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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PETSMART, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
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2. Form, Schedule or Registration Statement No.:
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4. Date Filed:
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PETSMART, INC.
10000 N. 31ST AVENUE, SUITE C-100
PHOENIX, AZ 85051
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 20, 1997
---------------------
TO THE STOCKHOLDERS OF PETsMART, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of PETsMART,
Inc., a Delaware corporation (the "Company"), will be held on Friday, June 20,
1997, at 10:00 a.m. local time at The Westin Hotel O'Hare, 6100 River Road,
Rosemont, Illinois, for the following purposes:
1. To elect four directors to hold office until the year 2000 Annual
Meeting of Stockholders.
2. To approve an amendment to the Company's 1996 Non-Employee Directors'
Equity Plan, as amended, to increase the number of shares of Common Stock
covered thereunder from 428,570 to 700,000.
3. To ratify the selection of Price Waterhouse LLP as independent auditors
of the Company for its fiscal year ending February 1, 1998.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on May 1, 1997, as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ ALAN C. MENDELSON
Alan C. Mendelson
SECRETARY
Palo Alto, California
May 16, 1997
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
PETSMART, INC.
10000 N. 31ST AVENUE, SUITE C-100
PHOENIX, AZ 85051
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 1997
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
PETsMART, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on Friday, June 20, 1997, at 10:00 a.m. local
time (the "Annual Meeting"), or at any adjournment or postponement thereof, for
the purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at The Westin Hotel O'Hare, 6100 River Road,
Rosemont, Illinois. The Company intends to mail this proxy statement and
accompanying proxy card on or about May 16, 1997, to all stockholders entitled
to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on May 1,
1997 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on May 1, 1997, the Company had outstanding and entitled to
vote 114,608,616 shares of Common Stock. Each holder of record of Common Stock
on such date will be entitled to one vote for each share held on all matters to
be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 10000 N.
31st Avenue, Suite C-100, Phoenix, AZ 85051, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the Company's
1998 Annual Meeting of Stockholders must be received by the Company not later
than January 16, 1998 in order to be included in the proxy statement and proxy
relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Board of Directors shall be divided into three classes, each class
consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board may
be filled only by persons elected by a majority of the remaining directors. A
director elected by the Board to fill a vacancy (including a vacancy created by
an increase in the Board of Directors) shall serve for the remainder of the full
term of the class of directors in which the vacancy occurred and until such
director's successor is elected and qualified.
The Board of Directors is presently composed of nine members and upon
election of the nominees listed below will be increased to ten members. There
are currently three directors in the class whose term of office expires in 1997
and upon election of the nominees listed below this class will be expanded to
four members. Three of the nominees for election to this class are currently
directors of the Company, all of whom were previously elected by the
stockholders. The fourth nominee, Mr. Salmon, is not currently a director of the
Company. If elected at the Annual Meeting, each of the nominees would serve
until the year 2000 annual meeting and until his or her successor is elected and
has qualified, or until such director's earlier death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the four nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING
Samuel J. Parker, age 54, Chairman of the Board, joined the Company in March
1989 as President and Chief Executive Officer. Mr. Parker served as President
until January 1993, when he was elected Chairman. Effective with the annual
meeting in June 1995, Mr. Parker resigned as Chief Executive Officer but
remained as Chairman of the Board. Effective January 1997, Mr. Parker resigned
as an employee of the Company and became non-executive Chairman of the Board.
Philip L. Francis, age 50, has been a director of the Company since June
1989. Since July 1991, Mr. Francis has been President of, and since January
1993, Chief Executive Officer of Shaw's Supermarkets Inc., a subsidiary of J.
Sainsbury plc, a supermarket operator. From July 1991 to January 1993, Mr.
Francis served as Chief Operating Officer of Shaw's.
Donna R. Ecton, age 49, has been a director of the Company since June 1994,
and joined the Company as Chief Operating Officer in December 1996. From 1995
until December 1996, Ms. Ecton was Chairman, President and Chief Executive
Officer of Business Mail Express, Inc., a business services company. From 1991
to 1994, she served as the President and Chief Executive Officer of Van Houten
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North America, Inc. and Andes Candies, Inc., manufacturers of confectionery
products. Ms. Ecton also serves as a director of the Barnes Group Inc., H&R
Block, Inc., and Vencor Inc.
Walter J. Salmon, age 66, has been the Stanley Roth, Sr., Professor of
Retailing at the Harvard Business School since 1980. Mr. Salmon also serves as a
director of Circuit City Stores, Inc., Hannaford Bros. Company, Harrah's
Entertainment, Inc., Luby's Cafeterias, Inc., The Neiman Marcus Group, and The
Quaker Oats Company.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
Richard M. Kovacevich, age 53, has been a director of the Company since June
1996. Mr. Kovacevich has served as the Chairman since May 1995, as Chief
Executive Officer since January 1993, as a Director since March 1986, and as
President from January 1989 until January 1997, of Norwest Corporation, a
financial services corporation. Mr. Kovacevich served as Vice Chairman and Chief
Operating Officer of Norwest Corporation from March 1986 to January 1989. Mr.
Kovacevich is a member of the board of directors of Dayton Hudson Corporation,
Northern States Power Co. and ReliaStar Financial Corp.
Thomas G. Stemberg, age 48, has been a director of the Company since April
1988. Mr. Stemberg has served as Chairman of the Board of Directors and Chief
Executive Officer of Staples, Inc., an office supply superstore retailer, since
February 1988 and served as President from January 1986 to February 1988.
F. Richard Northcott, age 50, has been a director of the Company since
December 1996. Mr. Northcott served as the Chairman of Pet City Holdings, plc
from 1992 until its acquisition by the Company in December 1996. Mr. Northcott
also serves as the Chairman of Theo Fennell Limited, an international jeweler.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
Denis L. Defforey, age 71, has been a director of the Company since October
1991. Mr. Defforey, retired Chairman of Carrefour, S.A, a discount retailing
company, served that company in various capacities since 1959.
Lawrence S. Phillips, age 70, has been a director of the Company since May
1993. Mr. Phillips also served as a director of the Company from January 1987 to
October 1991. Mr. Phillips served as Chairman of Phillips-Van Heusen
Corporation, an apparel manufacturer and retail company, from January 1987 to
June 1994, as Chief Executive Officer from 1969 through May 1993, and as a
director from 1951 to February 1995.
Mark S. Hansen, age 42, President and Chief Executive Officer of the
Company, joined the Company in December 1989 as Senior Vice President and was
elected Executive Vice President in March 1991. Mr. Hansen was appointed Chief
Operating Officer in December 1991 and President in January 1993 and was elected
a director of the Company in September 1993. Mr. Hansen was appointed Chief
Executive Officer of the Company in June 1995.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended February 2, 1997, the Board of Directors held
five meetings. During fiscal 1996 the Board had an Audit Committee and a
Compensation Committee. In addition, a Corporate Governance Committee was
created in March 1997.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent
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<PAGE>
auditors to be retained; and receives and considers the accountants' comments as
to controls, adequacy of staff and management performance and procedures in
connection with audit and financial controls. The Audit Committee is composed of
two non-employee directors: Messrs. Francis and Kovacevich. Ms. Ecton was a
member of the Audit Committee until her employment by the Company in December
1996. Mr. Kovacevich joined the Audit Committee in October 1996. The Audit
Committee met twice during fiscal 1996.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is composed of two non-employee directors:
Messrs. Phillips and Stemberg. Ms. Ecton was a member of the Compensation
Committee until her employment by the Company in December 1996. The Compensation
Committee met three times during fiscal year 1996 and it acted by unanimous
written consent thirteen times during such fiscal year.
The Corporate Governance Committee provides advice and assistance relating
to corporate governance, to the organization and functioning of the Board of
Directors and its committees, and to the selection of members for the Board of
Directors and appointments to its committees. The Corporate Governance Committee
currently is composed of two non-employee directors: Messrs. Kovacevich and
Stemberg. Upon Mr. Salmon's election to the Board it is anticipated that Mr.
Salmon also will be appointed to the Corporate Governance Committee.
During the fiscal year ended February 2, 1997, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the committees
on which he or she served, held during the period for which he or she was a
director or committee member, respectively.
PROPOSAL 2
1996 NON-EMPLOYEE DIRECTORS' EQUITY PLAN AS AMENDED
In March 1996, the Board of Directors adopted the 1996 Non-Employee
Directors' Equity Plan (the "1996 Directors' Plan") as an amendment and
restatement of the 1992 Non-Employee Directors' Stock Option Plan authorizing
the issuance of 428,570 shares of the Company's Common Stock; which was
originally adopted on May 1992 and was amended and restated on April 1993 and
June 1994. The stockholders of the Company approved the adoption of the 1996
Directors' Plan in June 1996.
Under the 1996 Directors' Plan, on the date a non-employee director is first
elected to the Board he or she will receive an option to purchase 30,000 shares
and each year he or she will receive an option to purchase additional 9,000
shares contingent upon the non-employee director attending 75% of the regularly
scheduled meetings of the Board.
In March 1997, the Board approved an amendment to the 1996 Directors' Plan,
subject to stockholder approval, to enhance the flexibility of the Board and the
Compensation Committee in granting stock options to the Company's non-employee
directors. The amendment increases the number of shares authorized for issuance
under the 1996 Directors' Plan by 271,430 shares from 428,570 shares to a total
of 700,000 shares, clarifies terms of the 1996 Directors' Plan and eliminates
certain other terms that are no longer necessary to ensure that (i) optionees
under the 1996 Directors' Plan qualify as disinterested directors under Rule
16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or (ii) certain rights qualify for an exemption
from the definition of a derivative security under Rule 16a-1 of the Exchange
Act. The Board adopted this amendment to ensure that the Company can continue to
attract qualified non-employee directors and grant stock options at levels
determined appropriate by the Board and the Compensation Committee.
Stockholders are requested in this Proposal 2 to approve the 1996 Directors'
Plan, as amended. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy at the
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meeting and entitled to vote will be required to approve the 1996 Directors'
Plan, as amended. Abstentions will be counted toward the tabulation of votes
cast on proposals presented to the stockholders and will have the same effect as
negative votes. Broker non-votes are counted toward a quorum, but are not
counted for any purpose in determining whether the matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2
The essential features of the 1996 Directors' Plan are outlined below:
GENERAL
The 1996 Directors' Plan provides for non-discretionary grants of
nonstatutory stock options. Nonstatutory stock options granted under the 1996
Directors' Plan are intended not to qualify as "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). See "Federal Income Tax Information" for a discussion of the tax
treatment of nonstatutory stock options. The 1996 Directors' Plan also permits
non-employee directors to elect to receive their annual retainer and per meeting
attendance fees in the form of Common Stock of the Company and to defer payment
of such fees.
PURPOSE
The 1996 Directors' Plan was adopted to provide a means by which each
director who is not otherwise an employee of the Company will be given an
opportunity to purchase stock of the Company and to advance the interests of the
Company through the motivation, attraction and retention of qualified non-
employee directors. All non-employee directors are eligible to receive options
under the plan.
ADMINISTRATION
The 1996 Directors' Plan is administered by the Board of Directors. The
Board has the power to construe and interpret the 1996 Directors' Plan and is
authorized to delegate administration of such plan to a committee composed of
not fewer than two members of the Board (the "Committee"). As used herein with
respect to the 1996 Directors' Plan, the "Board" refers to the Committee as well
as to the Board of Directors itself.
ELIGIBILITY
Only non-employee directors of the Company are eligible to participate in
the 1996 Directors' Plan.
STOCK SUBJECT TO THE PLAN
An aggregate of 428,570 shares of Common Stock are issuable under the 1996
Directors' Plan. Upon approval of Proposal 2, 700,000 shares of Common Stock
will be issuable under the 1996 Directors' Plan. As of April 1, 1997, options to
purchase an aggregate of 376,878 shares of Common Stock had been granted
pursuant to the 1996 Directors' Plan and 51,692 shares remained available for
future grant thereunder. If options granted under the 1996 Directors' Plan
expire or otherwise terminate without being exercised, the Common Stock not
purchased pursuant to such options again becomes available for issuance under
the plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under the
1996 Directors' Plan.
NON-DISCRETIONARY GRANTS. Option grants under the 1996 Directors' Plan are
automatic and non-discretionary. The plan provides that each person elected for
the first time to be a non-employee director
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after adoption of the plan by the Board will be granted an option on the date of
his or her initial election as a director to purchase 30,000 shares of Common
Stock. On February 10 of each year, each non-employee director who is then a
member of the Board and who has served as a non-employee director for at least
six months and has attended at least 75% of the regularly scheduled Board
meetings held during the time he or she was a non-employee director during the
previous fiscal year of the Company, will receive an option to purchase 9,000
shares of Common Stock.
OPTION EXERCISE. Options under the 1996 Directors' Plan "vest" as to 1/4 of
the shares subject to the option at the end of one year from the date of grant,
and 1/36 of the shares remaining subject to the option at the end of each month
thereafter, so long as the optionee continues to provide services to the
Company, or its affiliates, as a director or otherwise.
EXERCISE PRICE; PAYMENT. The exercise price of all options granted under
the 1996 Directors' Plan is 100% of the fair market value of the Common Stock of
the Company on the date on which the option is granted. The exercise price of
options granted under the 1996 Directors' Plan must be paid either (i) in cash
at the time the option is exercised; or (ii) by delivery of other Common Stock
of the Company that have been held for the requisite period necessary to avoid a
charge to the Company's reported earnings and valued at the fair market value on
the date of exercise; or (iii) by a combination of the methods of payment
specified in (i) or (ii) above. At May 9, 1997, the closing price of the
Company's Common Stock as reported on the Nasdaq National Market was $11.50 per
share.
TERMS. The maximum term of options under the 1996 Directors' Plan is 10
years. An option may be exercised following termination of the optionee's
services to the Company and its affiliates only for that number of shares for
which it was exercisable on the date of termination of such services.
PAYMENT OF FEES IN COMMON STOCK
A non-employee director may elect to receive payment of meeting attendance
and annual retainer fees in the form of Common Stock of the Company and to defer
payment of these fees.
An election to receive fees in the form of Common Stock of the Company shall
be effective with respect to fees payable following the date of the election. An
election to receive payment of fees in the form of the Company's Common Stock
may be revoked only by a subsequent election to receive payment of fees in cash,
which election shall be effective only with respect to fees payable (i) six
months or more after the date of the election or (ii) such shorter period, if
any, as would not cause the payment of fees in Common Stock to be a non-exempt
purchase under Rule 16b-3.
The number of shares of Common Stock shall be determined by dividing the
amount of each fee payable by the fair market value of the Company's Common
Stock on the date such fees were earned. The amount of any fractional share will
be paid in cash.
A non-employee director may elect to defer payment of fees that are payable
in the form of Common Stock until a date specified by the non-employee director
that is on or after the termination of the non-employee director's service (the
"deferred payment date"). An initial election to defer payment of fees must be
made on or before the date of the annual meeting of the Company's stockholders
preceding the date such fees would, absent the deferral election, be payable.
If a non-employee director has elected to receive his or her fees in the
form of Common Stock, a certificate for the number of shares of Common Stock to
which the non-employee director is entitled will be issued as soon as reasonably
practicable following the date (deferred or current) the non-employee director
is to receive the fee. Prior to issuance, shares of Common Stock subject to a
non-employee director's deferral election shall be maintained as a bookkeeping
entry only.
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The deferred payment date elected by a non-employee director may not be
changed, except that it may be postponed by an amendment to the deferral
election that is made at least 12 months in advance of the original deferred
payment date.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1996 Directors' Plan or
subject to any option under the 1996 Directors' Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
1996 Directors' Plan and options outstanding thereunder will be appropriately
adjusted as to the type of security and the maximum number of shares subject to
the 1996 Directors' Plan and the type of security, number of shares and price
per share of stock subject to outstanding options.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1996 Directors' Plan provides that, in the event of a dissolution or
liquidation of the Company, specified types of merger or other capital
reorganization in which more than 50% of the shares of the Company entitled to
vote are exchanged, to the extent permitted by law, the time during which such
option may be exercised will be accelerated and the options terminated if not
exercised prior to such event.
DURATION, AMENDMENT AND TERMINATION
Unless sooner terminated, the 1996 Directors' Plan will terminate on May 11,
2002, or upon the occurrence of any event described in the paragraph under the
heading "Effect of Certain Corporate Events." The Board may suspend or terminate
the 1996 Directors' Plan without stockholder approval or ratification at any
time or from time to time. The Board may also amend the 1996 Directors' Plan at
any time or from time to time, subject to stockholder approval when required by
Nasdaq.
RESTRICTIONS ON TRANSFER
Under the 1996 Directors' Plan, an option may not be transferred by the
optionee otherwise than by will or by the laws of descent and distribution.
During the lifetime of an optionee, an option may be exercised only by the
optionee, or by his guardian or legal representative.
FEDERAL INCOME TAX INFORMATION
There normally are no tax consequences to the optionee or the Company by
reason of the grant of nonqualified stock options.
Upon the exercise of an option, the difference between the market value of
the Common Stock on the date of exercise and the option price would be taxable
to the non-employee director as ordinary income. Subject to the requirement of
reasonableness, this amount will be deductible by the Company in form of a
business expense deduction.
Upon disposition of stock acquired upon exercise of a nonstatutory stock
option, the optionee will recognize a capital gain or loss in an amount equal to
the difference between the selling price and the sum of the amount paid for such
shares plus any amount recognized as ordinary income by reason of the exercise
of the option. Such gain or loss will be long or short-term depending on whether
the stock was held for more than one year from the date on which ordinary income
was measured. There are no tax consequences to the Company by reason of the
disposition by the optionee of Common Stock acquired upon exercise of a
nonstatutory stock option.
Directors' fees, whether payable in cash or Common Stock of the Company, are
taxable upon receipt by the director.
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PLAN BENEFITS
The following table presents certain information with respect to options,
which will be granted under the 1996 Directors' Plan within the twelve months
following the date hereof to (i) each non-employee director and nominee and (ii)
all non-employee directors and nominees as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES
SUBJECT TO
DOLLAR VALUE OF OPTIONS
NAME GRANTS GRANTED OF TOTAL
- --------------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
Philip L. Francis.................................................... -- 9,000
Thomas G. Stemberg................................................... -- 9,000
Denis L. Defforey.................................................... -- 9,000
Lawrence S. Phillips................................................. -- 9,000
Richard M. Kovacevich................................................ -- 9,000
F. Richard Northcott................................................. -- 9,000
Walter J. Salmon (1)................................................. -- 39,000
All non-employee directors and nominees as a group................... -- 93,000
</TABLE>
- ------------------------
(1) If Mr. Salmon is elected to the Board of Directors, he will receive an
initial option grant to purchase 30,000 shares at the conclusion of the 1997
annual meeting plus an annual option grant to purchase 9,000 shares in
February 1998.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending February 1, 1998 and has further
directed that management submit the selection of independent auditors for
ratification by the stockholders at the Annual Meeting. Price Waterhouse LLP has
audited the Company's financial statements since the fiscal year ended January
28, 1990. Representatives of Price Waterhouse LLP are expected to be present at
the Annual Meeting, will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
Stockholder ratification of the selection of Price Waterhouse LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Price Waterhouse
LLP to the stockholders for ratification as a matter of good corporate practice.
If the stockholders fail to ratify the selection, the Audit Committee and the
Board will reconsider whether or not to retain that firm. Even if the selection
is ratified, the Audit Committee and the Board in their discretion may direct
the appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Price Waterhouse LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of April 1, 1997 (except as may be noted in the
associated footnote) by: (i) each director and nominee; (ii) each of the
executive officers named in the Summary Compensation Table employed by the
Company in that capacity on April 1, 1997; (iii) all executive officers,
directors and nominees of the Company as a group; and (iv) all those known by
the Company to be beneficial owners of more than five percent of its Common
Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP (1)
------------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
- ----------------------------------------------- ------------- ---------------
<S> <C> <C>
FMR Corp. (2) ................................. 9,465,906 8.27%
82 Devonshire Street
Boston, MA02109
Fourcar, B.V. ................................. 8,763,018 7.65%
Gebauw Autumn
Overschiestraat 184 P
1062 XK Amsterdam
Samuel J. Parker (3)........................... 1,089,544 *
Mark S. Hansen (4)............................. 805,881 *
C. Donald Dorsey (5)........................... 630,300 *
Lawrence S. Phillips (6)....................... 137,938 *
Philip L. Francis (7).......................... 111,144 *
Ronald E. Brown (8)............................ 75,317 *
Ronald H. Butler (9)........................... 157,616 *
Ronald E. Grove (10)........................... 138,079 *
Donna R. Ecton (11)............................ 30,851 *
Thomas G. Stemberg (12)........................ 71,981 *
Denis L. Defforey (13)......................... 28,292 *
Richard M. Kovacevich.......................... 8,400 *
F. Richard Northcott (14)...................... 872,096 *
Walter J. Salmon (15).......................... 150 *
All executives officers and directors as a 4,416,466 3.81%
group (18 persons) (16)......................
</TABLE>
- ------------------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "SEC"). Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting and
investment power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 114,526,781 shares outstanding on April
1, 1997, adjusted as required by rules promulgated by the SEC.
(2) Based upon a Schedule 13G filed by FMR Corp. ("FMR") reporting such
beneficial ownership as of May 8, 1997. Consists of 9,465,906 shares over
which FMR has sole dispositive power and 505,740 shares over which FMR has
sole voting authority pursuant to discretionary investment management
9
<PAGE>
agreements. The shares are held in various fiduciary accounts for which FMR
acts as investment manager.
(3) Includes 971,686 shares held by Mr. Parker or his wife as trustees of the
Samuel J. and Sandra S. Parker Family Trust. Also includes 117,858 shares of
Common Stock subject to options exercisable on or before May 31, 1997.
(4) Includes 334,513 shares of Common Stock subject to options exercisable on or
before May 31, 1997.
(5) Includes 431,558 shares held by Mr. Dorsey or his wife as trustees of the C.
Donald Dorsey and Lydia Dorsey Revocable Trust dated August 5, 1993 and
3,588 shares held by Donaldson, Lufkin & Jenrette as IRA Custodian for C.
Donald Dorsey. Also includes 194,642 shares of Common Stock subject to
options exercisable on or before May 31, 1997.
(6) Includes 22,938 shares of Common Stock subject to options exercisable on or
before May 31, 1997.
(7) Includes 7,852 shares of Common Stock held by each of Mr. Francis' two minor
children. Also includes 103,292 shares of Common Stock subject to options
exercisable on or before May 31, 1997.
(8) Includes 75,000 shares of Common Stock subject to options exercisable on or
before May 31, 1997.
(9) Includes 156,250 shares of Common Stock subject to options exercisable on or
before May 31, 1997.
(10) Includes 137,500 shares of Common Stock subject to options exercisable on
or before May 31, 1997.
(11) Includes 29,751 shares of Common Stock subject to options exercisable on or
before May 31, 1997.
(12) Includes 33,646 shares of Common Stock subject to options exercisable on or
before May 31, 1997.
(13) Consists of 28,292 shares of Common Stock subject to options exercisable on
or before May 31, 1997.
(14) Includes 601,982 shares of Common Stock held by Mr. Northcott's spouse and
262,114 shares of Common Stock held by Thornhill Trust AG.
(15) Consists of 150 shares of Common Stock held by Goldman, Sachs & Co. as IRA
Custodian for Walter J. Salmon.
(16) Includes 3,125,377 shares of Common Stock held by directors, nominees and
executive officers of the Company, and entities affiliated with such
persons. Also includes 1,291,089 shares of Common Stock subject to stock
options held by executive officers and directors exercisable on or before
May 31, 1997. See Notes 3 through 15.
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(a)
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended February 2, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with except that one
amendment to a transaction report for Mr. Mendelsohn was filed late.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each of the Company's non-employee directors receive an annual retainer of
$6,000 and payments of $1,000 for each regularly scheduled Board of Directors
and committee meetings attended. As described in Proposal 2, it is proposed to
permit these fees to be paid in the Company's Common Stock on a current or
10
<PAGE>
deferred basis. Such directors are also reimbursed for certain expenses in
connection with attendance at Board and committee meetings. Directors who are
employees of the Company do not receive separate compensation for their services
as directors, but are eligible to receive stock options under the 1995 Equity
Incentive Plan (the "Incentive Plan"). Non-employee directors are not eligible
to receive stock options under the Incentive Plan.
Each non-employee director of the Company receives stock option grants under
the 1996 Directors' Plan (see discussion under Proposal 2). Only non-employee
directors of the Company or an affiliate of such directors (as defined in the
Code) are eligible to receive options under the 1996 Directors' Plan. Options
granted under the 1996 Directors' Plan are intended by the Company not to
qualify as incentive stock options under the Code.
During fiscal 1996, options to purchase an aggregate of 105,000 shares of
the Company's Common Stock were granted to non-employee directors at an exercise
price ranging from $16.59 to $23.00; no options were exercised under the 1996
Directors' Plan in fiscal 1996.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended February 2, 1997,
January 28, 1996, and January 29, 1995, compensation awarded or paid to, or
earned by, the Company's Chief Executive Officer and its other four most highly
compensated executive officers at February 2, 1997 (the "Named Executive
Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
--------------------------------------- UNDERLYING
OTHER ANNUAL STOCK ALL OTHER
SALARY COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION ($)(1) BONUS ($) $(2) (#)(3) ($)(4)
- --------------------------------------- --------- ----------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Mark S. Hansen ........................ 1996 $ 400,000 $ 80,000 -- -- $ 3,540
President and Chief Executive Officer 1995 $ 279,800 $ 139,900 -- 175,000 $ 3,516
1994 $ 190,000 $ 80,000 -- 75,000 $ 2,248
C. Donald Dorsey ...................... 1996 $ 275,000 $ 44,000 -- -- $ 3,540
Executive Vice President 1995 $ 245,200 $ 100,000 -- 36,000 $ 3,516
1994 $ 160,000 $ 80,000 105,000 $ 2,248
Ronald H. Butler (5) .................. 1996 $ 275,000 $ 44,000 -- -- --
Executive Vice President, Marketing 1995 197,116 $ 100,000 -- 186,000 --
1994 -- -- -- -- --
Ronald E. Brown (6) ................... 1996 $ 215,000 $ 34,400 -- -- $ 1,155
Senior Vice President, Store 1995 $ 175,000 $ 75,000 $ 49,669 186,000 --
Operations 1994 -- -- -- -- --
Ronald E. Grove (7) ................... 1996 $ 200,000 $ 32,000 -- -- --
Senior Vice President, Logistics & 1995 -- -- -- -- --
Business Development 1994 -- -- -- -- --
</TABLE>
- ------------------------------
(1) Includes amounts earned but deferred at the election of the Named Executive
Officer.
(2) Consists of reimbursement of relocation expenses (including tax gross-up).
(3) PETsMART has not granted any SARs or restricted stock awards.
(4) Consists of discretionary contributions made by PETsMART to PETsMART's
401(k) Plan on behalf of such employees.
(5) Mr. Butler joined the Company in April 1995.
(6) Mr. Brown joined the Company in January 1995.
(7) Mr. Grove joined the Company in March 1995.
11
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1995 Equity
Incentive Plan (the "Incentive Plan"). As of April 1, 1997, options to purchase
a total of 20,993,707 shares were outstanding under the Incentive Plan and
options to purchase 8,873,459 shares remained available for grant thereunder. No
options were granted under the Incentive Plan to the Named Executive Officers
during the year ended February 2, 1997.
The following table shows for the fiscal year ended February 2, 1997,
certain information regarding options exercised by and held at year end by, the
Named Executive Officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
VALUE FY-END (#) FY-END ($)(2)
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------- ----------------- -------------- ----------------- ------------------------
<S> <C> <C> <C> <C>
Mark S. Hansen..................... 85,000 $ 1,824,520 374,245/375,893 $ 5,989,164/$3,682,996
C. Donald Dorsey................... 83,852 $ 1,823,228 195,445/183,697 $ 2,901,402/$1,929,202
Ronald H. Butler................... -- -- 131,250/240,750 $ 896,875/$1,769,625
Ronald E. Brown.................... 100,000 $ 1,029,036 50,000/222,000 $ 566,667/$2,316,500
Ronald E. Grove.................... -- -- 112,500/259,500 $ 646,875/$1,694,625
</TABLE>
- ------------------------
(1) Value realized is based on the fair market value of PETsMART Common Stock on
the date of exercise minus the exercise price.
(2) Based on the fair market value of PETsMART's Common Stock at January 31,
1997 ($22.75), the last trading day of the fiscal year, minus the exercise
price of the option, multiplied by the number of shares underlying the
option.
EMPLOYMENT AGREEMENTS
The Company has entered into employment letter agreements with each of Mark
S. Hansen and C. Donald Dorsey. The agreements with Messrs. Dorsey and Hansen
terminate at the end of the Company's fiscal year ending January 31, 1999 and
February 1, 1998, respectively. The agreements provide for an annual salary and
bonus to be determined from time to time by the Compensation Committee of the
Board of Directors and participation in the Company's employee benefits
programs. In the event the employment of Messrs. Hansen or Dorsey is terminated
by the Company for reasons other than cause, the executive will be entitled to
receive a severance allowance equal to one year's compensation, which consists
of base salary, a pro rata bonus and continuation of health care benefits. If
the executive's employment is terminated voluntarily or for cause, no severance
allowance will be provided.
In 1995, the Company entered into a letter agreement with Donald S. Spear,
former Senior Vice President of the Company, under which Mr. Spear began a leave
of absence from the Company for up to three years. During the first year of Mr.
Spear's leave only, the Company paid him a salary continuation of $50,000, and
guaranteed him a bonus of $25,000 payable at the end of the Company's 1995
fiscal year.
12
<PAGE>
In October 1996, the Company entered into an employment agreement with C.
Giles Clarke, Executive Vice President Europe. The agreement terminates on
December 18, 1998, provides for an annual salary and bonus, participation in the
Company's employee benefits programs, use of an automobile, and pension
contributions. In the event Mr. Clarke's employment is terminated by the Company
for reasons other than cause, Mr. Clarke shall be entitled to receive a
severance allowance equal to the unexpired portion of the agreement. If Mr.
Clarke's employment is terminated voluntarily or for cause, no severance
allowance will be permitted.
Each executive officer and salaried employee has entered into a
non-competition agreement which prohibits such officer or employee from
competing with the Company for a period of one year after termination of his/her
employment. Each executive officer has also entered into a proprietary
information and inventions agreement in which the officer agrees to assign to
the Company any right, title or interest in any and all inventions and
proprietary information (as defined), conceived, reduced to practice or learned
during his/her employment and agreed for one year after termination of
employment not to induce any employee to leave the Company or solicit the
business of any client or customer of the Company.
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors is responsible for
establishing the policies and programs which determine the compensation of
PETsMART's executive officers. The Committee sets base cash compensation and
incentive bonus compensation on an annual basis for the Chief Executive Officer
and other executive officers of the Company. In addition, the Compensation
Committee, consisting of two non-employee directors, has exclusive
responsibility to recommend for Board approval grants of incentive stock options
or other equity incentives to executive officers. The Committee considers both
internal and external data in determining officers' compensation, including
input from outside compensation consultants and independent executive
compensation data. All decisions by the Compensation Committee relating to the
compensation of the Company's executive officers are reviewed by the full Board.
COMPENSATION PHILOSOPHY
When creating policies and making decisions concerning executive
compensation, we:
- ensure that the executive team has clear goals and accountability with
respect to Company performance;
- establish pay opportunities that are competitive based on prevailing
practices for our industry, our stage of growth and the labor markets in
which we operate;
- assess results fairly and regularly in light of expected Company
performance; and
- align pay incentives with the long-term interests of the Company's
stockholders.
COMPENSATION PROGRAM
PETsMART's executive compensation program has three major components, all of
which are intended to attract, retain and motivate highly effective executives:
1. BASE SALARY for executive officers is set annually by reviewing, in
order of importance, the skills and performance levels of individual
executives, the needs of the Company and the competitive
- ------------------------
(1) The material in this report is not "soliciting material," is not deemed
filed with the SEC, and is not to be incorporated by reference into any
filing of the Company under the Securities Act of 1933, as amended (the
"1933 Act") or the Exchange Act, whether made before or after the date
hereof and irrespective of any general incorporation language contained in
such filing.
13
<PAGE>
pay practices of comparable companies. The Committee believes that the
base annual salaries it pays to its executives are somewhat lower than
those paid to executives of comparable companies in the industry and
other high-performance retailers. It seeks, however, to provide its
executives with opportunities for higher compensation through bonuses and
stock options.
2. CASH INCENTIVE COMPENSATION is designed to motivate executives to attain
short-term and long-term corporate and business goals. Our policy is to
have a significant portion of an executive's total cash compensation tied
to the Company's overall performance. At the beginning of each fiscal
year, each executive officer is assigned a bonus award target equal to a
specified percentage of his or her annual base salary. For fiscal 1996,
Mr. Hansen, the Chief Executive Officer of the Company, was assigned a
bonus award target of approximately 50% of his annual salary. The bonus
award target for each executive is determined by the Compensation
Committee at the beginning of each fiscal year based on the executive's
position and responsibilities. Actual bonus payout to an executive
officer in relation to his or her bonus target is a function of two
measures for the prior fiscal year: the Company's overall performance
relative to a net income target, and the individual's success in meeting
certain specified individual objectives. Actual bonuses generally range
from zero, if neither Company nor individual performance goals are met,
to a maximum of 200% of an executive's bonus target if both Company and
individual performance goals are substantially exceeded.
3. EQUITY-BASED INCENTIVE COMPENSATION is provided to certain employees,
including executive officers, through the Incentive Plan. Under the
Incentive Plan, executive officers are granted stock options based on
their responsibilities and position in the Company. These options
generally terminate 10 years from the date of grant subject to vesting
during the participant's employment with the Company. Options issued
prior to 1996 generally vest ratably over a period of four years. Annual
option grants to executive officers for fiscal 1996 and fiscal 1997 vest
only at the end of three years, and are intended to be part of a new
program of smaller but more frequent annual stock option grants. Annual
grants of an aggregate of 1,088,000 shares for fiscal 1996 and an
aggregate of 869,000 shares for fiscal 1997 have been granted to
executive officers. In granting options under the Incentive Plan, the
Compensation Committee takes into account each executive's
responsibilities, relative position in the Company, and past grants. The
purpose of the Incentive Plan is to instill the economic incentives of
ownership and to create management incentives to improve stockholder
value. Vesting periods under the Incentive Plan are utilized to encourage
executives to remain with the Company and to focus on longer-term
results.
OTHER EXECUTIVE COMPENSATION
PETsMART provides programs to executives that are also available to other
Company employees, including the 401(k) Savings Plan, medical/dental/vision
benefits and the Company's Employee Stock Purchase Plan, which allows employees
to purchase shares of the Company's Common Stock at a discount, subject to
certain limitations. There is no pension program. In addition, the Company has
implemented a Non-Qualified Deferred Compensation Plan pursuant to which
executive officers and directors of the Company can elect to defer receipt of
certain salary and cash bonus payments. The Company provides a car allowance to
its executives, but generally does not provide other perquisites.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mark S. Hansen, PETsMART's President and Chief Executive Officer, joined the
Company in December 1989 as Senior Vice President and was elected Executive Vice
President in March 1991. Mr. Hansen was elected Chief Operating Officer in
December 1991, President in January 1993 and Chief Executive Officer in June
1995. The Company has entered into an employment letter agreement with Mr.
Hansen which provides for an annual salary and bonus to be determined from time
to time by the Compensation Committee, at its discretion.
14
<PAGE>
Mr. Hansen is eligible to participate in the same executive compensation
plans available to the other executive officers of the Company. Mr. Hansen's
base salary for fiscal 1996 was $400,000, an increase of $120,200 over fiscal
1995. Mr. Hansen's incentive bonus payment for fiscal 1996, paid in fiscal 1997,
was $80,000, or 40% of his bonus award target for the year.
The Compensation Committee has set Mr. Hansen's base salary for fiscal 1997
at $500,000, and has set his bonus target for fiscal 1997 at 75% of his base
salary based on its subjective evaluation of various factors, including the
importance to PETsMART of the exceptionally high level of leadership and
strategic planning contributed by Mr. Hansen, compensation paid to executives of
comparable companies in the retail industry and the importance to PETsMART and
its stockholders of keeping the Company in its industry leadership position.
LIMITATION ON DEDUCTION OF COMPENSATION PAID TO CERTAIN EXECUTIVE OFFICERS
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
executive officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code.
The statute containing this law and the applicable Treasury regulations
offer a number of transitional exceptions to this deduction limit for
pre-existing compensation plans, arrangements and binding contracts. As a
result, the Compensation Committee believes that at the present time it is quite
unlikely that the compensation paid to any executive officer in a taxable year
which is subject to the deduction limit will exceed $1 million. The Compensation
Committee has determined that stock options granted under the Company's
Incentive Plan with an exercise price at least equal to the fair market value of
the Company's Common Stock on the date of grant should be treated as
"performance-based compensation." Accordingly, the Incentive Plan has previously
been amended to provide for an annual per person limitation on the size of
option grants and such amendment has been approved by the stockholders. Any
compensation recognized by a Named Executive Officer as a result of the exercise
of such a stock option will be deductible by the Company.
COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS
Lawrence S. Phillips
Thomas G. Stemberg
15
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON(1)
The following chart shows the value of an investment of $100 made (i) on
July 23, 1993 in the Company's Common Stock, (ii) on June 30, 1993, in the
Standard & Poors 500 Index, and (iii) on June 30, 1993, in the Standard & Poors
Retail Stores -- Specialty Index, including reinvestment of dividends, as of the
last day of the fiscal years ended January 30, 1994, January 29, 1995, January
28, 1996, and February 2, 1997.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PETSMART, INC. S&P 500 S&P RETAIL (SPECIALTY)
<S> <C> <C> <C>
7/23/93 $100 $100 $100
1/30/94 125 109 100
1/29/95 138 109 100
1/28/96 170 151 93
2/02/97 273 191 102
</TABLE>
As of May 9, 1997 the value of an investment of $100 made on July
23, 1993 in the Company's Common Stock equaled $138.
- ------------------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the Exchange Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
16
<PAGE>
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with its executive
officers and directors which provide, among other things, that the Company will
indemnify such officer or director, under the circumstances and to the extent
provided for therein, for expenses, damages, judgments, fines and settlements he
or she may be required to pay in actions or proceedings which he or she is or
may be made a party by reason of his or her position as a director, officer or
other agent of the Company, and otherwise to the full extent permitted under
Delaware law and the Company's Bylaws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ ALAN C. MENDELSON
ALAN C. MENDELSON
Secretary
May 16, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 2, 1997 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: INVESTOR RELATIONS, PETSMART, INC.,
10000 N. 31ST AVENUE, SUITE C-100, PHOENIX, AZ 85051.
17
<PAGE>
PETSMART, INC.
1996 NON-EMPLOYEE DIRECTORS' EQUITY PLAN
Adopted by the Board of Directors on March 28, 1996
Approved by the Stockholders on June 21, 1996
Amended March 27, 1997
Reflects 2:1 Stock Dividend paid July 19, 1996
to Holders of Record as of July 8, 1996
INTRODUCTION
The PETsMART, Inc. 1996 Non-Employee Directors' Equity Plan (the "Plan")
was adopted on March 28, 1996 as an amendment and restatement of the 1992
Non-Employee Directors' Stock Option Plan, which was originally adopted on
May 11, 1992 and was amended and restated on April 11, 1993 and on June 24,
1994. The Plan was last amended to read as set forth herein on March 27,
1997.
1. PURPOSE.
(a) The purpose of the Plan is to provide a means by which each
director of PETsMART, Inc., a Delaware corporation (the "Company"), who is
not otherwise an employee of the Company or of any Affiliate of the Company
(each such person being hereafter referred to as a "Non-Employee Director")
will be given an opportunity to purchase stock of the Company. The Plan also
permits Non-Employee Directors to elect to receive their annual retainer and
meeting attendance fees in the form of common stock of the Company and to
defer such payments.
1.
<PAGE>
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are
defined in Sections 424(e) and (f), respectively, of the Internal Revenue
Code of 1986, as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success
of the Company.
(d) The Company intends that the options issued under the Plan not be
incentive stock options as that term is used in Section 422 of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to
a committee, as provided in subparagraph 2(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To construe and interpret the Plan and options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any option agreement, in
a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(2) To amend the Plan as provided in paragraph 12.
2.
<PAGE>
(3) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee").
If administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore
possessed by the Board, subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and
revest in the Board the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 11 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate Seven Hundred Thousand
(700,000) shares of the Company's common stock. If any option granted under
the Plan shall for any reason expire or otherwise terminate without having
been exercised in full, the stock not purchased under such option shall again
become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Only Non-Employee Directors of the Company may participate in the Plan.
3.
<PAGE>
5. NON-DISCRETIONARY GRANTS.
(a) Each person who is elected for the first time to be a Non-Employee
Director of the Company shall, upon the date of his initial election to be a
Non-Employee Director by the Board or stockholders of the Company, be granted
an option to purchase Thirty Thousand (30,000) shares of common stock of the
Company on the terms and conditions set forth herein.
(b) On February 10 of each year each person who is then, and who has
been for at least six (6) months, a Non-Employee Director of the Company and
who attended at least seventy-five percent (75%) of the regularly scheduled
meetings of the Board held while such Non-Employee Director was so serving
during the previous fiscal year of the Company shall be granted an option to
purchase Nine Thousand (9,000) shares of common stock of the Company on the
terms and conditions set forth herein. Should the date of grant set forth
above be a legal holiday, such grant shall be made on the next business day.
6. OPTION PROVISIONS.
Each option shall contain the following terms and conditions:
(a) No option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) The exercise price of each option shall be one hundred percent
(100%) of the fair market value of the stock subject to such option on the
date such option is granted.
(c) The purchase price of stock acquired pursuant to an option shall be
paid, to the extent permitted by applicable statutes and regulations, either
1. in cash at the time the option is exercised, or 1. by delivery to the
Company of shares of common stock of the Company that have been held for the
requisite period necessary to avoid a charge to the Company's reported
4.
<PAGE>
earnings and valued at the fair market value on the date of exercise, or (3)
by a combination of such methods of payment.
(d) An option shall not be transferable except by will or by the laws
of descent and distribution, and shall be exercisable during the lifetime of
the person to whom the option is granted only by such person or by his
guardian or legal representative. The person to whom the option is granted
may, by delivering written notice to the Company, in a form satisfactory to
the Company, designate a third party who, in the event of the death of the
optionee, shall thereafter be entitled to exercise the option.
(e) An option shall vest with respect to each optionee as follows: (i)
twenty-five percent (25%) of the total number of shares subject to the option
shall vest one year after the grant date of such option and (ii) one
thirty-sixth (1/36) of the remaining seventy-five percent (75%) of the shares
subject to such option shall vest at the end of each additional one-month
period following the vesting of the first twenty-five percent (25%) pursuant
to subsection (i) above, provided that the optionee has, during the entire
period prior to such vesting date, continuously served as a Non-Employee
Director or as an employee of or consultant to the Company or any Affiliate
of the Company, whereupon such option shall become fully exercisable in
accordance with its terms with respect to that portion of the shares
represented by that installment.
(f) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 6(d), as a condition of exercising
any such option: (1) to give written assurances satisfactory to the Company
as to the optionee's knowledge and experience in financial and business
matters; and (2) to give written assurances satisfactory to the Company
5.
<PAGE>
stating that such person is acquiring the stock subject to the option for
such person's own account and not with any present intention of selling or
otherwise distributing the stock. These requirements, and any assurances
given pursuant to such requirements, shall be inoperative if (i) the issuance
of the shares upon the exercise of the option has been registered under a
then-currently-effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), or (ii), as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then-applicable
securities laws.
(g) Notwithstanding anything to the contrary contained herein, an
option may not be exercised unless the shares issuable upon exercise of such
option are then registered under the Securities Act or, if such shares are
not then so registered, the Company has determined that such exercise and
issuance would be exempt from the registration requirements of the Securities
Act.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company
to register under the Securities Act either the Plan, any option granted
under the Plan, or any stock issued or issuable pursuant to any such option.
If the Company is unable to obtain from any such regulatory commission or
agency the authority
6.
<PAGE>
which counsel for the Company deems necessary for the lawful issuance and
sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. PAYMENT OF FEES IN COMMON STOCK
(a) A Non-Employee Director may elect to receive payment of his or her
annual retainer and meeting attendance fees from the Company in the form of
common stock of the Company. Such an election shall be effective with
respect to fees payable six months or more following the date of the
election. An election to receive payment of fees in the form of the
Company's common stock may be revoked only by a subsequent election to
receive payment of fees in cash, which election shall be effective with
respect to fees payable (i) six months or more after the date of the election
or (ii) such shorter period, if any, as would not cause the payment of fees
in common stock to be a non-exempt purchase under Rule 16b-3 of the
Securities Exchange Act of 1934 (the "Exchange Act"). The number of shares of
the Company's common stock to be paid to a Non-Employee Director shall be
determined by dividing the amount of each fee payable by the fair market
value of the Company's common stock on the date such fees were earned. The
amount of any fractional share shall be paid in cash.
(b) A Non-Employee Director may elect to defer payment of any annual
retainer and meeting attendance fees from the Company that are payable in the
form of common stock of the
7.
<PAGE>
Company to a date specified by the Non-Employee Director that is on or after
termination of the Non-Employee Director's service (the "deferred payment
date"). An initial election to defer payment of fees must be made within 30
days following the adoption of the Plan or on or before the date of the
annual meeting of the Company's shareholders preceding the date such fees
would, absent the deferral election, be payable. An election to defer fees
must be made: (i) within 30 days after the approval of this Plan by the
Company's stockholders, or (ii) for later elections, on or before the date of
the annual meeting of the Company's shareholders immediately preceding the
date the fees would otherwise be payable. A Non-Employee Director's deferred
payment date may not be changed, except that it can be postponed by an
amendment to the deferral election that is made at least 12 months before the
original deferred payment date.
(c) If a Non-Employee Director has elected to receive his or her fees
in the form of common stock, a certificate for the number of shares of common
stock to which the Non-Employee Director is entitled shall be issued as soon
as reasonably practicable following the date (deferred or current) the
director is to receive the fee. Prior to issuance, shares of common stock
subject to a Non-Employee Director's deferral election shall be maintained as
a bookkeeping entry only.
10. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any
of the rights of a holder
8.
<PAGE>
with respect to, any shares subject to such option unless and until such
person has satisfied all requirements for exercise of the option pursuant to
its terms.
(b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the
service of the Company or any Affiliate or shall affect any right of the
Company, its Board or stockholders or any Affiliate to terminate the service
of any Non-Employee Director with or without cause.
(c) No Non-Employee Director, individually or as a member of a group,
and no beneficiary or other person claiming under or through him, shall have
any right, title or interest in or to any option reserved for the purposes of
the Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(d) In connection with each option made pursuant to the Plan, it shall
be a condition precedent to the Company's obligation to issue or transfer
shares to a Non-Employee Director, or an affiliate of such Non-Employee
Director, or to evidence the removal of any restrictions on transfer, that
such Non-Employee Director make arrangements satisfactory to the Company to
insure that the amount of any federal or other withholding tax required to be
withheld with respect to such sale or transfer, or such removal or lapse, is
made available to the Company for timely payment of such tax.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of
9.
<PAGE>
shares, exchange of shares, change in corporate structure or otherwise), the
Plan and outstanding options will be appropriately adjusted as to the type of
security and maximum number of shares subject to the Plan and the type of
security and number of shares and price per share of stock subject to
outstanding options.
(b) In the event of (i) a merger or consolidation in which the Company
is not the surviving corporation; (ii) a reverse merger in which the Company
is the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise; or (iii) any other capital reorganization in which more than fifty
percent (50%) of the shares of the Company entitled to vote are exchanged,
then, to the extent permitted by applicable law, the time during which
outstanding options may be exercised shall be accelerated to permit the
optionee to exercise all such options prior to such merger, consolidation,
reverse merger or reorganization, and the options terminated if not exercised
prior to such event.
12. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan,
provided, however, that no amendment shall be effective unless approved by
the stockholders of the Company to the extent required by Nasdaq or stock
exchange listing requirements.
(b) Rights and obligations under any option granted before any
amendment of the Plan shall not be altered or impaired by such amendment of
the Plan unless (i) the Company requests the consent of the person to whom
the option was granted and (ii) such person consents in writing.
10.
<PAGE>
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on May 11, 2002. No options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
14. CONTINUATION OF PLAN.
Notwithstanding any other provision of the Plan to the contrary, the terms
of the Plan as in effect from time to time prior to this restatement shall
remain in effect and shall apply to grants made under prior versions of the
Plan.
15. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan as amended and restated herein shall become effective upon
approval by the Board of Directors and approved by the stockholders of the
Company.
(b) No option granted after the date of this amendment and restatement of
the Plan shall be exercised or exercisable unless and until the condition of
subparagraph 15(a) above has been met.
11.
<PAGE>
PETSMART, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 20, 1997
The undersigned hereby appoints Mark S. Hansen and C. Donald Dorsey and each
of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of PETsMART, Inc. which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
PETsMART, Inc. to be held at The Westin Hotel O'Hare, 6100 River Road, Rosemont,
Illinois, on Friday, June 20, 1997 at 10:00 a.m. local time, and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3, AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
PROPOSAL 1. To elect four directors to hold office until the 2000 Annual Meeting
of Stockholders.
<TABLE>
<S> <C>
/ / FOR all nominees listed below. / / WITHHOLD AUTHORITY to
(except as marked to the contrary vote for all nominees listed below.
below)
</TABLE>
NOMINEES: Samuel J. Parker, Philip L. Francis, Donna R. Ecton, Walter J. Salmon
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S) WRITE SUCH NOMINEE(S)' NAME(S)
BELOW:
________________________________________________________________________________
________________________________________________________________________________
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
PROPOSAL 2. To approve an amendment to the Company's 1996 Non-Employee
Directors' Equity Plan, as amended, to increase the number of shares
of Common Stock covered thereunder from 428,570 to 700,000.
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 3. To ratify the selection of Price Waterhouse LLP as independent
auditors of the Company for its fiscal year ending February 1, 1998.
/ / FOR / / AGAINST / / ABSTAIN
Dated ___________________________, 1997
_______________________________________
_______________________________________
SIGNATURE(S)
PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS HEREON. IF THE STOCK IS
REGISTERED IN THE NAMES OF TWO OR MORE
PERSONS, EACH SHOULD SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, GUARDIANS AND
ATTORNEYS-IN-FACT SHOULD ADD THEIR
TITLES. IF SIGNER IS A CORPORATION,
PLEASE GIVE FULL CORPORATE NAME AND
HAVE A DULY AUTHORIZED OFFICER SIGN,
STATING TITLE. IF SIGNER IS A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP
NAME BY AUTHORIZED PERSON.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
