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PETsMART, Inc

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PETsMART, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

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 Thursday, June 22, 2000, at 10:00 a.m. local time at The Marriott Boston Long Wharf Hotel, 296 State Street, Boston, Massachusetts, 02109 for the following purposes:

	1.	To elect three directors to hold office until the 2003 Annual Meeting of Stockholders.
	2.	To ratify the selection of Deloitte & Touche LLP as independent auditors of the Company for its fiscal year ending January 28, 2001.
	3.	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, 2000, 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

Phoenix, Arizona

      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.

PETsMART, INC.

PROXY STATEMENT

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 Thursday, June 22, 2000, 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 Marriott Boston Long Wharf Hotel, 296 State Street, Boston, Massachusetts, 02109. The Company intends to mail this proxy statement and accompanying proxy card on or about May 5, 2000 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, 2000, will be entitled to notice of and to vote at the Annual Meeting. At the close of business on May 1, 2000, the Company had outstanding and entitled to vote 111,951,905 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, 19601 N. 27th Avenue, Phoenix, AZ 85027, 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.

Stockholder Proposals

      Pursuant to Rule 14a-8 of the Securities and Exchange Commission, the deadline for submitting a stockholder proposal for inclusion in the Company’s proxy statement and form of proxy for the Company’s 2001 Annual Meeting of Stockholders is January 6, 2001. Pursuant to the Company’s Bylaws, stockholders who wish to bring matters or propose nominees for director at the Company’s 2001 Annual Meeting of Stockholders must provide specified information to the Company between March 26, 2001 and April 25, 2001. Stockholders are also advised to review the Company’s Bylaws, which contain additional requirements with respect to advance notice of stockholder proposals and director nominations.

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 size of 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. There are no vacancies. There are three directors in the class whose term of office expires in 2000. Each of the nominees for election to this class is currently a director of the Company. Walter J. Salmon was previously elected by the stockholders and Jane Evans and Thierry Defforey were appointed to the Board in March 1999 and March 2000, respectively. If elected at the Annual Meeting, each of the nominees would serve until the 2003 Annual Meeting and until their successors are elected and 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 three 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 2003 Annual Meeting

      Jane Evans, age 55, has been a director of the Company since March 1999. Ms. Evans has been President and Chief Executive Officer of Gamut Interactive, an interactive television and consumer operating system provider, since 1995. From 1991 to 1995, she served as Vice President and General Manager, Home and Personal Services for US West Communications. Ms. Evans serves as a director of Georgia Pacific Corporation, Kaufmann & Broad Home Corp., Main Street & Main Incorporated and Philip Morris Companies, Inc. She also serves on the Board of Trustees of Vanderbilt University.

      Walter J. Salmon, age 69, has been a director of the Company since June 1997. He has been the Stanley Roth, Sr., Professor Emeritus of Retailing at the Harvard University Business School since 1997 and was the Stanley Roth Sr., Professor of Retailing from 1980 to 1997. Mr. Salmon also serves as a director of Circuit City Stores, Inc., Cole National Corp., Hannaford Bros. Co., Harrah’s Entertainment, Inc., Luby’s Cafeterias, Inc., The Neiman Marcus Group, and The Quaker Oats Company.

      Thierry Defforey, age 43, has been a director of the Company since March 2000. Mr. Defforey has been an Independent Fund Manager in Luxemburg since 1996. From 1991 to 1996, he was the Director in charge of equity sales for Kleinwort Benson Securities in Paris and Geneva. From 1989 to 1991, he was in charge of

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THE BOARD OF DIRECTORS RECOMMENDS

Directors Continuing in Office Until the 2001 Annual Meeting

      Norman E. Brinker, age 68, has been a director of the Company since October 1998. Mr. Brinker currently serves as Chairman of the Board and is the former Chief Executive Officer of Brinker International, an operator, owner, and franchisor of restaurants. From 1983 to 1991, he was the Chairman and Chief Executive Officer of Brinker International. He also serves as a director of Haggar Corporation, and is the founder of Steak & Ale and a former President of the Pillsbury Restaurant Group.

      Barbara A. Munder, age 54, has been a director of the Company since March 1999. Since July 1998, Ms. Munder has been Senior Vice President, New Initiatives for The McGraw-Hill Companies, an information services provider, where she is involved in electronic commerce and other corporate-wide initiatives. From July 1994 to July 1998, she was McGraw’s Senior Vice President, Corporate Affairs, and from 1991 to July 1994, she was Senior Vice President and Executive Assistant to the Chairman. Ms. Munder is also the former President of McGraw’s Corporate Contributions and Community Relations program.

      Thomas G. Stemberg, age 51, has been a director of the Company since 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 1988.

Directors Continuing in Office Until the 2002 Annual Meeting

      Lawrence A. Del Santo, age 66, has been a Director of the Company since September 1998. From 1994 until his retirement in 1997, Mr. Del Santo served as former Chairman and Chief Executive Officer of Vons Companies, a supermarket retailer. From 1993 to 1994, he served as Senior Vice President and Chief Operating Officer of American Stores Company, a retailer. Mr. Del Santo also serves as a director of Hussman International and Supervalu, Inc.

      Philip L. Francis, age 53, has been a director of the Company since 1989 and President and Chief Executive Officer since March 1998. Prior to joining the Company, Mr. Francis was President of, and since January 1993, Chief Executive Officer of Shaw’s Supermarkets, Inc., a subsidiary of J. Sainsbury plc, a supermarket operator. From 1991 to 1993, Mr. Francis served as Chief Operating Officer of Shaw’s.

      Richard K. Lochridge, age 56, has been a director of the Company since June 1998. Mr. Lochridge is the founder and has been President since 1986 of Lochridge & Company, Incorporated, a management consulting firm. He also serves as a director of Hannaford Bros. Company, Lowe’s Company, Inc., John H. Harland Company and Dover Corporation.

Board Committees and Meetings

      During the fiscal year ended January 30, 2000, the Board of Directors held eleven meetings and acted by unanimous written consent twice during such fiscal year. The Board has an Audit Committee, a Compensation Committee and a Corporate Governance Committee.

      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 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 three non-employee directors: Mr. Lochridge, Ms. Evans and Ms. Munder. It met three times during fiscal year 1999.

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      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 three non-employee directors: Messrs. Del Santo, Stemberg and Brinker. It met twice during fiscal year 1999 and acted by unanimous written consent twice during fiscal year 1999.

      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 three non-employee directors: Messrs. Salmon and Del Santo and Ms. Munder. It did not meet during the 1999 fiscal year.

      During the fiscal year 1999, all directors except Messrs. Del Santo and Stemberg attended at least 75% of the aggregate meetings of the Board, held during the period for which they were a director.

      During fiscal year 1999, each Board member attended 75% or more of the aggregate of the meetings of the committees on which he or she served, held during the period for which he or she was a committee member.

PROPOSAL 2

RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

      The Board of Directors has selected Deloitte & Touche LLP as the Company’s independent auditors for the fiscal year ending January 28, 2001, and has further directed that management submit the selection of independent auditors for ratification by the stockholders at the Annual Meeting. Representatives of Deloitte & Touche 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 Deloitte & Touche 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 Deloitte & Touche 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 Deloitte & Touche LLP.

THE BOARD OF DIRECTORS RECOMMENDS

A VOTE IN FAVOR OF PROPOSAL 2.

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SECURITY OWNERSHIP OF

      The following table sets forth certain information regarding the ownership of the Company’s Common Stock as of May 1, 2000 (except as may be noted in the associated footnote) by: (i) all those known by the Company to be beneficial owners of more than five percent of its Common Stock; (ii) each director and nominee; (iii) each of the executive officers named in the Summary Compensation Table; and (iv) all executive officers, directors and nominees of the Company as a group.

	(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, the Company believes that 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 111,951,905 shares outstanding on May 1, 2000, adjusted as required by rules promulgated by the SEC.
	(2)	Based upon a Schedule 13D filed by Carrefour S.A. and Fourcar, B.V. reporting shared voting and dispositive power over 13,182,584 shares as of February 17, 1999.

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	(3)	Based upon a Schedule 13G filed by Capital Research and Management Company (“Capital Research”) reporting such beneficial ownership as of December 31, 1999. Consists of 6,150,000 shares over which Capital Research has sole dispositive power pursuant to discretionary investment management agreements. The shares are held in various fiduciary accounts for which Capital Research acts as investment manager.
	(4)	Based upon a Schedule 13G filed by The Kaufmann Fund, Inc. reporting such beneficial ownership of 5,863,800 shares as of August  20, 1999.
	(5)	Includes 7,426 shares of Common Stock held by each of Mr. Francis’ two minor children. Also includes 410,063 shares of Common Stock subject to options exercisable on or before June 30, 2000.
	(6)	Includes 173,958 shares of Common Stock subject to options exercisable on or before June 30, 2000.
	(7)	Includes 41,612 shares of Common Stock held in trust for Mr. Stemberg’s minor children, 81,555 shares of Common Stock owned by Thomas G. Stemberg Ltd. Partnership. and 39,104 shares of Common Stock subject to options exercisable on or before June 30, 2000.
	(8)	Includes 2,000 shares held by Mr. Leonardi’s spouse. Also includes 133,959 shares of Common Stock subject to options exercisable on or before June 30, 2000.
	(9)	Includes 1,000 shares of Common Stock held by Mr. Murphy’s son. Also includes 95,951 shares of Common Stock subject to options exercisable on or before June 30, 2000.

(10)	Includes 30,000 shares of Common Stock held by Norman E. Brinker, Trustee of the Norman E. Brinker Residuary Trust. Also includes 15,500 shares of Common Stock subject to options exercisable on or before June 30, 2000.
(11)	Includes 30,750 shares of Common Stock subject to options exercisable on or before June 30, 2000.
(12)	Includes 18,000 shares of Common Stock subject to options exercisable on or before June 30, 2000.
(13)	Represents 16,125 shares of Common Stock subject to options exercisable on or before June 30, 2000.
(14)	Represents 9,375 shares of Common Stock subject to options exercisable on or after June 30, 2000.
(15)	Includes 952,160 shares of Common Stock subject to stock options held by executive officers and directors exercisable on or before June 30, 2000. See Notes 5 through 14.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Section 16(a) of the Securities Exchange Act of 1934 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 10% 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 January 30, 2000, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with.

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EXECUTIVE COMPENSATION

Compensation of Directors

      Each non-employee director of the Company receives an annual retainer of $6,000 and a per meeting fee of $1,000 (plus $1,000 for each committee meeting attended by committee members). In the fiscal year 1999, the total compensation paid to non-employee directors was $113,000. The members of the Board of Directors are also eligible for reimbursement for their expenses incurred in connection with attendance at Board meetings in accordance with Company policy.

      Each non-employee director of the Company also receives stock option grants under the 1996 Non-Employee Directors’ Equity Option Plan, as amended (the “Directors’ Plan”). Only non-employee directors of the Company or an affiliate of such directors are eligible to receive options under the Directors’ Plan. Options granted under the Directors’ Plan are intended by the Company not to qualify as incentive stock options under the Internal Revenue Code.

      Option grants under the Directors’ Plan are non-discretionary. The Directors Plan provides that each person elected for the first time to be a non-employee director 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. In February of each year, each member of the Company’s Board of Directors who is not an employee of the Company and has served as a non-employee director for at least six months or, where specified by the non-employee director, an affiliate of such director, is automatically granted under the Directors’ Plan, without further action by the Company, the Board of Directors or the stockholders of the Company, an option to purchase 9,000 shares of Common Stock of the Company. No other options may be granted at any time under the Directors’ Plan. The exercise price of options granted under the Directors’ Plan is 100% of the fair market value of the Common Stock subject to the option on the date of the option grant. Options granted under the Directors’ Plan may not be exercised until the date upon which such optionee, or the affiliate of such optionee, as the case may be, has provided one year of continuous service as a non-employee director following the date of grant of such option, whereupon such option shall become exercisable as to 25% of the option shares and the remaining 75% of the option shares shall become exercisable each month thereafter on a ratable basis over a period of 36 months in accordance with its terms. The term of options granted under the Directors’ Plan is ten years. 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.

      During the last fiscal year, the Company granted options covering 9,000 shares to each non-employee director of the Company, at an exercise price per share of $7.53125. The fair market value of such Common Stock on the date of grant was $7.53125 per share (based on the closing sales price reported in the Nasdaq Stock Market for the date of grant). As of May 1, 2000, 101,498 options have been exercised under the Directors’ Plan.

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COMPENSATION OF EXECUTIVE OFFICERS

SUMMARY OF COMPENSATION

      The following table shows for the fiscal years ended January 30, 2000, January 31, 1999, and February 1, 1998, compensation awarded or paid to, or earned by, each individual who served as the Company’s Chief Executive Officer during the fiscal year, and its other four most highly compensated executive officers at January 30, 2000 (the “Named Executive Officers”):

(10)	Represents $3,326 discretionary contributions made by the Company to the Company’s 401(k) Savings Plan and the Company’s payment of $277 premium on term life insurance.
(11)	Represents $1,820 discretionary contributions made by the Company to the Company’s 401(k) Savings Plan and the Company’s payment of $744 premium on term life insurance.

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STOCK OPTION GRANTS AND EXERCISES

      The Company grants options to its executive officers under its 1995 Equity Incentive Plan (the “Incentive Plan”). As of May 1, 2000, options to purchase a total of 13,474,872 shares were outstanding under the Incentive Plan and 2,638,276 options remained available for grant thereunder.

      The following tables show for the fiscal year ended January 30, 2000 certain information regarding options granted to, exercised by, and held at year-end by, the Named Executive Officers:

Option Grants in Last Fiscal Year

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Aggregated Option Exercises in Last Fiscal Year, and FY-End Option Values

EMPLOYMENT AND SEVERANCE AGREEMENTS

      The Company has entered into employment agreements with the Company’s Named Executive Officers which provides for an annual salary and bonus to be determined from time to time by the Board, at its discretion, and participation in the Company’s employee benefit programs. The agreement also provides for a grant of options to purchase shares of Common Stock, under the Incentive Plan, at an exercise price equal to the fair market value of the Common Stock on the date of grant in accordance with the Company’s standard vesting policy. In the event the officer’s employment is terminated by the Company for reasons other than cause, he or she will be entitled to receive a severance allowance equal to one year’s base salary. If his or her employment is terminated voluntarily or for cause, no severance allowance will be provided.

      On December 3, 1998, the Company adopted Change of Control Severance Arrangements for the Company’s Named Executive Officers. On a change of control of the Company, the arrangements provide: (a) for a lump sum salary payment equal to 1.5 to 2.0 multiplied by the sum of (i) the Named Executive Officer’s base annual salary at the highest rate in effect during the fiscal year of the Company immediately preceding the date Executive’s employment terminates, and (ii) the greater of the amount of any incentive, bonus or cash compensation that was paid to Executive during either the 12 months preceding the date Executive’s employment terminates and the 12 months immediately preceding the Change in Control; (b) that all outstanding stock options for the Executive will vest upon a Change in Control severance as determined under the terms of the stock compensation plan under which the option was granted; (c) that the Executive will be entitled (but not obligated) to continue health care coverage and life insurance coverage with the Company. The Company will continue to subsidize its portion of the premiums payable on account of the Executive for 1.5 to 2.0 years; (d) that in the event that the Executive is subject to the “golden parachute” excise tax, the Company will provide a gross-up payment to offset the financial impact of such tax to the Executive.

      As a condition of receiving these severance benefits, the Named Executive Officers signed a release of claims and confirmed the Named Executive Officers’ existing post-termination obligations regarding keeping confidential the Company’s proprietary information, refraining from soliciting the Company’s employees, other service providers, or suppliers for a limited period of time, and/or not competing with the Company for a limited period of time.

      Each Named Executive Officer has entered into a non-competition agreement that prohibits such Named Executive Officer from competing with the Company for a period of one year after termination of his employment.

      The Company has entered into an employment agreement with Philip L. Francis, the Company’s President and Chief Executive Officer. Please see the section below entitled “Report of the Compensation

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REPORT OF THE COMPENSATION COMMITTEE OF THE

      The Compensation Committee of the Board of Directors is responsible for establishing the policies and programs that 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 three non-employee directors, has exclusive responsibility to recommend for Board approval grants of 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 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. 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: (1) the Company’s overall performance relative to a net income target, and (2) the individual’s success in meeting certain

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	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 ten years from the date of grant subject to vesting during the participant’s employment with the Company. Options issued prior to 1996 and after December 4, 1997, generally vest over a period of four years. Options issued during 1996 up to December 4, 1997, generally vest 100% at the end of a three-year period. Named Executive Officers were granted options to purchase an aggregate of 650,000 shares during fiscal 1999. 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 and an annual physical examination to its executives, but generally does not provide other perquisites.

Chief Executive Officer Compensation

      Philip L. Francis joined the Company in March 1998 as President and Chief Executive Officer. The Company has entered into an employment agreement with Mr. Francis that provides for an annual salary and bonus to be determined from time to time by the Board, at its discretion. Mr. Francis is eligible to participate in the same executive compensation plans available to the other executive officers of the Company. Mr. Francis’s compensation for fiscal 1999 was $589,616 and his salary effective May 1, 2000 has been set at $620,000. Mr. Francis did not receive an incentive cash bonus payment for fiscal 1999. In lieu of the bonus, on December 6, 1999, the Board granted Mr. Francis a stock option to purchase 100,000 shares vesting over four years on the Company’s standard vesting schedule. Mr. Francis’s incentive bonus award target for fiscal 2000 is 60% of his base salary. The Board has set Mr. Francis’s compensation based on its subjective evaluation of various factors, including the importance to PETsMART of the exceptionally high level of leadership and strategic planning expected to be contributed by Mr. Francis and compensation paid to executives of comparable companies in the retail industry.

Limitation on Deduction of Compensation Paid to Certain Executive Officers

      Section 162(m) of the Internal Revenue Code (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 that is subject to the deduction limit will exceed

12

	Compensation Committee of the Board of Directors
	Norman E. Brinker
	Lawrence A. Del Santo
	Thomas G. Stemberg

13

Performance Measurement Comparison²

      The following graph shows the total stockholder return of an investment of $100 made (i) on January 29, 1995 in the Company’s Common Stock, (ii) on January 29, 1995, in the Standards & Poor’s 500 Index (“S&P 500”), and (iii) on January 29, 1995, in the Standards & Poor’s Retail Stores — Specialty Index (“Retail Specialty”), including reinvestment of dividends, as of the last day of the fiscal years ended January 29, 1995, January 28, 1996, February 2, 1997, February 1, 1998, January 31, 1999 and January 30, 2000.

Comparison of 5 Year Cumulative Total Return*

[performance line graph]

14

CERTAIN TRANSACTIONS

      The Company has entered into indemnity agreements with certain 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. See also “Employment and Severance Agreements.”

      In April 2000, the Company entered into a lease agreement for real property in Denton, Texas. The Company intends to locate a PETsMART superstore on this site. The lease is with Oaktree Plaza Limited Partnership. Norman E. Brinker, a member of the Company’s Board of Directors, is a limited partner and holds an 89% interest in the Oaktree Plaza Limited Partnership. The real property lease is for fifteen (15) years and we have five (5) five-year options to renew the lease. The annual rent is approximately $192,350 and can be increased every five (5) years up to $9,000 per year. This transaction was approved by a majority of the Board of Directors and a majority of the independent and disinterested directors. The Company believes that this transaction was made on terms no less favorable to the Company than could have been obtained from an unaffiliated third party. All future transactions between the Company and its officers, directors, principal stockholders and their affiliates will be approved by a majority of the Board of Directors, including a majority of the independent and disinterested directors, and will continue to be on terms no less favorable to the Company than could be obtained from unaffiliated third parties.

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 5, 2000

      A COPY OF THE COMPANY’S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 30, 2000 IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO: INVESTOR RELATIONS, PETsMART, INC., 19601 NORTH 27TH AVENUE, PHOENIX, AZ 85027.

15

ANNUAL MEETING OF STOCKHOLDERS

Thursday, June 22, 2000

MARRIOTT BOSTON LONG WHARF HOTEL

---------------------------------------------------------------------------

	PETsMART, INC.
	19601 North 27th Avenue

Phoenix, AZ 85027	proxy

	PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
	ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 22, 2000
	The undersigned hereby appoints Philip L. Francis and Neil T. Watanabe, 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 Marriott Boston Long Wharf Hotel, 296 State Street, Boston, Massachusetts 02109, on Thursday, June  22, 2000 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 PROPOSAL 2, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
	PLEASE VOTE BY PHONE OR INTERNET OR VOTE,
	DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN
	THE ENCLOSED RETURN ENVELOPE THAT IS POSTAGE PREPAID
	IF MAILED IN THE UNITED STATES.
	See reverse for voting instructions.

There are three ways to vote your Proxy

Your telephone or Internet vote authorizes the Named Proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.

VOTE BY PHONE — TOLL FREE — 1-800-240-6326 — QUICK *** EASY *** IMMEDIATE

•	Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week, until 12:00 p.m. on June 21, 2000.
•	You will be prompted to enter your 3-digit Company Number and your 7-digit Control Number which are located above.
•	Follow the simple instructions the Voice provides you.

VOTE BY INTERNET — http://www.eproxy.com./petm/ — QUICK *** EASY *** IMMEDIATE

•	Use the Internet to vote your proxy 24 hours a day, 7 days a week, until 12:00 p.m. on June 21, 2000.
•	You will be prompted to enter your 3-digit Company Number and your 7-digit Control Number which are located above to obtain your records and create an electronic ballot.

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we’ve provided or return it to PETsMART, Inc., c/o Shareowner Services^SM, P.O. Box 64873, St. Paul, MN 65164-0873.

If you vote by Phone or Internet, please do not mail your Proxy Card

The Board of Directors Recommends a Vote FOR Items 1 and 2.