMART undertake to use their reasonable commercial efforts
to achieve satisfaction of each of the conditions referred to in clause 4.1
and, where applicable, as soon as possible following signature of this
agreement. In particular, but without limitation:
(a) subject to securing the necessary approvals at the Meetings, Pet City
shall do everything within its power to secure the Court's sanction
for the Scheme and shall forthwith upon Completion, subject to the
satisfaction or complete waiver of the conditions referred to in
clause 4.1, file the court order sanctioning the Scheme with the
Registrar of Companies forthwith following the making of the same; and
(b) PETsMART and Pet City shall do everything within their power to ensure
that Listing will occur on issue of the Consideration Common Stock
including, in the case of PETsMART, all legal requirements.
4.3 If at any time any party hereto becomes aware of a matter that might
prevent a condition referred to in clause 4.1 being satisfied, it shall
immediately inform the other party hereto.
4.4 If any of the conditions referred to in clause 4.1 have not been waived by
PETsMART and Pet City or have not been satisfied on or before 1 February
1997 this agreement shall be terminated whereupon each party's further
rights and obligations cease immediately on termination, but termination
does not affect a party's accrued rights and obligations at the date of
termination.
5. CONSIDERATION
5.1 The consideration for the allotment to PETsMART of the New Pet City Shares
shall be the capitalization of L50,000 standing to the credit of Pet City's
share premium account.
5.2 The Consideration Common Stock shall be allotted and issued credited as
fully paid on the Effective Date and shall rank pari passu in all respects
with the other PETsMART Common Stock then in issue.
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6. COMPLETION
6.1 Completion shall take place at the offices of PETsMART's solicitors on the
Effective Date.
6.2 At Completion written resolutions of Pet City's directors (or certified Pet
City board minutes) shall be delivered to PETsMART:
(a) changing Pet City's registered office to a place nominated by
PETsMART;
(b) removing the existing secretary of Pet City;
(c) appointing persons nominated by PETsMART as directors and secretary of
Pet City with effect from Completion;
(d) with effect from Completion, authorising the secretary to notify the
specimen signatures of the new officers of Pet City in connection with
each existing mandate given by Pet City for the operation of its bank
accounts.
6.3 At Completion written resolutions of the board of directors of each
Subsidiary (or certified board minutes) shall be delivered to PETsMART:
(a) changing each Subsidiary's registered office to a place nominated by
PETsMART;
(b) removing the existing secretary of each Subsidiary;
(c) appointing persons nominated by PETsMART as directors and secretary of
each Subsidiary with effect from Completion;
(d) with effect from Completion, authorising the secretary of the relevant
Subsidiary to notify the specimen signatures of the new officers of
each Subsidiary in connection with each existing mandate given by each
Subsidiary for the operation of their bank accounts.
7. PETSMART OBLIGATIONS
7.1 PETsMART hereby irrevocably agrees and undertakes to Pet City (which for
the purposes of this clause only is contracting on its own behalf and as
trustee for the shareholders for the time being of Pet City prior to the
Effective Date other than PETsMART) as follows:
(a) that it will consent to the issue of the Circular with such
modifications as have been agreed with PETsMART with references to
PETsMART in the form and context in which they appear; and
(b) that it will instruct counsel to appear on its behalf on the hearing
of the petition to sanction the Scheme to undertake to the Court to be
bound thereby and further undertakes to execute and do or procure to
be executed and done all such documents acts and things as may be
necessary or desirable to be executed or done by the purposes of
giving effect to the Scheme, all of which obligations are
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as set out in the paragraph headed "Preliminary - (d)" in the Scheme;
and
(c) that it will deliver or procure the delivery of a legal opinion to Pet
City from Cooley Godward in the agreed form on or before 30 October
1996.
8. PUBLICITY
Save with the consent of both parties, there shall be no publicity relating
to the Merger or to any transaction between PETsMART and Pet City until
after the announcement of the Merger. Following the announcement of the
Merger and prior to the Effective Date, Pet City agrees to limit any
publicity regarding the Merger to that which may be required by law or as
may be necessary to maintain the business of Pet City such as and including
communications with employees, customers, suppliers or lenders, or as a
necessary effect of satisfying any conditions to the Merger (such as may
arise in connection with discussions with lenders and licensors), and Pet
City agrees to jointly consult with PETsMART concerning the content of such
publicity or communications. Notwithstanding the foregoing, neither party
shall be prevented from publicly disclosing any information to the extent
required by a court order or pursuant to the rules and regulations of a
government agency or body or the rules and regulations of the Nasdaq
National Market, the Stock Exchange or the Alternative Investment Market,
in any case having jurisdiction over the disclosing party, or pursuant to
the rules of the Code.
9. NOTICES
9.1 Any notice or other written communication given under or in connection with
this agreement may be delivered personally or sent by first class post
(airmail if overseas) or by facsimile.
9.2 The address for service of any party shall (in the case of a company) be
its registered office marked for the attention of the managing director and
(in the case of an individual) shall be his address stated in this
agreement or, if any other address for service has previously been notified
to the server, to the address so notified.
9.3 Any such notice or other written communication shall be deemed to have been
served:
(a) if personally delivered, at the time of delivery;
(b) if posted, at the expiry of two Business Days or in the case of
airmail four Business Days after it was posted;
(c) if sent by facsimile message, at the time of transmission (if sent
during normal business hours, that is 9.30 to 17.30 local time) in the
place from which it was sent or (if not sent during such normal
business hours) at the beginning of the same Business Day in the place
from which it was sent if sent before 9.30am local time or at the
beginning of the next Business Day in the place from which it was sent
if sent after 17.30 local time.
9.4 In proving such service it shall be sufficient to prove that personal
delivery was made, or that such notice or other written communication was
properly addressed stamped and posted or in the case of a facsimile message
that an activity or other report from the sender's facsimile machine can be
produced in respect of the notice or other written
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communication showing the recipient's facsimile number and the number of
pages transmitted.
10. MISCELLANEOUS
10.1 This agreement shall so far as it remains to be performed hereafter
continue in full force and effect notwithstanding Completion.
10.2 Neither party may assign the benefit or the burden of this agreement
without the prior written consent of the other.
10.3 Subject to clause 8, no press or other public statement or circular shall
be made or issued in connection with the subject matter of this agreement
after the Effective Date unless previously approved in writing by PETsMART.
10.4 No term or provision of this agreement shall be varied or modified by any
prior or subsequent statement, conduct or act of any party, except that
hereafter the parties may amend this agreement only by letter or written
instrument signed by all of the parties.
10.5 The headings to the clauses and any underlining in this agreement and in
the schedules are for ease of reference only and shall not form any part of
this agreement for the purposes of construction.
10.6 Pet City shall and shall use all reasonable endeavours to procure that any
other necessary party shall execute and do all such documents acts and
things as may reasonably be required on or subsequent to the Scheme
becoming effective by PETsMART for securing to or vesting in PETsMART the
legal and beneficial ownership of the New Pet City Shares and PETsMART
shall and shall use all reasonable endeavours to procure that any other
necessary party shall execute and do all such documents, acts and things as
may reasonably be required on or subsequent to the Scheme becoming
effective by Pet City for securing the obligations of PETsMART to Pet City
under this agreement.
10.7 This agreement may be entered into in any number of counterparts and by the
parties to it on separate counterparts, each of which when so executed and
delivered shall be an original, but all the counterparts shall together
constitute one and the same instrument.
10.8 If at any time any term or provision in this agreement shall be held to be
illegal, invalid or unenforceable, in whole or in part, under any rule of
law or enactment, such term or provision or part shall to that extent be
deemed not to form part of this agreement, but the enforceability of the
remainder of this agreement shall not be affected.
11. LAW AND JURISDICTION
11.1 This agreement shall be governed by and construed in accordance with
English law and each party to this agreement submits to the non-exclusive
jurisdiction of the English courts.
11.2 Pet City and PETsMART hereby agree that any legal action or proceeding
arising out of or in connection with this agreement may be brought in the
High Court of Justice in England, and Pet City and PETsMART hereby
irrevocably submit to the non-exclusive jurisdiction of such court in
connection with any such legal action or proceedings. Pet
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City agree that any writ, judgment or other notice of legal process in
connection with any such legal action or proceedings shall be sufficiently
served if delivered to it care of Osborne Clarke, Hillgate House, 26 Old
Bailey, London EC4M 7HS, telephone: 0171 600 0155, fax: 0171 248 9934, for
the attention of Andrew Saul. PETsMART agrees that any writ, judgment or
other notice of legal process in connection with any such legal action or
proceedings shall be sufficiently served if delivered to it care of Taylor
Joynson Garrett, Carmelite, 50 Victoria Embankment, Blackfriars, London
EC4Y 0DX, telephone: 0171 353 1234, fax: 0171 936 2666, for the attention
of Gordon Jackson. The submission to such jurisdiction shall not (and shall
not be construed so as to) limit the right of either Pet City or PETsMART
to take proceedings against the other in whatever jurisdictions shall to
them seem fit, nor shall the taking of proceedings in one or more
jurisdictions preclude the taking of proceedings in any other jurisdiction.
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APPENDIX I
CONDITIONS TO THE IMPLEMENTATION OF
THE SCHEME AND THE MERGER
The Merger is conditional upon the Scheme becoming effective by not later than 1
February 1997 or such later date as Pet City and PETsMART may agree and the
Court shall approve.
(1) The Scheme will become effective following:
(a) approval by a majority in number of the holders representing three-
fourths in value of the Pet City Shares present and voting, either in
person or by proxy, at the Court Meeting;
(b) the passing at the Extraordinary General Meeting of the special
resolution set out in the Notice of such meeting at the end of this
document; and
(c) sanction (with or without modification) of the Scheme by the Court and
an office copy of the Order of the Court being delivered to the
Registrar of Companies in England and Wales for registration, and such
office copy being duly registered.
(2) Pet City and PETsMART have agreed that, subject as stated in paragraph 3
below, the Merger will also be conditional upon the following matters, and,
accordingly, an office copy of the Order of the Court to sanction the
Scheme will only be delivered for registration to the Registrar of
Companies in England and Wales if:
(a) PETsMART is informed by Price Waterhouse LLP (having received a letter
from Pet City's auditors) that it is able to issue a letter confirming
that in its opinion the Merger may be accounted for as a pooling of
interests under US GAAP;
(b) since 27 July 1996, being the date to which the latest audited report
and accounts of Pet City were made up, and unless otherwise publicly
announced by Pet City or agreed by PETsMART to have been disclosed by
Pet City, in each case prior to 25 October 1996:
(i) no litigation, arbitration proceedings, prosecution or other
legal proceedings to which any member of the Pet City Group is a
party (whether as plaintiff or defendant or otherwise), in each
case which is material and adverse in the context of the Pet City
Group taken as a whole, has been instituted or threatened or
remains outstanding; or
(ii) there has been no material adverse change or deterioration in the
business, financial or trading position or prospects of the Pet
City Group taken as a whole;
(c) since 28 January 1996, being the date to which the latest audited
report and accounts of PETsMART were made up, and unless otherwise
publicly announced by PETsMART or agreed by Pet City to have been
disclosed by PETsMART, in each case prior to 25 October 1996:
(i) no litigation, arbitration proceedings, prosecution or other
legal
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proceedings to which any member of the PETsMART Group is a
party (whether as plaintiff or defendant or otherwise), in each
case which is material and adverse in the context of the PETsMART
Group taken as a whole, has been instituted or threatened or
remains outstanding; or
(ii) there has been no material adverse change or deterioration in the
business, financial or trading position or prospects of the
PETsMART Group taken as a whole;
(d) Pet City has not discovered regarding the PETsMART Group and PETsMART
has not discovered regarding the Pet City Group:
(i) any financial, business or other information which has been
publicly disclosed at any time by either Pet City or PETsMART (as
the case may be) that is misleading or contains
misrepresentations of fact or omits to state a fact necessary to
make the information contained therein not misleading, and which
in any such case is material in the context of the Pet City Group
or the PETsMART Group, in each case taken as a whole,
respectively; or
(ii) that any member of the PETsMART Group or the Pet City Group (as
the case may be) is subject to any liability (contingent or
otherwise) which has not been disclosed or reflected in the last
published audited consolidated accounts of the relevant group or
otherwise publicly disclosed prior to 25 October 1996 and which
is material in the context of the group (in each case taken as a
whole) of which the member subject to such liability is a party;
(e) no government or governmental, quasi-governmental, supranational,
statutory or regulatory body, or court, in any jurisdiction has
instituted, implemented or threatened to take any action, proceeding,
suit, investigation or inquiry, or has made, proposed or enacted any
statute, regulation or order, or taken any other steps, which would
or might:
(i) make the Merger or Scheme or their respective implementation or
the acquisition or proposed acquisition of any shares in, or
control of, Pet City by PETsMART void, illegal or unenforceable
or otherwise, directly or indirectly, restrain, prohibit,
materially restrict or materially delay the implementation or
performance thereof or impose additional material conditions or
obligations with respect thereto, or otherwise challenge or
interfere therewith;
(ii) require the divestiture by any member of the Pet City Group or
(in connection with the Scheme) any member of the PETsMART Group
of all or any material portion of their respective businesses,
assets or property, or impose any material limitation on the
ability of any of them to conduct their respective businesses or
own their assets or property and which in any such case is
material in the context of the Pet City Group or the PETsMART
Group (in each case taken as a whole), being the group on which
such requirement or imposition is made, as the case maybe; or
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(iii) otherwise affect the business, financial or trading position
or prospects of the PETsMART Group or the Pet City Group, in
each case taken as a whole, in a manner which is material
and adverse;
(f) all necessary filings in any jurisdiction have been made, all
regulatory and statutory obligations in any jurisdiction have been
complied with, all necessary waiting periods under any applicable
legislation or regulations of any jurisdiction have expired, lapsed or
terminated, in each case in respect of the Merger and the
implementation of the Scheme and the acquisition or proposed
acquisition of any shares in, or control of, Pet City by PETsMART and
all authorizations, orders, recognitions, grants, consents, licenses,
confirmations, clearances, permissions and approvals necessary in any
jurisdiction for or in respect of the Merger and the implementation of
the Scheme or the acquisition or proposed acquisition of any shares
in, or control of, Pet City by PETsMART have been obtained in terms
and in a form satisfactory to PETsMART from appropriate governments,
governmental, quasi-governmental, supranational, statutory or
regulatory bodies or courts and all such authorisations, orders,
recognitions, grants, consents, licenses, confirmations, clearances,
permissions and approvals, together with all such authorisations,
orders, recognitions, grants, licenses, confirmations, permissions and
approvals necessary for Pet City to carry on its business, remain in
full force and effect and all filings necessary for such purpose have
been made and there has been no notice or intimation of any intention
to revoke or not to renew the same and all necessary statutory or
regulatory obligations in all relevant jurisdictions have been
complied with;
(g) save as Pet City and PETsMART have agreed as being disclosed to
PETsMART prior to 25 October 1996, there is no provision of any
agreement or instrument to which any member of the Pet City Group is a
party (which is material in the context of the Pet City Group taken as
a whole) and which, in consequence of the Merger or the Scheme or the
acquisition or proposed acquisition of any shares in or control of Pet
City by PETsMART, could or might (to an extent which is material in
the context of the Pet City Group taken as a whole) result in:
(i) any monies borrowed by or indebtedness of any member of the Pet
City Group being or becoming repayable or being capable of being
declared repayable immediately or prior to their stated
maturity, or the ability of any member of the Pet City Group to
borrow or incur indebtedness of a material amount being
withdrawn or prohibited;
(ii) the creation of any liabilities or any mortgage, charge or other
security interest over the whole or any part of the business,
property or assets of any member of the Pet City Group or any
such security (whenever arising or having arisen) becoming
enforceable;
(iii) any such agreement or instrument being terminated or
materially and adversely modified or any action being taken
pursuant to such agreement or instrument materially adverse
to the Pet City Group;
(iv) any interests or assets of any member of the Pet City Group
being or falling to be disposed of or charged other than in the
ordinary course of business;
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(v) any interests or assets or business of any member of the Pet City
Group in or with any firm or body or person or any arrangements
relating to such interest or business being terminated or
modified or materially and adversely affected; or
(vi) Pet City Ltd ceasing to be able to carry on business under the
name Pet City,
and no event has occurred which, under any such agreement or
instrument could result in any of the events or circumstances referred
to in paragraphs (i) to (vi) above;
(h) save as Pet City and PETsMART have agreed as being disclosed to
PETsMART prior to 25 October 1996, or as publicly announced by Pet
City prior to 25 October 1996, or as required by the Scheme, or
disclosed in the annual report and accounts of Pet City for the 52
weeks ended 27 July 1996, Pet City shall not have:
(i) issued or authorised or proposed the issue of additional shares
of any class, or securities convertible into, or rights,
warrants or options to subscribe for or acquire, any such
shares or convertible securities (save for any Pet City Shares
unconditionally issued upon or pursuant to the exercise of
options granted prior to 25 October 1996 under the Pet City
Share Option Schemes) or redeemed, purchased or reduced any
part of its share capital;
(ii) recommended, declared, paid, made or proposed to declare, pay
or make any bonus, dividend or distribution;
(iii) merged with any body corporate or acquired or disposed of or
transferred, mortgaged or charged or created any security
interest over any assets or any right, title or interest in
any asset (other than in the ordinary course of business)
which is material to the Pet City Group taken as a whole
(including shares and trade investments) or made any change
in its share or loan capital authorised or proposed or
announced any intention to propose any merger, demerger,
acquisition, disposal, transfer, mortgage, charge, security
interest or charge as aforesaid;
(iv) issued or proposed the issue of any debentures, or incurred or
increased any indebtedness (except under lines of credit
existing on 25 October 1996) or contingent liability of an
aggregate amount which is material in the context of the Pet
City Group taken as a whole;
(v) entered into any contract or commitment (whether in respect of
capital expenditure or otherwise) which is of a long-term or
unusual nature and involves an aggregate commitment of more
than L50,000 or which is material in the context of the Pet
City Group taken as a whole;
(vi) entered into any contract, reconstruction, amalgamation,
transaction or arrangement otherwise than in the ordinary
course of business which is material in the context of the Pet
City Group taken as a whole;
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(vii) entered into any contract or commitment whereby any member
of the Pet City Group guarantees the payment or performance
of any obligations of any person other than a member of the
Pet City Group which involves an aggregate commitment of
more than L25,000;
(viii) entered into any contract or commitment restricting in any
material respect the ability of any member of the Pet City
Group to compete in any area or in any line of business,
with any other person;
(ix) entered into an agreement or commitment or passed any
resolution with respect to any of the transactions or events
referred to in this paragraph;
(x) passed any resolution in general meeting to sanction, approve
or implement any such issue, merger, acquisition, disposal,
change, transaction, contract or commitment as is referred to
in this paragraph;
(xi) taken any corporate action or had any order made for its
winding-up or dissolution or for the appointment of a receiver,
administrator, administrative receiver, trustee or similar
officer of all or a material part of its assets and revenues;
or
(xii) entered into or varied the terms of any service agreement
with any of the Directors or senior executives of any member
of the Pet City Group;
(i) save as Pet City and PETsMART have agreed as being disclosed to Pet
City prior to 25 October 1996 or as publicly announced by PETsMART
prior to 25 October 1996 or in connection with the Merger, PETsMART
shall not have:
(i) recommended, declared, paid or made or proposed to declare, pay
or make any bonus, dividend or distribution (including any
rights offering) to stockholders of PETsMART;
(ii) made or proposed to make any sub-division of outstanding shares
(e.g. by way of a stock split), or any issue of warrants or
other securities convertible into or exchangeable for shares;
(iii) made or proposed to make any share re-purchases or
redemptions that would prevent the Merger from being treated
as a pooling of interests for accounting purposes; or
(iv) authorised, or proposed or announced its intention to propose:
(a) any merger or consolidation or series of related mergers or
consolidations which whether alone or taken together are
material in the context of the PETsMART Group as a whole
and which (X) would require the approval of the stock-
holders of PETsMART or (Y) involve(s) cash consideration in
excess of $200 million;
(b) any amendment to its Certificate of Incorporation or
Bylaws;
(c) any one or more related acquisition(s) or related
disposal(s) of
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assets which alone or taken together is or
are material in the context of the PETsMART Group as a
whole and which (X) would require the approval of the
stockholders of PETsMART or (Y) involve(s) whether alone or
taken together assets to a value of more than 20 per cent
of the assets of the Pet City Group; or
(d) any issuance of shares or other securities which would
require the approval of the stockholders of PETsMART;
(j) the Consideration Common Stock has been approved for listing upon
notice of issuance on the Nasdaq National Market;
(k) each affiliate of Pet City (as such term is defined by the United
States Securities and Exchange Commission) has executed and delivered
to PETsMART an Affiliate Agreement in the form previously agreed upon
by Pet City and PETsMART; and
(l) the Board of the Inland Revenue has given the Tax Clearances.
(3) PETsMART reserves the right, in its absolute discretion, to waive all or
any of the conditions 2(b), 2(e), 2(f), 2(g), 2(h), and 2(k) and all or any
of condition 2(d) insofar as it relates to Pet City or the Pet City Group
(in each case in whole or in part) and Pet City reserves the right, in its
absolute discretion, to waive all or any of the conditions 2(c) and 2(i)
and all or any of condition 2(d) (in each case in whole or in part) insofar
as it relates to PETsMART or the PETsMART Group. Conditions 2(a) and 2(l)
may be waived only with the prior consent of both PETsMART and Pet City.
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EXHIBIT 10.1
DATED 24 OCTOBER 1996
- -------------------------------------------------------------------------------
C.G. CLARKE ESQ.
- and -
PET CITY LIMITED
- and -
PETsMART INC.
- -------------------------------------------------------------------------------
SERVICE AGREEMENT
- -------------------------------------------------------------------------------
TAYLOR JOYNSON GARRETT
Carmelite
50 Victoria Embankment
Blackfriars
London EC4Y 0DX
Tel: 0171 353 1234
Fax: 0171 936 2666
DX: 41 LONDON
9/10/96
Ref: ASH/JEC
<PAGE>
THIS SERVICE AGREEMENT is made the 24th day of October 1996
BETWEEN
(1) CHARLES GILES CLARKE of Holt Manor, Holt, Wiltshire BA14 6PR (the
"Executive");
(2) PET CITY LIMITED of Unit E, The Dorcan Complex, Faraday Road, Swindon SN3
5HQ ("the Company").
(3) PETsMART INC of 10000 North 31st Avenue Suite C100 Phoenix Arizona 85051
("the Parent")
AGREED TERMS
1. This agreement is conditional upon an office copy of the Order of the Court
sanctioning the proposed scheme of arrangement to be effected by Pet City
Holdings Plc pursuant to section 425 of the Companies Act 1985 being
delivered for registration to and being registered by the Registrar of
Companies in England and Wales by not later than 31 January 1997 or such
later date as Pet City Holdings Plc and the Parent shall agree and the High
Court of Justice in England and Wales shall approve.
2. ROLE
2.1 The Executive shall be employed as Chief Executive Officer of the Company
("the Role"). In connection with the Role and during the term of this
agreement the Executive shall:
(a) be appointed as an Executive Vice President of the Parent with
particular responsibility for the development of the business of the
Parent and its subsidiary and associated companies ("the Group") in
Europe (including for the avoidance of doubt the Republic of Ireland,
United Kingdom, all other members of the European Union, Switzerland,
Austria, Iceland and all Central European States,
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Russia and those states that once formed part of the USSR and Israel
("the Territory").
(b) be appointed as Executive Vice President of any company formed to hold
or manage the Group's business interests within any part of the
Territory and;
(c) shall report direct to the Chief Executive Officer of the Parent from
time to time; and
(d) in addition and without prejudice to the generality of the foregoing,
the Executive shall in connection with the Role assume such duties and
responsibilities, powers, authorities and discretions as shall be
consistent with such a position and as may be reasonably determined by
the board of directors of the Company (the "Board") with regard to the
United Kingdom or the board of directors of the Parent with regard to
the rest of the Territory from time to time.
3. NOTICE
Subject to the provisions of clause 11 below the Executive's employment by
the Company shall continue from the date of this agreement for a period of
two years from the date that the condition set out in clause 1 shall be
satisfied. Pursuant to Section 197 of the Employment Rights Act 1996 the
Executive hereby excludes any right to compensation for unfair dismissal or
to a redundancy payment in the event of the expiry of the fixed term
without renewal.
Without prejudice to the above the Executive may terminate this contract
prior to the expiry of the fixed term by giving not less than 60 days
written notice.
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4. CONTINUITY OF EMPLOYMENT
The Executive's previous employment with Pet City Holdings Plc shall be
treated as part of his continuous period of employment which accordingly
began on 9 October 1992 (the "Commencement Date").
5. HOURS OF WORK/PLACE OF WORK
5.1 Subject to Clause 13.1 below the Executive's employment hereunder is a
"full-time" commitment to the intent that the Executive shall have no other
employment or other business interests which will interfere with his
obligations hereunder. In any event, the Executive will be required to
devote such time and attention to the service of the Company and any other
company which is a subsidiary or holding company of the Company or any
subsidiary of any such holding company (together "the Group") as may be
reasonably necessary for the proper discharge of his duties and as directed
by the Board.
5.2 The Executive's principal place of work will be Unit E, The Dorcan Complex
aforesaid or such other address as may from time to time be the Company's
principal place of business as agreed by the Executive and the Board.
6. SALARY, BONUS, EXPENSES AND OPTIONS
6.1 The Executive's salary shall be L180,000 per annum increasing to L200,000
per annum on 1 February 1998 provided that, on that date, a Group Company
has been established and is operating within The Territory outside the
United Kingdom or the Republic of Ireland. The Executive's salary shall be
paid in four-weekly instalments in arrears by direct credit transfer to the
Executive's nominated bank account.
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6.2 In addition to payment of salary in accordance with clause 6.1 the
Executive shall be entitled to a bonus payable on the terms and subject to
the conditions set out in the First Schedule.
6.3 Upon presentation of such receipts and vouchers as are reasonably required
by the Company, the Company (or another company comprised within the Group)
shall pay to the Executive the amount of all hotel, travelling,
entertainment and other out of pocket expenses reasonably and properly
incurred by him in carrying out his duties under this agreement. Any
credit card or charge card supplied to the Executive by the Company shall
be used solely for expenses incurred by him in carrying out his duties
under this agreement.
6.4 The Executive shall be entitled to participate in option schemes and
arrangements established by the Parent for the benefit of other Executive
Vice Presidents of the Parent and the level, terms, and frequency of such
grants shall be without prejudice or discrimination to the Executive (in
comparison with the level, terms and frequency of grants to other Executive
Vice Presidents).
7. MOTOR CAR
The Company shall continue to provide the Executive with a car of a type
and value appropriate (in the reasonable opinion of the Board) to the
Executive's position in the Company for the Executive's use in the
performance of his, duties under this agreement and shall pay all running
expenses in connection with it including all road tax and it is
acknowledged that the Executive's current car is so appropriate and that
any replacement would be a vehicle of equivalent value. Subject to such
restrictions and upon such conditions (if any) as the Company may from time
to time impose, the Executive shall be entitled to use this car for his own
private use. The Executive shall return this car to the Company
immediately after the termination of his employment or if he ceases at any
time during the period of his employment to hold a valid and current
license to drive private motor cars. The Executive shall at all times take
good care of the car and
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procure that it is properly taxed (at the cost of the Company), kept
in a roadworthy condition, that the provisions and conditions of any
policy of insurance relating thereto are observed and that so far as
is reasonably practical such policy is not rendered void or voidable.
For the purpose of calculating the value to the Executive of the
benefit of using the car for the Executive's private purposes the then
current Inland Revenue scales will be used.
8. HOLIDAYS
8.1 The Executive shall be entitled to 25 working days holiday, with pay in
each period of 12 months, to be taken at such time or times as the
Executive shall notify the Board. This holiday entitlement is in addition
to statutory and other public holidays.
8.2 The Executive's entitlement to holiday shall accrue pro rata to the nearest
whole day throughout each period of 12 months of the Executive's
employment.
8.3 Upon termination of his employment for whatever reason the Executive shall
either be entitled to holiday pay in lieu of holiday entitlement
outstanding or shall be required to repay to the Company any salary
received for holiday taken in excess of his actual entitlement. The basis
for calculation of such payment shall be 1/253 x annual basic salary for
each day.
9. SICKNESS OR INJURY
9.1 If the Executive shall at any time be incapacitated by illness or accident
from performing his duties then the Executive shall as soon as possible
inform the Company Secretary of such illness or accident and of the
expected date of his return to work.
9.2 Without prejudice to the provisions of the following clause and subject to
the Executive accounting to the Company for all sickness or other national
insurance benefit which may be payable to him, the Executive shall continue
to receive his salary under this agreement
5
<PAGE>
in respect of the first 13 weeks of absence through illness or injury (such
remuneration being deemed to be inclusive of any statutory sick pay to
which he may be entitled).
9.3 Immediately following the Executive's return to work after a period of
absence of seven days or less which or any part of which has not previously
been authorised by the Company he shall be required on request by the
Company to complete a self-certification form in the terms of the form
which shall be provided stating the date of and the reason for his absence,
including details of sickness on non-working days, as this information is
required by the Company for calculating statutory sick pay entitlement.
Completed self-certification forms will be retained in the Company's
records.
9.4 The Executive shall, if so required by the Company, produce a doctor's
certificate verifying that any absence from work is due to accident or
ill-health and in default such absence shall be deemed to be unjustified.
9.5 For the purposes of calculation of statutory sick pay the days on which the
Executive could qualify for payments are Monday, Tuesday, Wednesday,
Thursday and Friday.
9.6 The Executive may be required during the course of his employment to attend
a doctor or clinic nominated by the Company for the purpose of a
comprehensive medical examination to determine his fitness for continued
employment and shall cooperate in ensuring the prompt delivery of the
resulting report to the Company.
10. PENSION, MEDICAL COVER, PHI AND LIFE ASSURANCE
10.1 A contracting out certificate is not in force in respect of the Executive's
employment hereunder.
10.2 The Company agrees to make an annual lump sum contribution equal to 10 per
cent of the salary payable to the Executive in accordance with clause 6.1
(or pro rata for any part of a year during which the Executive is employed)
to an Inland Revenue approved
6
<PAGE>
personal pension scheme nominated by the Executive to be made on
4 April 1997 and on 4 April 1998 provided that such contribution shall
not exceed the amount permitted by the Inland Revenue.
10.3 Subject to the rules for the time being thereof (including the Executive
satisfying any eligibility conditions) the Executive, his spouse and his
dependent children shall be entitled to become and remain throughout the
period of his employment a member of the Pet City private medical insurance
scheme at a level appropriate to the Executive's position with the Company,
details of which are available for inspection from the Company Secretary.
10.4 Subject to the rules for the time being of such schemes (including the
Executive satisfying any eligibility conditions), the Executive shall be
entitled to become and remain throughout the period of his employment a
member of the Pet City Life Assurance and Permanent Health Insurance
schemes with a level of cover, appropriate to the Executive's position with
the Company. The details of the schemes are available for inspection from
the Company Secretary.
11.1 Notwithstanding any other provisions of this agreement, the Executive's
employment shall terminate automatically without prior notice upon the
Executive:
(a) reaching the age of 65; or
(b) being disqualified from being a director due to an order made by any
court or under any legislation from time to time in force.
11.2 Notwithstanding any other provision of this agreement, if the Executive
shall:
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<PAGE>
(a) fail or neglect efficiently and diligently to carry out his duties or
be guilty of any material or persistent breach or non-observance of
any of the provisions of this agreement;
(b) be guilty of gross misconduct or any other conduct which is in the
opinion of the Board calculated or likely to affect prejudicially the
interests of the Company or the Group, whether or not such misconduct
or other conduct occurs during or in the context of his employment;
(c) be convicted of any criminal offence involving dishonesty;
(d) be made the subject of a bankruptcy offer or have a receiving order or
an administration order made against him or makes any composition with
his creditors or otherwise takes advantage of any statute from time to
time in force offering relief for insolvent debtors; or
(e) become a patient within the meaning of the Mental Health Act 1983;
the Company may in any such case by written notice to the Executive
forthwith terminate his employment without any obligation to pay any
further sums to him whether by way of compensation, damages or otherwise in
respect of any notice period or any unexpired period of this agreement,
provided that any such termination shall be without prejudice to any other
rights of the Company.
11.3 Upon any termination of the Executive's employment the Company shall be
entitled to pay the Executive salary in lieu of notice or any unexpired
period of this agreement which would otherwise have been payable during
such period of notice or unexpired period in the amounts and at the times
provided for in this agreement. In addition, the Company may at any time
during the Executive's employment require the Executive to carry out no
duties or to remain away from the office for a period of not more than 6
months in aggregate.
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<PAGE>
11.4 Notwithstanding any other provision of this agreement, if the Executive
shall become unable properly to perform his duties hereunder by reason of
ill-health, accident or otherwise for a period or periods aggregating at
least 180 days in any period of 12 consecutive calendar months then the
Company may by not less than three month's prior written notice to the
Executive terminate his employment hereunder provided that no such notice
shall be given after the expiration of two months from the end of any such
period or, if more than one, the last of such periods aggregating at least
180 days.
11.5 In order to investigate a complaint of misconduct made against the
Executive or otherwise when in the opinion of the Board the interests of
the Company so require the Company shall be entitled to suspend the
Executive from his duties on full pay and with full entitlement to all
other benefits under this agreement for so long as the Board shall
reasonably consider appropriate (up to a maximum of 4 weeks) and to require
the Executive to stay away from any premises, employees, officers,
customers and clients of the Company or of any company within the Group.
11.6 Forthwith upon being requested by the Company and in any event upon
termination of his employment for whatever reason the Executive shall
deliver to the Company all books, documents, papers (including copies),
materials, keys and other property of or relating to the business of the
Company or of any member of the Group then in his possession or which are
or were last under his power or control including, without limitation, any
car, credit card or charge card provided in connection with the Executive's
employment.
11.7 Upon termination of the Executive's employment for whatever reason the
Company shall be entitled to deduct from any salary or other payment due to
him any sums owed by the Executive to any member of the Group under the
terms of this agreement or on any account whatsoever.
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<PAGE>
12. OTHER BUSINESS INTERESTS AND CONFIDENTIALITY
12.1 Without prejudice to the generality of clause 5.1 above, except with the
prior written consent of the Board, the Executive shall not during the
continuance of his employment be engaged or interested in or concerned with
(in any capacity whatsoever and whether on his own account or in
conjunction with any other party) any other business which will interfere
with the Executive's obligations under this agreement save that nothing in
this clause shall prevent the Executive from:
(i) being a director/shareholder of The Foster Rooms Limited provided
that this company shall be and remain a reputable company which
does not compete with or supply the Company or any company within
the Group;
(ii) with the written consent of the Chief Executive Officer of the
Parent, being an officer of any Quango or other government body;
(iii) holding or being beneficially interested in shares or securities
quoted on any recognised investment exchange ("Quoted
Securities") provided that the principal business of the company
or group of companies in which the Executive holds such Quoted
Securities is not a Relevant Business that is competitive with
that of the Company as both terms are defined in paragraph 13
below; or
(iv) with the written consent of the Chief Executive Officer of the
Parent, spending up to 2 business days per month on any other
business interests (provided that they are not competitive with
the trading interests of the Group.
12.2 The Executive shall not, either during the continuance of his appointment
under this agreement (except so far as may be necessary in carrying out his
obligations under this agreement) or thereafter, without the prior consent
in writing of the Board, divulge to any person or use or exploit except for
the benefit of the Company or any other member of the Group, and shall use
his best endeavours to prevent the publication or disclosure of any
confidential information concerning the business, finances, transactions or
affairs of the Company or any other member of the Group which has or may
come to his knowledge-either during the course of his employment under this
agreement or prior
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thereto provided that this restriction shall cease to apply to information
or knowledge which may come into the public domain otherwise than through
unauthorized disclosure by the Executive.
12.3 For the purposes of this clause "confidential information" shall comprise
all information which is identified or treated by the Company as
confidential or which by reason of its character or the circumstances or
manner of its disclosure is evidently of such a nature and without
prejudice to the generality of the foregoing shall include the Group's
store opening plan, business plan, management accounts and other key
indices including the gross margin, shrinkage rate, store contribution
percentage and stock turn of the Group.
13. POST TERMINATION COVENANTS
13.1 For the purposes of this clause:
(a) all references to the "Company" shall be construed to mean the Company
and/or any member of the Group with which the Executive has been
actively concerned during the course of his appointment under this
agreement or under his previous contract of employment with Pet City
Holdings Plc;
(b) the "Restricted Period" shall mean the period of 12 months from the
termination of the Executive's employment under this agreement;
(c) a "Restricted Employee" shall mean any person employed by any member
of the Group as a director or in a managerial or technical capacity or
as a sales representative or in a skilled or supervisory position;
(d) "Relevant Business" means the wholesale and retail sale of animals,
animal food stuffs and products relating to the up-keep of animals
within the United Kingdom carried out by the Group as at the
commencement of the Restricted Period.
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13.2 Except with the prior written consent of the Board, the Executive shall not
during the Restricted Period be engaged or interested in or concerned with
(in any capacity whatsoever and whether on his own account or in
conjunction with any other party) any person, firm or company carrying on
the Relevant Business in the United Kingdom.
13.3 Except with the prior written consent of the Board, the Executive shall
not, in competition with the Company, during the Restricted Period (in any
capacity whatsoever and whether on his own account or in conjunction with
any other party) canvass or solicit or accept, orders or facilitate the
canvassing or soliciting or acceptance of orders in respect of the Relevant
Business from any customer of the Company's Relevant Business as at the
date of the termination of the Executive's employment under this agreement
or from any person who was such a customer at any time during the period of
12 months prior thereto was a person, firm or company with whom the Company
has or had dealings, such person firm or company being or having been a
supplier or manufacturer of whom the Executive has knowledge or with whom
he has dealt at any time during the period of 12 months prior to the
termination of his appointment under this agreement.
13.4 Except with the prior written consent of the Board, the Executive shall not
during the Restricted Period (in any capacity whatsoever and whether on his
own account or in conjunction with any other party) employ or endeavour to
entice away from the Company any person who is at the date of termination
of the Executive's employment hereunder a Restricted Employee employed by
the Company and the Executive shall not discourage any such Restricted
Employee from continuing to be so employed.
13.5 The Executive hereby agrees that, he will, at the request of the Board of
Directors of the Parent, execute a deed of restriction in terms similar to
or in all respects less restrictive than the covenants contained in this
clause 13 in relation to other parts of the Territory in which the
Executive is involved in the course of his employment under this agreement.
13.6 The Executive hereby acknowledges and agrees that the covenants contained
in this clause are separate, severable and enforceable and that, having
obtained professional
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advice, the restrictions contained in such covenants are fair and
reasonable in the context of this agreement. The parties acknowledge,
however, that such restrictions are liable to be rendered invalid by
changing circumstances or other unforeseen reasons and accordingly:
(a) if any one or more of the restrictions contained in this clause shall
either individually or together be adjudged, for whatever reason, to
go beyond that which is reasonable in all the circumstances for the
protection of the legitimate interests of the Company but would be
adjudged reasonable if any particular restriction or restrictions were
deleted or limited in any manner (including, without prejudice to the
generality of the foregoing, any reduction in duration or geographical
area) the said restrictions shall apply with such deletions or
limitations; or
(b) if at any other time for whatever reason the Company shall consider it
to be in its best interests it shall be entitled, at its discretion,
by notice in writing to the Executive to delete or limit in any manner
any of the restrictions contained in this clause and in such event the
said restrictions shall apply with such deletions or limitations.
13.7 The Executive hereby acknowledges and agrees that upon the termination of
his employment hereunder he shall be obliged during the Restricted Period
to draw the provisions of this clause 13 to the attention of any third
party who may at any time either before or after the date of termination of
this agreement offer employment or appointment as a consultant to him.
14. DISCIPLINE AND GRIEVANCE PROCEDURE
There are no specific disciplinary rules applicable to the Executive's
employment hereunder and any relevant matters shall be made a subject for
discussion at the meeting of the Board next following the issue arising and
any matter that cannot be resolved to
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the mutual satisfaction of both parties shall be referred to the Chief
Executive Officer of the Parent.
15. PREVIOUS AGREEMENTS
All previous agreements or arrangements between the Executive and any
company in the Group relating to the employment of the Executive shall be
deemed to be cancelled.
16. GENERAL
16.1 No amendment to these terms shall be effective unless made in writing and
signed by or on behalf of the parties.
16.2 The information in this statement constitutes a written statement of the
terms of your employment in accordance with the provisions of the
Employment Rights Act 1996.
16.3 Any notice required to be given by either party to this agreement to the
other shall be deemed validly served if delivered by hand or sent by first
class prepaid registered or recorded delivery letter through the post to
the address of the party to be served herein given or (in the case of the
Company) the registered office of such party for the time being and any
notice so served by hand shall be deemed to have been served at the lime of
delivery and any notice so served through the post shall be deemed to have
been served forty eight hours after the time it was posted. In proving
such service it shall be sufficient to prove that the notice was properly
delivered, transmitted or (as the case may be) addressed and posted.
16.4 This agreement and the documents to be entered into as provided in this
agreement shall be governed and construed in accordance with English law
and the parties submit to the non-exclusive jurisdiction of the English
courts.
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IN WITNESS WHEREOF THIS AGREEMENT HAS BEEN EXECUTED AS, A DEED ON THE DATE
APPEARING ABOVE.
SIGNED as a Deed by )
CHARLES GILES CLARKE ) /s/ Charles Giles Clarke
in the presence of: )
EXECUTED AS A DEED BY )
PET CITY LIMITED ) /s/ Francis Richard Northcott Director
/s/ Nicholas Harrison Director/Secretary
EXECUTED AS A DEED BY ) /s/ C. Donald Dorsey Director
PETsMART INC. ) /s/ Mark S. Hansen Director/Secretary
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FIRST SCHEDULE
THE BONUS
1. In respect of the period from 1 August 1996 to 31 January 1997 the Company
will procure that the Executive is paid a bonus of L20,000. This bonus
will be paid on or before 31 March 1997.
2. (a) In respect of the periods:
(i) 1 February 1997 to 31 January 1998; and,
(ii) 1 February 1998 to the date of expiry of the fixed term of this
agreement,
the Executive shall be entitled to a bonus of 40% of his salary as
specified in clause 6.1 of the agreement to which this is a schedule
in respect of such period if EBIT exceeds Budgeted EBIT.
(b) Save as set out in 2(a) above any bonus paid to the Executive by the
Company shall be at the Board's absolute discretion.
(c) "EBIT" for the purposes of 2(a) above shall mean the earnings before
interest and taxation of the Pet City Holdings Plc, Pet City Limited
and Pet City Resources Limited (formerly Jollyes Limited) (referred to
in this Schedule as the "UK Group") as shown:
(A) in respect of the period specified in 2(a)(i) above, by the audited
consolidated profit and loss account of the UK Group for that period;
and
(B) in respect of the period specified in 2(a)(ii) above the
management accounts approved by the boards of the UK Group for that
period,
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with the following adjustments (to the extent not already taken into
account in such account):
3.
(i) after deducting all expenses (including, without prejudice to the
generality of the foregoing, the salary payable to the Executive
under this agreement (but, for the avoidance of doubt not
deducting any amount in respect of the bonus payable hereunder)
and salaries and bonuses payable by the Company under any other
service agreement to which the Company is a party), depreciation
as charged in the accounts and any revenue expenses charged
directly against reserves;
(ii) before deducting any taxation or interest on borrowed moneys or
commissions in respect of documentary credits;
(iii) before taking into account extraordinary items or capital
profits or capital losses unless provided for in the
relevant Business Plan;
(iv) after deducting any part of the profits and adding any part of
the losses of any subsidiary undertaking attributable to shares
in such subsidiary undertaking not owned by the Company or by any
subsidiary undertaking of the Company; and
(v) after making such further adjustments as the auditors for the
time being of the Company in their absolute discretion (but in
consultation with the Board and the Executive) shall consider
appropriate.
(a) "Budgeted EBIT" shall mean the figure in the Business Plan of the UK
Group for the related period that is equivalent to EBIT and, in the
event of any dispute, as certified by the auditors of the Company,
acting as experts and in their absolute discretion.
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(b) "Business Plan" shall mean the business plan of the UK Group as
approved by the Board of the Parent each year and as amended from time
to time.
(c) If any increase in the issued share capital of any company within the
UK Group shall be effected after the date hereof as a result of which
the net profits are in the opinion of the Board likely to be
materially enlarged such adjustment shall be made in the calculation
of Budgeted EBIT or the rate of bonus payable thereon (or partly one
and partly the other) as the Company and the Executive may agree or
failing agreement as the auditors of the Company from time to time in
their absolute discretion determine to be fair and reasonable for the
purpose of counteracting an increase in the bonus otherwise resulting
from the making of additional EBIT (directly or indirectly)
attributable to such increase of issued share capital.
4. (a) The bonus (if any) payable in respect of the period specified in
2(a)(i) above shall be ascertained following the completion and
adoption in general meeting of the audited consolidated accounts of
the UK Group in the year to 31 January 1998 and shall be certified by
the auditors of the Company from time to time, acting as experts and
not as arbitrators, whose decision shall be final and binding on the
parties to this agreement. Such bonus shall be paid within one month
after the completion and adoption of such accounts.
(b) The bonus (if any) payable in respect of the period specified in
2(a)(ii) above, or in respect of any period of the term of this
agreement embracing part only of either period specified in 2 (a) (i)
or (ii) above, shall be ascertained by reference to the Management
Accounts as approved by the boards of the UK Group or if required by
the Company, by the auditors of the Company from time to time, Such
bonus shall be paid within four months of the end of such period.
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