Petsmart 2004 Annual Report Download - page 91

PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
awarded under the plans are subject to a reacquisition right held by the Company. In the event that the award
recipient's employment by, or service to, the Company is terminated for any reason, the Company is entitled
to simultaneously and automatically reacquire for no consideration all of the unvested shares of restricted
common stock previously awarded to the recipient.
In Ñscal 2004 and 2003, the Company awarded 617,000 and 583,000 shares of restricted stock and
recorded approximately $15,003,000 and $8,882,000, respectively, as deferred compensation with an oÅsetting
credit to additional paid-in capital. Such deferred compensation is being amortized ratably by a charge to
income over the four-year term of the restricted stock awards. In Ñscal 2004 and 2003, the Company recorded
$4,812,000 and $2,090,000, respectively, of compensation expense for restricted stock. During Ñscal year 2004
and 2003, approximately 125,000 and 9,000 shares, respectively, were reacquired by the Company due to
employee terminations.
Restricted Stock Bonus Plan
The Company had a Restricted Stock Bonus Plan, under which employees were awarded shares of
common stock of the Company, subject to approval by the Board of Directors. The shares of common stock
awarded under the Restricted Stock Bonus Plan are subject to a reacquisition right held by the Company. In
the event that the award recipient's employment by, or service to, the Company is terminated for any reason,
the Company should simultaneously and automatically reacquire for no consideration all of the unvested
shares of restricted common stock previously awarded to the recipient.
The employee was not required to make any cash payment as a condition of receiving the award. The
shares of restricted common stock awarded under the Restricted Stock Bonus Plan vested and were released
from the Company's reacquisition right under an accelerated schedule when the Company's common stock
price reached certain speciÑed targets.
In Ñscal 1998, the Company awarded 286,000 shares under the Restricted Stock Bonus Plan and
recorded approximately $3,003,000 as deferred compensation with an oÅsetting credit to additional paid-in
capital. The Company accounted for this plan under APB No. 25 and related Interpretations. Such deferred
compensation was being amortized ratably by a charge to income over the Ñve-year term of the restricted
stock awards. During Ñscal 2003 and 2002 approximately 5,500 and 9,200 shares, respectively, were reacquired
by the Company due to employee terminations. In Ñscal 2004, no shares were acquired by the Company due to
employee terminations.
In Ñscal 2003, all remaining shares became fully vested. At February 1, 2004 there were no remaining
outstanding shares under the Restricted Stock Bonus Plan and the compensation expense had been fully
recognized. Compensation expense was $19,000 and $172,000 in Ñscal 2003 and 2002, respectively.
Stock Options
During Ñscal 2003, the Company's stockholders approved an amendment and restatement of the 1995
Equity Incentive Plan as the 2003 Equity Incentive Plan. The amendments to the 2003 Equity Incentive Plan
included an increase of 7,000,000 shares of common stock authorized for issuance, an extension of the term to
August 31, 2007, a minimum exercise price for all options granted be equivalent to the fair market value on
the date of the grant, a cap of 20% on awards that may be granted below fair market value on the date of grant,
and the awards subject to the cap shall have a cumulative weighted average vesting period of at least three
years. The Company may grant under the PETsMART, Inc. 1997 Equity Incentive Plan and the
PETsMART, Inc. 2003 Equity Incentive Plan either incentive stock options, nonstatutory options or other
stock awards to purchase up to 19,621,700 shares of common stock. These grants are made to employees,
including oÇcers, consultants and directors of the Company, at the fair market value on the date of the grant.
At January 30, 2005, stock options to purchase 10,725,200 shares of common stock were outstanding with
F-29