PETSMART, INC.
EXECUTIVE SHORT-TERM INCENTIVE PLAN
Originally Adopted effective:
February 4, 2002
Originally Approved by the Stockholders: June 27, 2002
Amended and Restated effective: March 24, 2009
Amendment Approved by the Stockholders: June 17,
2009
This
PetSmart Executive Short-Term Incentive Plan (the “
Plan ”) provides for incentive compensation to
those key officers and employees of PetSmart, Inc. or any
affiliated entity (collectively, the “ Company
”), who, from time to time may be selected for participation.
The Plan is intended to provide incentives and rewards for the
contributions of such employees toward the successful achievement
of the Company’s financial and business goals established for
the applicable performance period. The Company’s policy is to
have a significant portion of a participant’s total
compensation tied to the Company’s performance. Payments
pursuant to the Plan are intended to qualify as
“performance-based compensation” within the meaning of
Section 162(m) of the Internal Revenue Code (“
Section 162(m) ”).
Section 2 –
Administration.
The
Plan shall be administered by the committee (the “
Committee ”) of the Board of Directors of
PetSmart, Inc. (“ PetSmart ”) that has
been designated to administer programs intended to qualify as
“performance-based compensation” within the meaning of
Section 162(m). The Committee shall have authority to make
rules and adopt administrative procedures in connection with the
Plan and shall have discretion to provide for situations or
conditions not specifically provided for herein consistent with the
purposes of the Plan. The Committee shall determine the beginning
and ending dates for each performance period. Unless otherwise
determined by the Committee, the performance period shall
correspond to PetSmart’s fiscal year. Notwithstanding any
other provision of the Plan to the contrary, the Plan shall be
administered and its provisions interpreted so that payments
pursuant to the Plan qualify as “performance-based
compensation” within the meaning of Section 162(m).
Determinations by the Committee shall be final and binding on the
Company and all participants.
Section 3 – Selection of
Participants.
The
executive officers of the Company as well as those other key
employees of the Company who, in the opinion of the Committee, may
become executive officers of the Company or who otherwise may make
comparable contributions to the Company shall be eligible to
participate in the Plan. Each performance period, the Committee may
designate from among those employees who are eligible to
participate in the Plan those employees who shall participate in
the Plan for such performance period. In the event an individual is
selected to participate in the Plan, such individual shall not also
participate in the Company’s regular Short-Term Incentive
Plan.
Section 4 – Establishing Performance
Objectives.
During
the first ninety (90) days of each performance period the
Committee shall establish one or more performance objectives, at
least one of which shall be based on a shareholder approved
business criteria. The Committee shall have discretion to establish
objectives that are not based on shareholder approved business
criteria, including objectives the achievement of which may require
subjective assessments by the Committee. Notwithstanding the
foregoing, the maximum possible payout shall be based solely on
shareholder approved business criteria. The use of non-shareholder
approved business criteria shall be used solely to reduce an award.
The shareholder approved business criteria are as
follows:
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Net
income of PetSmart as set forth in PetSmart’s audited
financial statements
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Earning per share of PetSmart as set
forth in PetSmart’s audited financial
statements
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Customer satisfaction as determined
by an independent professional survey research firm
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Increase in the trading price of
PetSmart’s stock above the trading price at the time the
criteria is established
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Return on equity, including return
on invested capital as calculated from PetSmart’s audited
financial statements
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Return on assets as calculated from
PetSmart’s audited financial statements
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Return on investments as calculated
from PetSmart’s audited financial statements
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Increase in sales, including sales
growth as calculated from PetSmart’s audited financial
statements
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end-of-year net cash (cash,
restricted cash and cash equivalents, less outstanding debt on
PetSmart’s revolving credit agreement) as calculated from
PetSmart’s audited financial statements
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criteria that are based on PetSmart’s audited financial
statements may be modified by the Committee at the time the
specific criteria are selected to take into consideration one or
more of the following: (1) changes in accounting principles
that become effective during the performance period,
(2) extraordinary, unusual or infrequently occurring events,
(3) the disposition of a business or significant assets,
(4) gains or losses from all or certain claims and/or
litigation and insurance recoveries, (5) the impact of
impairment of intangible assets, (6) restructuring activities,
(7) the impact of investments or acquisitions,
(8) changes in corporate capitalization such as stock splits
and certain reorganizations (9) changes in PetSmart’s
dividend policy, (10) common share repurchases, (10) changes
in capital expenditures, and/or (11) changes to
PetSmart’s accounts payable policies relative to payment
terms. Notwithstanding the foregoing, the Committee must select
criteria that collectively satisfy the requirements of
performance-based compensation for the purposes of
Section 162(m), including by establishing the targets at a
time when the performance relative to such targets is substantially
uncertain.
Section 5 – Establishing Target
Awards.
During
the first ninety (90) days of each performance period the
Committee shall establish a target award for each participant in
the Plan. Individual participants may earn an award payout ranging
from zero percent to a maximum of five hundred percent of their
target award. The Committee will establish an award payout schedule
based upon the extent to which the Company performance objectives
and/or other performance objectives are or are not achieved or
exceeded. Pursuant to Section 4, entitlement to an award shall
be based solely on shareholder approved business criteria; however,
non-shareholder approved criteria may be used to reduce the amount
of an award payable to one or more participants. Notwithstanding
the foregoing, no participant shall receive a payment pursuant to
the Plan that exceeds $5 million for any twelve
(12) month period. To the extent that a target award is
expressed by reference to a number of shares of the Company’s
common stock, for the purpose of applying the limitations on a
maximum award as set forth in this Section 5, unless otherwise
determined by the Committee when determining the target award, the
value of such stock shall be determined as follows: (a) if the
Company’s common stock is listed on any established stock
exchange or national market system, by reference to the closing
sales price of the Company’s common stock as quoted on such
exchange or system (or the exchange with the greatest volume of
trading in the Company’s common stock) on the date the target
award is determined by the Committee as reported in The Wall
Street Journal or such other source as the Committee deems
reliable; and (b) if there is no closing sales price for the
Company’s common stock on the date the target award is
determined by
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