PRE 14A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No.    )
 
 
Filed by the Registrant  ☒
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))
 
Definitive Proxy Statement
 
Definitive Additional Materials
 
Soliciting Material under
§240.14a-12
Petco Health and Wellness Company, 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 all boxes that apply):
 
No fee required
 
Fee paid previously with preliminary materials
 
Fee computed on table below in exhibit required by Item 25(b) per Exchange Act Rules
14a-6(i)(1)
and
0-11
 
 
 
 


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Petco Health and Wellness Company, Inc.

10850 Via Frontera

San Diego, CA 92127

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

June 22, 2023

12:00 p.m. Pacific Time

www.virtualshareholdermeeting.com/WOOF2023

To Our Stockholders: We are pleased to invite you to attend the 2023 Annual Meeting of Stockholders of Petco Health and Wellness Company, Inc. (“Petco” or, the “Company”) on Thursday, June 22, 2023 at 12:00 p.m., Pacific Time online via live audio webcast at www.virtualshareholdermeeting.com/WOOF2023 (the “Annual Meeting”) for the following purposes:

 

  1.

To elect the three director nominees named in the proxy statement as Class III directors of the Company, each to serve for a three-year term and until his or her successor has been duly elected and qualified, or until his or her earlier death, resignation, removal, retirement, or disqualification (Proposal 1);

 

  2.

To approve, on a non-binding, advisory basis, the compensation of our named executive officers (Proposal 2);

 

  3.

To approve the First Amendment to the Company’s 2021 Equity Incentive Plan to increase the number of shares of Class A Common Stock authorized for issuance under the plan (Proposal 3);

 

  4.

To approve the Amendment to the Company’s Second Amended and Restated Certificate of Incorporation to limit the liability of certain officers as permitted by Delaware law (Proposal 4);

 

  5.

To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending February 3, 2024 (Proposal 5); and

 

  6.

To transact any other business that may be properly presented at the Annual Meeting or any adjournment or postponement thereof.

The Company’s board of directors has determined to hold the Annual Meeting virtually. We believe that this is the right choice for Petco as it provides expanded stockholder access regardless of the size of the Annual Meeting or resources available to stockholders, improves communications, and allows the participants to attend the Annual Meeting safely and conveniently from any location at no additional cost.

Stockholders of record as of the close of business on April 25, 2023 are entitled to notice of, and to vote at, the Annual Meeting, or any adjournment or postponement thereof. Holders of Class A common stock are entitled to vote on all matters listed above. Holders of Class B-1 common stock are entitled to vote on all matters listed above except for Proposal 1, the election of the three director nominees named in the proxy statement as Class III directors of the Company. Holders of Class B-2 common stock are entitled to vote only on Proposal 1, the election of the three director nominees named in the proxy statement as Class III directors of the Company.

As permitted by the U.S. Securities and Exchange Commission (the “SEC”), we are providing access to our proxy materials online under the SEC’s “notice and access” rules. As a result, unless you previously requested electronic or paper delivery of our proxy materials on an ongoing basis, we are mailing to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of the proxy statement, our 2022 Annual Report, and a form of proxy card or voting instruction card (together, the “proxy materials”). This distribution process is more resource- and cost-efficient. The Notice contains instructions on how to access the proxy materials online. The Notice also contains instructions on how stockholders can receive a paper copy of the proxy materials. If you elect to receive a paper copy, the proxy materials will be mailed to you. The Notice is first expected to be mailed, and the proxy materials are first expected to be made available, to our stockholders on or about May 12, 2023.

All stockholders are cordially invited to attend our Annual Meeting, conducted virtually via live audio webcast at www.virtualshareholdermeeting.com/WOOF2023. The Company has endeavored to provide stockholders attending the Annual Meeting with the same rights and opportunities to participate as they would at an in-person meeting. You will be able to attend the Annual Meeting online and submit questions during the meeting by visiting www.virtualshareholdermeeting.com/WOOF2023. You will also be able to vote your shares electronically at the Annual Meeting.

To attend the Annual Meeting, vote, submit questions, or view the list of registered stockholders during the Annual Meeting, stockholders of record will be required to visit the meeting website listed above and log in using their 16-digit control number included on their proxy card or Notice. Beneficial owners should review the proxy materials and their voting instruction form or Notice for how to vote in advance of, and how to participate in, the Annual Meeting. Specifically, if you are a beneficial owner and your voting instruction form or the Notice does not indicate that you may vote the shares through the http://www.proxyvote.com website, you should contact your bank, broker, or other nominee (preferably at

 

 

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least 5 days before the Annual Meeting) and obtain a “legal proxy” (which will contain a 16-digit control number that will allow you to attend, participate in, or vote at the Annual Meeting). When accessing our Annual Meeting, please allow ample time for online check-in, which will begin at 11:30 a.m. Pacific Time on Thursday, June 22, 2023. On the day of the Annual Meeting, if you experience technical difficulties either during the check-in process or during the Annual Meeting, a technical assistance phone number will be made available on the virtual meeting registration page approximately 15 minutes prior to the start of the Annual Meeting.

Your vote is important. Regardless of whether or not you participate in the Annual Meeting, we hope you vote as soon as possible. You may vote online or by phone, as indicated on your proxy card or voting instruction form, or, if you received paper copies of the proxy materials by mail, you may also vote by mail by following the instructions on the proxy card or voting instruction card. Voting online or by phone, written proxy, or voting instruction card ensures your representation at the Annual Meeting regardless of whether you attend online.

By Order of the Board of Directors,

 

 

Ilene Eskenazi

Chief Legal and Human Resources Officer and Secretary

San Diego, California

May     , 2023

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR

THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 22, 2023

The Notice, proxy statement, and the Company’s 2022 Annual Report are available at www.proxyvote.com.

 

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PROXY SUMMARY

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all the information you should consider in voting your shares. Please read the complete proxy statement and our Annual Report to Stockholders for the fiscal year ended January 28, 2023 carefully before voting.

Meeting Information

 

Date:    Thursday, June 22, 2023
Time:    12:00 p.m. Pacific Time
Virtual Meeting:    www.virtualshareholdermeeting.com/WOOF2023
Record Date:    April 25, 2023

How to Vote

Your vote is important. You may vote your shares in advance of the Annual Meeting via the Internet, by telephone or by mail, or during the meeting by attending and voting electronically. Please refer to the section “If I am a stockholder of record of the Company’s shares, how do I vote?” on page 67 for detailed voting instructions. If you vote via the Internet, by telephone or plan to vote electronically during the Annual Meeting, you do not need to mail in a proxy card.

 

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INTERNET    TELEPHONE    MAIL
To vote before the meeting, visit www.proxyvote.com. To vote at the meeting, visit www.virtualshareholdermeeting.com/WOOF2023. You will need the control number printed on your notice, proxy card or voting instruction form.    Dial toll-free (1-800-690-6903) in accordance with instructions on you proxy card or the telephone number on your voting instruction form in accordance with instructions on the form. You will need the control number printed on your notice, proxy card or voting instruction form.    If you received a paper copy of the proxy materials, send your completed and signed proxy card or voting instruction form using the enclosed postage-paid envelope.

We first began sending our stockholders a Notice Regarding the Internet Availability of Proxy Materials, and made our proxy materials available, on or about May     , 2023.

 

 

 

Proposals

 

  

 

PROPOSAL #1

  

To elect the three director nominees named in the proxy statement as Class III directors of the Company, each to serve for a three-year term and until his or her successor has been duly elected and qualified, or until his or her earlier death, resignation, removal, retirement or disqualification (Proposal 1).

 

OurBoard unanimously recommends that you vote “FOR ALL” of the director nominees.

Directors

 

PROPOSAL #2

  

To approve, on a non-binding, advisory basis, the compensation of our named executive officers (Proposal 2).

 

Our Board unanimously recommends that you vote “FOR” approval, on a non-binding, advisory basis, of the 2022 compensation of our named executive officers.

Say-On-Pay

 

PROPOSAL #3

  

To approve the First Amendment to the Company’s 2021 Equity Incentive Plan to increase the number of shares of Class A Common Stock authorized for issuance under the plan (Proposal 3).

Our Board unanimously recommends that you vote “FOR” approval of the Amendment to the Company’s 2021 Equity Incentive Plan to increase the number of authorized shares of Class A Common Stock.

Equity Incentive

Plan Amendment

 

PROPOSAL #4

  

To approve the Amendment to the Company’s Second Amended and Restated Certificate of Incorporation to limit liability of certain officers as permitted by Delaware law (Proposal 4).

Our Board unanimously recommends that you vote “FOR” approval of the Amendment to the Company’s Second Amended and Restated Certificate of Incorporation to limit the liability of certain officers as permitted by Delaware law.

Certificate of

Incorporation

Amendment

 

PROPOSAL #5

  

To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending February 3, 2024 (Proposal 5).

Our Board unanimously recommends that you vote “FOR” ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2023.

Auditor

Ratification

 

 

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Board Qualifications

 

                     
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Strategic Planning/Strategy Development

 

11

                     
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Retail Experience

 

 

11

                     
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Senior Executive Leadership

 

9

                     
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Accounting/Financial Reporting

 

9

                     
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Public Company Experience

 

11

                     
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Human Capital Management

 

6

Board Tenure, Age, and Diversity

 

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Fiscal 2022 Performance Highlights

 

NET REVENUE

          RECURRING CUSTOMER REVENUE

 

$6.04B

 

+4% YoY

 

    

 

+$1.0B

 

 

    

PET CARE CENTERS (U.S. and Puerto Rico)

     TOTAL ACTIVE CUSTOMERS1

 

1,430

 

at Fiscal Year End

 

    

 

25.1M

 

 

 

1 

Total Active Customers is the total number of customers trackable by certain personal information that have made at least one transaction with us during the prior 12-month period. It reflects the inflow of new customers as well as the outflow of customers who have not made a transaction during the prior 12-month period. Previously, Total Active Customers included Pals members whose transactions were tracked by member numbers only as opposed to other personal information. Currently, only Vital Care Core member accounts with certain personal information are counted.

 

 

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SUSTAINABILITY AND CORPORATE RESPONSIBILITY

     5  

Sustainability Overview

     5  

Sustainability Governance

     6  

Petco Love

     6  

Human Capital

     6  

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

     8  

Status as a Controlled Company

     8  

Composition of the Board of Directors

     8  

Director Independence

     16  

Board Leadership Structure

     16  

Executive Sessions

     17  

Director Nominations

     17  

Procedures for Recommending Individuals to Serve as Directors

     17  

Board Qualifications and Diversity

     18  

Committees of our Board of Directors

     19  

Strategy and Risk Oversight

     21  

Stockholder Engagement

     21  

Communications with Directors

     21  

Code of Business Conduct and Ethics

     21  

Corporate Governance Guidelines

     22  

Fiscal Year 2022 Director Compensation

     22  

PROPOSAL 1—ELECTION OF DIRECTORS

     23  

INFORMATION REGARDING OUR EXECUTIVE OFFICERS

     24  

EXECUTIVE COMPENSATION

     26  

Compensation Discussion and Analysis

     26  

Compensation Committee Report

     34  

Executive Compensation Tables

     34  

PROPOSAL 2—NON-BINDING, ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

     50  

PROPOSAL 3—APPROVAL OF FIRST AMENDMENT TO THE COMPANY’S 2021 EQUITY INCENTIVE PLAN

     51  

Best Practices Under the Amended Plan

     52  

Summary of the Amended Plan

     53  

Federal Income Tax Consequences

     55  

New Plan Benefits

     56  

Awards Granted Under the 2021 Plan

     56  

PROPOSAL 4—APPROVAL OF AMENDMENT TO THE COMPANY’S SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO LIMIT THE LIABILITY OF CERTAIN OFFICERS AS PERMITTED BY DELAWARE LAW

     57  

Purpose and Effect of the Proposed Amendment

     57  

Effectiveness and Vote Required

     57  

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     58  

Principal Accountant Fees and Services

     58  

Pre-Approval of Audit and Non-Audit Services Policy

     58  

AUDIT COMMITTEE REPORT

     59  

PROPOSAL 5—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     60  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     61  

Procedures for Review, Approval, and Ratification of Related Person Transactions

     61  

Related Person Transactions

     61  

BENEFICIAL OWNERSHIP OF SECURITIES

     63  

DELINQUENT SECTION 16(a) REPORTS

     65  

QUESTIONS & ANSWERS ABOUT THE ANNUAL MEETING

     66  

OTHER MATTERS

     70  

Other Business

     70  

Submission of Stockholder Proposals for the 2024 Annual Meeting

     70  

Householding Information

     70  

Where You Can Find More Information

     70  

Appendix A

     A-1  

Appendix B

     B-1  

 

 

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Forward-Looking Statements and Website References

 

This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, concerning expectations, beliefs, plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical fact, including statements regarding our social, environmental, and other sustainability plans and goals. Although we believe that the expectations and assumptions reflected in these statements are reasonable, there can be no assurance that these expectations will prove to be correct. Forward-looking statements are subject to many risks and uncertainties, including the risk factors that we identify in our U.S. Securities and Exchange Commission filings, and actual results may differ materially from the results discussed in such forward-looking statements. We undertake no duty to update publicly any forward-looking statement that we may make, whether as a result of new information, future events or otherwise, except as may be

required by applicable law, regulation, or other competent legal authority. Forward-looking and other statements in this document may also address our progress, plans, and goals with respect to social and sustainability initiatives, and the inclusion of such statements is not an indication that these contents are necessarily material to investors or required to be disclosed in our filings with the U.S. Securities and Exchange Commission. Such plans and goals may change, and statements regarding such plans and goals are not guarantees or promises that they will be met. In addition, historical, current, and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this document.

 

 

 

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SUSTAINABILITY AND CORPORATE RESPONSIBILITY

 

Our commitment to improving the lives of pets, pet parents, and our own Petco partners is making a tangible impact, a key ingredient in what we call our purpose-driven performance. At Petco, we are dedicated to investing in and meeting the pet welfare needs of every community where our pet care centers are located. Relatedly, we believe that environmental sustainability is fundamental to the future health and wellness of pets, pet parents, and our own Petco partners.

Sustainability Overview

We are committed to being a positive contributor to the planet we share, now and in the future. Over the last three years, we’ve closely examined social responsibility and sustainability efforts across our business – from pet care, product development and sourcing, to packaging, labeling, delivery, and beyond. To help us prioritize key areas of focus and drive our sustainability approach, in 2020 we conducted a materiality* identification process and analysis from an environmental, social, and governance (“ESG”) perspective. We engaged a third party to support a rigorous materiality assessment, engaging key stakeholders’ input on ESG topics that are key to Petco’s business. These included external stakeholders (such as suppliers, industry trade groups, non-governmental organizations, and animal welfare experts), internal stakeholders across the business, and a consumer survey that generated more than 900 responses.

Based on this review, we developed our sustainability platform: a strategic plan to set the standard in responsible pet care, help people thrive, and preserve the health of our planet. These efforts culminated in the publication of our first Sustainability Report in June 2021, followed by hosting our first Sustainable Product Vendor Summit in September 2021, which welcomed 37 current and prospective vendors who submitted 480 qualified products across 269 brands. And in January 2022, we engaged a third party to conduct a company-wide assessment across a range of ESG metrics to assist with building a focused short- to mid-term framework of ESG initiatives for us to undertake. We are excited to share more details regarding those initiatives in our upcoming 2022 Sustainability Report, and are proud of our other achievements and recognition thus far, which include:

Petco’s Progress

 

    Ranking in the top 12% in the Retailing industry in the S&P Global CSA (Dow Jones Sustainability Index assessment) as of December 16, 2022.

 

    Being recognized in Newsweek’s “America’s Most Responsible Companies 2023”.

 

    Launching an ESG dashboard that measures Key Sustainability Performance Indicators quarterly.

Setting the Standard in Responsible Pet Care

 

    Becoming the first pet retailer in history to be awarded the American Humane Certified Seal of Approval.

 

    Becoming the first major pet retailer to stop selling human or bark-activated shock collars.
    Removing traditional rawhide options from our shelves in favor of safe and highly digestible alternatives.

 

    Sourcing more than 92% of the aquatic life sold at our pet care centers from aquaculture, including freshwater fish and coral.

Helping People Thrive

 

    Increasing every non-trainee partner’s base wage to at least $15 an hour. This change, along with other adjustments, resulted in approximately 15% average wage increases for our pet care center partners in fiscal 2022.

 

    Keeping healthcare benefit premiums flat since 2020, and announcing investments in fertility care, adoption, medical travel, and mental health benefits in fiscal 2022.

 

    Expanding our partner resource groups which, in partnership with our Diversity, Equity, and Inclusion (“DEI”) team, facilitate engagement activities to increase cultural competencies, educate partners on issues facing affinity group members, and deepen our workplace connections. Today, we have 7 partner resource groups: Ability at Petco; Black at Petco; LGBTQ+ at Petco; Pan Asian American at Petco; Petcontigo (Latinx) at Petco; Military and Veterans at Petco; and Women at Petco.

 

    Providing more than 400,000 hours of training across our pet care center partners in fiscal 2022.

 

    Maintaining the Petco Partner Assistance Fund, which has provided over $2 million in financial support to nearly 2,000 Petco partners who suffered a hardship, including those related to COVID-19, severe weather events, and natural disasters.

Preserving the Health of Our Planet

 

    Decreasing our energy intensity per unit of revenue by 4.3% in fiscal 2022 compared to fiscal 2021, and by 28.7% compared to fiscal 2018.

 

    Producing approximately 780 MWh of electricity annually through solar panels for our national support center in San Diego.

 

    Eliminating more than 6 million single-use plastic polybags within our owned brand supply chain.

 

    Removing nearly 1,300 pounds of trash from entering our waterways through company-wide community cleanup events.

 

    Printing 95% of our signage in Pet Care Centers on more sustainable materials.

As we continue to develop our ESG program and execute our ESG initiatives, we will strive to continue to lead the industry in making a difference for the world and all those in it, and we look forward to sharing future updates on our progress and execution against our goals.

 

 

 

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* Inclusion of information herein or in our Sustainability Report, or identifying it as material for purposes of such report or assessing our ESG initiatives, should not be construed as a characterization of the materiality or financial impact of that information with respect to Petco or for purposes of any SEC filings of Petco. For cautionary information and forward-looking statements regarding our sustainability efforts and other ESG information, see page 4 of this proxy statement.

Sustainability Governance

We are both propelled by, and held accountable for, our sustainability efforts by our board of directors (our “board” or, our “board of directors”) as well as our Chairman and Chief Executive Officer (“CEO”), who believe in the importance of sustainability for the long-term success of our business. Our board oversees ESG issues through its nominating and corporate governance committee, which reviews and provides guidance on our sustainability efforts, progress, initiatives, and priorities.

Our Vice President of Sustainability leads our efforts to implement our ESG strategy on a day-to-day basis, identifying and aligning resources and priorities, facilitating internal collaboration, and driving our performance. The role reports to our Chief Strategy Officer, reflecting our commitment to place sustainability firmly within our corporate strategy.

Our leaders view sustainability not as a separate stream of activity to our main business, but as integrated into our identity and operations. To support that integration, we have two groups of key internal stakeholders to help provide insight from across the business, support strategic alignment, champion initiatives, and help to embed them:

 

    Our Sustainability Executive Steering Committee includes 13 executive-level sustainability champions, including our CEO, who oversee important aspects of our business – such as products, services, pet care centers, e-commerce, and supply chain. In addition to helping develop our strategy, their involvement supports the integration of sustainability considerations and initiatives throughout the business.

 

    Our Sustainability Task Force includes key representatives and subject matter experts from core business areas. They drive the implementation of our initiatives both within their departments and cross-functionally and discuss ideas for improvement and innovation.

Petco Love

Petco Love, formerly the Petco Foundation, is a nonprofit organization changing lives by making communities and pet families healthier, stronger, and closer. It is a separately incorporated 501(c)(3) nonprofit organization supported both by contributions from us and contributions from Petco customers and community partners. Since its founding in 1999, Petco Love has inspired and empowered animal welfare organizations to make a difference, investing more than $346 million in adoption and medical care programs, spay/neuter

services, pet cancer research, service and therapy animals, and numerous other lifesaving initiatives. Through the Think Adoption First program, Petco Love partners with our pet care centers and animal welfare organizations across the country to increase pet adoptions, helping nearly 7 million pets to date find their new loving families.

In April 2021, Petco Love launched Petco Love Lost, a searchable database that uses facial recognition technology to help reunite lost pets with their families should they ever go missing. To date, nearly 2,500 animal welfare organizations and pet industry partners across the U.S. have adopted the platform, and Petco Love Lost has helped return over 17,000 pets to their loving homes.

Launched in August 2021, Petco Love’s Vaccinated and Loved initiative marked a significant milestone when it reached its one millionth free pet vaccine distribution in September 2022, and subsequently committed to distributing another one million free pet vaccines. Since that milestone, Petco Love has distributed an additional 430,000 free pet vaccines to its partners, bringing the total number of free pet vaccines distributed as part of its Vaccinated and Loved initiative to more than 1.4 million to date. Distributing these much-needed vaccinations in under-resourced communities is something Petco Love believes gives all pets the best chance to live long and healthy lives.

Human Capital

Our Partners

Our employees, who we call our Petco partners, are our most significant assets, and are critical to the delivery of our transformation and our continued progress. We have built an open culture where great people have the opportunity to flourish. We empower our partners to deliver on our mission of improving lives to guide our customer offerings, serve our customers, and grow within our organization. We encourage candid feedback, a broad range of opinions, innovative thinking, and, importantly, people who have a real passion for pets.

We strive to make Petco a diverse and inclusive workplace and to provide opportunities for our partners to grow and develop in their careers. We offer competitive compensation and benefits programs, as well as a range of health and wellness offerings, to help meet the needs of our partners and their families. In addition to base cash compensation, we offer our partners a mix of annual bonuses, restricted stock units, various incentive plans, an Employee Stock Purchase Plan, a 401(k) Plan with company match, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, and a range of employee assistance programs. Partners have experienced no increase in their healthcare benefit premiums since 2020, and investments in fertility care, adoption, medical travel, and mental health benefits were announced in 2022. In addition, we offer a range of webinars, trainings, and subscriptions to support our partners’ total wellbeing. Finally, in 2022, we announced that every non-trainee partner at Petco will be paid a base wage of at least $15 an hour. This change, along with other adjustments, resulted in approximately 15% average wage increases for our pet care center partners.

We also invest significant resources to attract, develop, and retain top talent. In recent years, we have streamlined methods for setting executional priorities, provided comprehensive sales training, and

 

 

 

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developed store-level sales and marketing capabilities. In fiscal 2022, we are proud to have provided more than 400,000 hours of training across our pet care center partners. In addition, nearly 50% of open General Manager and District General Managers positions were filled with internal promotions. In our support centers, we offer a range of development programs, including leadership essentials training for all new people leaders and an on-demand library of professional and leadership development content for use at the point of need.

Diversity, Equity, and Inclusion

Our commitment to fostering a diverse, equitable, and inclusive environment is key to our mission of improving the lives of pets, pet parents, and the Petco partners who work for us. This commitment begins at the top, where our CEO sets annual people goals related to achieving long term workforce diversity, equity, and inclusion outcomes. Progress on our people goals is tracked and reviewed regularly with our executive team and our board of directors, and serves as a component of our CEO’s compensation. We are committed to creating a culture where partners feel as if they can achieve their career goals through ongoing growth and development opportunities and fair and transparent performance management and promotion processes. So that our partners feel valued and heard, we gather and respond to our partners’ feedback, including, but not limited to, anonymous, periodic, and formal feedback, partner engagement surveys, round table sessions, and one-on-one interactions. We also have five Voice of the Partner Councils made up of approximately 75 partners across our pet care centers, distribution centers, and support centers who meet monthly and serve as an additional communication channel, helping develop action plans in response to concerns. Based

on the feedback received across all channels, leaders review and create action plans in an effort to drive meaningful changes in our business. In addition, all Petco leaders participate in diversity, equity, and inclusion training aimed at building respect in the workplace.

We believe that building and supporting connections between our partners and our communities creates a more fulfilling and enjoyable workplace experience. We have continued to expand our partner resource groups, which enable partners to build connections among themselves and their communities, as well as our diversity, inclusion, and belonging programs to encourage partners to bring their “whole selves” to work. We currently have seven Partner Resource Groups that are foundational to our culture of inclusion and belonging. Our current partner-led Partner Resource Groups are: Ability at Petco; Black at Petco; LGBTQ+ at Petco; Pan Asian American at Petco; Petcontigo (Latinx) at Petco; Military and Veterans at Petco; and Women at Petco. In partnership with our Diversity, Equity, and Inclusion team, these seven groups facilitate engagement activities to increase cultural competencies, educate partners on issues facing affinity group members, and deepen our workplace connections.

Health and Safety

The health, safety, and overall well-being of our partners is a top priority. We are focused on protecting and supporting our partners, as well as the people and pets in our pet care centers and the communities we serve. The Petco Partner Assistance Fund has provided over $2 million in financial support to nearly 2,000 Petco partners who suffered a hardship, including related to COVID-19, severe weather events, and natural disasters.

 

 

 

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Our well-balanced board of directors is uniquely positioned to effectively guide our strategy and oversee our operations in the rapidly-changing retail industry and macroeconomic environment. We believe that an effective board should be made up of individuals who collectively provide an appropriate balance of diverse occupational and personal backgrounds and perspectives, and who have a range of skills and expertise sufficient to provide guidance and oversight with respect to the Company’s strategy and operations. As such, our board expects directors to be open and forthright, to develop a deep understanding of the Company’s business, to exercise sound judgment in fulfilling their oversight responsibilities, to embrace Petco’s values and culture, and to possess the highest levels of integrity.

The evaluation and selection of director nominees is a key aspect of our nominating and corporate governance committee’s regular evaluation of the composition of, and criteria for membership on, our board. Our board and the nominating and corporate governance committee also actively seek to achieve a diversity of occupational and personal backgrounds on our board, including diversity with respect to demographics such as gender, race, ethnic and national background, geography, age, and sexual orientation. As part of the search process for each new director, the nominating and corporate governance committee actively seeks out women and other diverse candidates to include in the pool from which board nominees are chosen.

Status as a Controlled Company

We are currently indirectly controlled by certain funds (the “CVC Funds”) that are advised and/or managed by CVC Capital Partners (“CVC”) and Canada Pension Plan Investment Board, a Canadian company (together with its affiliates, “CPP Investments” and, together with the CVC Funds, our “Sponsors”). Our Sponsors primarily exercise their control through Scooby Aggregator, LP (our “Principal Stockholder”), who holds shares of our Class A and Class B-1 common stock. Holders of Class A common stock are entitled to vote on all Proposals that are being submitted to the stockholder vote at the Annual Meeting. Holders of Class B-1 common stock are similarly entitled to one vote per share on all matters that are being submitted to the stockholder vote at the Annual Meeting, except for Proposal 1, the election of the three director nominees named in this proxy statement as Class III directors of the Company. Holders of Class B-2 common stock are entitled to one vote per share only on Proposal 1, the election of the three director nominees named in this proxy statement as Class III directors of the Company. Our Class A common stock is currently listed on The Nasdaq Stock Market LLC (“Nasdaq”). There is no public trading market for our Class B-1 common stock or our Class B-2 common stock. We divided the voting rights between Class B-1 common stock and Class B-2 common stock in order to maintain CPP Investments’ compliance with certain regulations under the Canada Pension Plan Investment Board Act, which restricts CPP Investments from investing in securities of a corporation that carry more than 30% of the votes that may be cast for the election of directors of such corporation. Each share of our Class B-1 common stock is convertible into one share of Class A common stock at the option of the holder. As a condition to such conversion, the holder of

the shares of Class B-1 common stock to be converted must direct a holder of Class B-2 common stock to transfer an equal number of Class B-2 common shares to our Company. For additional details, see “Beneficial Ownership of Securities” below.

Because our Principal Stockholder controls approximately 69% of the outstanding voting power of the Company with respect to director elections, we are a “controlled company” under the Nasdaq rules. A controlled company is not required to have a majority of independent directors or form an independent compensation or nominating and corporate governance committee. However, despite our status as a controlled company, we do remain subject to rules that require us to have an audit committee composed entirely of independent directors. Accordingly, as described in further detail below, we currently have a fully independent audit committee. If at any time we cease to be a controlled company, we will take all actions necessary to comply with applicable SEC rules and regulations and Nasdaq rules, including appointing a majority of independent directors to our board and ensuring that we have a compensation committee and a nominating and corporate governance committee each composed entirely of independent directors, subject to permitted “phase-in” periods.

Composition of the Board of Directors

Our business and affairs are managed under the oversight of our board of directors. Our board consists of eleven directors, including four independent directors, and is divided into three classes of directors, each serving staggered three-year terms of office. Our board has the exclusive power to fix the number of directors in each class, subject to the terms of the stockholder’s agreement entered into with our Principal Stockholder at the time of our initial public offering (referred to as the “stockholder’s agreement”). Only one class of directors is elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms.

In addition, the stockholder’s agreement provides our Principal Stockholder with the right to designate a certain number of nominees for election to our board and with certain committee nomination and observer rights. Specifically, so long as our Principal Stockholder (including its permitted transferees under the stockholder’s agreement) has sold, in the aggregate, (i) 50% or less of the total outstanding shares of Class A common stock and Class B-1 common stock beneficially owned (directly or indirectly) by it upon the completion of our initial public offering, it is entitled to nominate six directors, (ii) more than 50% but less than or equal to 75% of such shares, it is entitled to nominate four directors, (iii) more than 75% but less than or equal to 90% of such shares, it is entitled to nominate two directors, and (iv) more than 90% of such shares, it is not entitled to nominate any directors. If, with our Principal Stockholder’s prior written consent, the size of our board is decreased, our Principal Stockholder is entitled to designate the same number of persons for nomination and election to our board as set forth above. If, with our Principal Stockholder’s prior written consent, the size of our board is increased beyond eleven directors, our Principal Stockholder is entitled to designate a proportional number of persons for nomination and election to our board (rounded up to the nearest whole, even number). In addition, subject to any requirements, including

 

 

 

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independence requirements for committee members imposed by applicable law or by the applicable rules of any national securities exchange on which our Class A common stock may be listed or traded, our Principal Stockholder has the right to have two of its nominees appointed to serve on each committee of our board of directors for so long as our Principal Stockholder has the right to designate at least two directors for nomination and election to our board.

Pursuant to the stockholder’s agreement, our Principal Stockholder has nominated Christopher J. Stadler, Cameron Breitner, and Nishad

Chande as designees of CVC, and Jennifer Pereira, Maximilian Biagosch, and Mary Sullivan as designees of CPP Investments, to serve on our board of directors.

Our Principal Stockholder is also entitled to designate at least four non-voting observers to attend all meetings of our board and its committees as long as our Principal Stockholder has director nomination rights under the stockholder’s agreement. For additional details, please see “—Related Person Transactions—Stockholder’s Agreement” below.

 

 

The following table sets forth information with respect to our directors as of the record date:

 

  Name    Age    Class    Director
Since
   Current Term
Expires
   Position at the Company   

Committee

Membership

 
   AC    CC      NCGC  
                 

Ronald Coughlin, Jr.

   56    I    2018    2024   

 

Chairman and Chief
Executive Officer (“CEO”)

                      

Maximilian Biagosch

   50    I    2018    2024    Director     

 

     M       

 

 

 

 

 

Cameron Breitner

   48    I    2016    2024    Director     

 

     C        M  

Sabrina Simmons

   60    I    2021    2024    Director    C*     

 

 

 

 

 

    

 

 

 

 

 

Christy Lake

   49    II    2018    2025    Director     

 

     M       

 

 

 

 

 

R. Michael (Mike) Mohan

   55    II    2021    2025    Lead Independent Director    M     

 

 

 

 

 

    

 

 

 

 

 

Jennifer Pereira

   40    II    2016    2025    Director     

 

    

 

 

 

 

 

    

 

 

 

 

 

Christopher J. Stadler

   58    II    2016    2025    Director     

 

    

 

 

 

 

 

    

 

 

 

 

 

Gary Briggs

   60    III    2018    2023    Director    M     

 

 

 

 

 

     C  

Nishad Chande

   48    III    2016    2023    Director     

 

    

 

 

 

 

 

    

 

 

 

 

 

Mary Sullivan

   59    III    2021    2023    Director     

 

    

 

 

 

 

 

     M  

 

AC: Audit Committee

 

CC: Compensation Committee

 

NCGC: Nominating and Corporate Governance Committee

     

 

M – Member

C – Chairperson

 

 

 

*  Audit Committee Financial Expert

     

 

 

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NOMINEES STANDING FOR ELECTION AS CLASS III DIRECTORS AT THE ANNUAL MEETING

For a three-year term expiring at the 2026 Annual Meeting of Stockholders

 

Gary Briggs

 

    

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Board Member Since: 2018

 

Age: 60

 

Board Committees:

     Gary has served as a member of our board of directors since 2018. Most recently, Mr. Briggs served as Chairman at Hawkfish, a data and technology firm, until May 2021. He currently serves on the board of directors of Etsy as well as Combe, Inc., a personal-care company, and served on the board of directors of Afterpay from January 2020 to January 2022 until it was acquired by Block, Inc. Between 2013 and 2018, Mr. Briggs served as the Chief Marketing Officer of Facebook, Inc. (now known as Meta Platforms, Inc.). Prior to joining Facebook, he served in various leadership roles at Google Inc. Before then, he held a number of marketing and general management leadership roles at eBay Inc., PayPal, Inc., PepsiCo, Inc., and IBM Corp. Earlier in his career, he was a management consultant with McKinsey and Company. He holds a bachelor’s degree from Brown University and a master’s degree from the Kellogg School of Management at Northwestern University. His extensive experience in marketing and brand management qualifies him to serve on our board of directors.

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Nominating and

Corporate Governance

Chairperson

 

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Nishad Chande

 

    

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Board Member Since: 2016

 

Age: 48

 

Board Committees: None

 

     Nishad has served as a member of our board of directors since 2016. He is Partner, U.S. Head of Consumer and Co-Head of Business Services at CVC, one of our Sponsors, which he joined in 2016. Prior to joining CVC, he worked at Centre Partners, a private equity firm, from 2005 to 2016, Bain & Company from 2003 to 2005, Raymond James Capital from 1999 to 2001, and Schroders from 1997 to 1999. Mr. Chande previously served on the board of directors of BJ’s Wholesale Club Holdings, Inc. Mr. Chande holds a bachelor’s degree in economics and mathematics from Dartmouth College and a master’s in business administration degree from the Wharton School at the University of Pennsylvania. His experience across multiple industries qualifies him to serve on our board of directors.

 

 

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Mary Sullivan

 

    

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Board Member Since: 2021

 

Age: 59

 

Board Committees:

     Mary has served as a member of our board of directors since 2021. Ms. Sullivan is Senior Managing Director & Chief Talent Officer at CPP Investments, one of our Sponsors, which she joined in 2015 and where she currently is responsible for talent acquisition, organizational development, international mobility, compensation and benefits, and inclusion and diversity. Prior to joining CPP Investments, Ms. Sullivan was Senior Vice President, People at Holt, Renfrew & Co., a Canadian luxury department store chain, from 2014 to 2015, where she was responsible for the Human Resources function. From 2007 to 2014, she worked at Four Seasons Hotels and Resorts, ending her career at the firm in the role of Senior Vice President, Corporate Human Resources. She also spent seven years as a leader of the Human Resources function at IMAX Corporation, ending as Senior Vice President of Human Resources. Ms. Sullivan holds a bachelor’s degree in administrative and commercial studies from the University of Western Ontario and a master’s degree in business administration from the Rotman School of Management at the University of Toronto. Her experience in leadership roles across the retail and hospitality industries qualifies her to serve on our board of directors.

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CLASS I DIRECTORS CONTINUING IN OFFICE UNTIL

THE 2024 ANNUAL MEETING OF STOCKHOLDERS

 

Ronald Coughlin, Jr.

 

Chairman and CEO

 

    

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Board Member Since: 2018

 

Age: 56

 

Board Committees: None

     Ron has served as our CEO since June 2018. He was also appointed to serve as Chairman of our board of directors in January 2021 in connection with our initial public offering. Prior to that time, he served as one of our directors since June 2018. Prior to joining us, Mr. Coughlin served from 2014 to 2018 as President of the Personal Systems segment of HP Inc. (then-Hewlett-Packard Company), a $33 billion global business that offers consumer and commercial products and services. Previously, he served as Senior Vice President of Consumer PCs, Senior Vice President of LaserJet Hardware and Commercial Document Services and Solutions, and Senior Vice President of Sales, Strategy, and Marketing at HP. Prior to joining HP in 2007, Mr. Coughlin spent 13 years at PepsiCo in a range of senior executive roles, including Chief Marketing Officer of Tropicana and PepsiCo International Beverages. Mr. Coughlin earned a bachelor’s degree in international marketing from Lehigh University and a master’s degree in business administration from the Kellogg School of Management at Northwestern University. His in-depth knowledge of the issues, challenges, and opportunities facing us and his extensive operational, executive, and technology experience qualifies him to serve on our board of directors.

 

Maximilian Biagosch

 

    

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Board Member Since: 2018

 

Age: 50

 

Board Committees:

     Maximilian has served as a member of our board of directors since 2018. Mr. Biagosch is Senior Managing Director, Global Head of Real Assets & Head of Europe at CPP Investments, one of our Sponsors, which he joined in 2015. Between 2007 and 2015, Mr. Biagosch worked at Permira Advisers LLP, an international investment firm, where he was the head of Permira’s Capital Markets Group. Prior to Permira, Mr. Biagosch worked in investment banking at Deutsche Bank and at BNP Paribas. Mr. Biagosch received a Master of Laws (LLM) from Ludwig-Maximilians-Universität Munich. His experience across multiple industries and with portfolio company operational performance improvement qualifies him to serve on our board of directors.

 

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Compensation

 

 

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Cameron Breitner

 

    

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Board Member Since: 2016

 

Age: 48

 

Board Committees:

 

     Cameron has served as a member of our board of directors since 2016. He is a Managing Partner at CVC, one of our Sponsors, which he joined in 2007. He is the head of CVC’s San Francisco office and shares responsibility for overseeing CVC’s North and South American Private Equity activities. Prior to joining CVC, Mr. Breitner was a Managing Director at Centre Partners, a private equity firm, where he worked from 1998 to 2007. Prior to Centre Partners, he worked in mergers and acquisitions at Bowles Hollowell Conner & Co. Mr. Breitner also serves on the board of directors of Advantage Solutions Inc., a leading business solutions provider to consumer goods manufacturers and retailers. Mr. Breitner has previously served on the board of directors of BJ’s Wholesale Club Holdings, Inc. and many other public and private companies. Mr. Breitner received a bachelor’s degree in psychology from Duke University. His retail industry experience qualifies him to serve on our board of directors.

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Compensation

Chairperson

 

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Nominating and

Corporate Governance

 

 

Sabrina Simmons

 

    

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Board Member Since: 2021

 

Age: 60

 

Board Committees:

     Sabrina has served as a member of our board of directors since 2021. She served as Executive Vice President and Chief Financial Officer of Gap, Inc., a worldwide clothing and accessories retailer, from 2008 to 2017. Previously, Ms. Simmons also served in the following positions at Gap: Executive Vice President, Corporate Finance from 2007 to 2008; Senior Vice President, Corporate Finance and Treasurer from 2003 to 2007; and Vice President and Treasurer from 2001 to 2003. Prior to that, Ms. Simmons served as Chief Financial Officer and an executive member of the board of directors of Sygen International plc, a British genetics company, and was Assistant Treasurer at Levi Strauss & Co., a clothing company. Ms. Simmons also serves on the board of directors of Columbia Sportswear Company and Moloco, Inc., as well as the board of directors and audit committee of Coursera, Inc. She also served on the board of directors and audit committee of e.l.f. Beauty, Inc. from 2016 to May 2021 and Williams-Sonoma, Inc. from 2015 to June 2022. Ms. Simmons holds a bachelor’s degree in business administration from the University of California, Berkeley and a master’s degree in business administration from the Anderson School at the University of California, Los Angeles. Her public company, global retail, and financial experience qualifies her to serve on our board of directors.
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CLASS II DIRECTORS CONTINUING IN OFFICE UNTIL

THE 2025 ANNUAL MEETING OF STOCKHOLDERS

 

Christy Lake

 

    

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Board Member Since: 2018

 

Age: 49

 

Board Committees:

     Christy has served as a member of our board of directors since 2018. Since April 2020, she has served as the Chief People Officer at Twilio, a cloud communications platform. Previously, from 2018 to 2020, Ms. Lake served as Senior Vice President and Chief People Officer at Box, Inc., an internet company. Prior to Box, Ms. Lake worked at Medallia, serving as VP of People and Culture from 2016 to 2018 and VP of HRBP & HR Operations in 2016. Ms. Lake also served as Global Head of HR for HP Inc.’s Personal Systems division from 2015 to 2016 and has held additional HR positions at HP Inc. and The Home Depot, among other companies. Ms. Lake holds a bachelor’s degree in political science from the University of Connecticut. Her experience in leadership across various industries qualifies her to serve on our board of directors.
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R. Michael (Mike) Mohan

 

    

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Board Member Since: 2021

 

Age: 55

 

Board Committees:

 

     Mike has served as a member of our board of directors since March 2021, and as our Lead Independent Director since July 2021. Previously, Mr. Mohan served as President and Chief Operating Officer of Best Buy Co., Inc. from June 2019 to July 2021, where he was responsible for the operations of the company’s U.S. and International businesses. From 2004 to June 2019, he served in various leadership roles at Best Buy, overseeing services, customer experience, category management, merchandising, marketing, and supply chain functions. Prior to joining Best Buy, Mr. Mohan was Vice President and General Merchandising Manager for Good Guys. Mr. Mohan also previously worked at Future Shop in Canada from 1988 to 1997, prior to Best Buy’s acquisition of the company, where he served in various merchandising roles. Mr. Mohan also serves on the board of directors of VIZIO Holding Corp., Bloomin’ Brands, Inc., and Jackson Family Wines. His extensive retail industry and management experience, coupled with his digital marketing acumen, qualifies him to serve on our board of directors.
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Jennifer Pereira

 

    

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Board Member Since: 2016

 

Age: 40

 

Board Committees: None

 

     Jennifer has served as a member of our board of directors since 2016. She is Managing Director, Direct Private Equity at CPP Investments, one of our Sponsors, which she joined in 2011 and where she currently leads consumer and retail private equity efforts in North America. Prior to joining CPP Investments, Ms. Pereira worked at the Boston Consulting Group from 2006 to 2009. Ms. Pereira also serves on the board of directors of Ultimate Kronos Group and as an observer on the board of directors of Merlin Entertainments Ltd. She holds a bachelor’s degree in engineering from the University of Toronto and a master’s degree in business administration from the Wharton School at the University of Pennsylvania. Her experience in private equity investing and the consumer and retail industries qualifies her to serve on our board of directors.

 

Christopher J. Stadler

 

    

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Board Member Since: 2016

 

Age: 58

 

Board Committees: None

 

     Christopher has served as a member of our board of directors since 2016. He is a Managing Partner at CVC, one of our Sponsors, which he joined in 2007. Mr. Stadler is on the board of the CVC Capital Partners advisory business. Prior to joining CVC, he worked for Investcorp as Head of Private Equity, North America after joining as Managing Director in 1996. Mr. Stadler previously served on the board of directors of BJ’s Wholesale Club Holdings, Inc. He holds a bachelor’s degree in economics from Drew University and a master’s degree in business administration from Columbia University. His experience across multiple industries qualifies him to serve on our board of directors.

 

 

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Director Independence

Our nominating and corporate governance committee and our board have conducted their annual review of the independence of each director nominee under the applicable Nasdaq and SEC independence standards. Based upon the nominating and corporate governance committee’s recommendation and our board’s own review and assessment, our board has affirmatively determined in its business judgment that each of Gary Briggs, Christy Lake, R. Michael (Mike) Mohan, and Sabrina Simmons is “independent” as defined under the Nasdaq rules and Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Board Leadership Structure

Our board regularly reviews its leadership structure to evaluate whether the structure remains appropriate for the Company. While our board does not have a written policy on whether the role of Chairman

and CEO should be separate or combined, we believe strong independent leadership is important for the Board to effectively perform its functions and to help ensure independent oversight of management. Therefore, our principles of corporate governance provide that at any time when the Chairman of the board is not an independent director, the independent directors may appoint, or recommend to the board for appointment, an independent director to serve as the Lead Independent Director for a period of at least one year. Accordingly, since July 2021, R. Michael (Mike) Mohan has served as our Lead Independent Director. Our board believes that our current structure, with a combined Chairman and CEO role coupled with a Lead Independent Director who is well-versed in the needs of a complex business and has strong, well-defined governance duties, gives our board a strong leadership and corporate governance structure that best serves the needs of Petco and our stockholders to drive the Company forward at this time.

 

 

The following list of duties of the Lead Independent Director does not fully capture Mr. Mohan’s active role as our board’s independent leader. Among other things, Mr. Mohan:

 

Responsibility    Description
Agendas and Information    Works closely with the Chairman and CEO in framing the issues for board consideration and setting the board agenda and with respect to information sent to the board for board meetings.
Schedules    Works closely with the Chairman and CEO to ensure that there is sufficient time for discussion of all agenda items and reviews schedules for board meetings.
Board meetings    Presides at all meetings of the board at which the Chairman is not present.
Board Structure    Participates in discussions on matters relating to the board and committee composition, leadership and director succession, and provides key inputs regarding board processes, governance, nominations, and committee structures.
Executive sessions    Has authority to call meetings of independent directors and presides at all executive sessions of the non-employee and independent directors, as applicable, and coordinates feedback to the Chairman and CEO regarding issues discussed in executive sessions.
Self-Evaluations    Helps coordinate self-evaluations of the board, its committees, and/or individual directors, as applicable.
Communicating with Directors    Acts as a liaison between the non-employee and/or independent directors and the Chairman and CEO.
Communicating with Stockholders    If requested by major stockholders, is available for consultation and direct communication, and, together with the Chairman and CEO, provides leadership to the board in the establishment of positions the board should take on issues to be voted on by stockholders.
Communicating with the Public    Acts as a spokesperson for the board in circumstances where it is appropriate for the board to have a voice distinct from that of management, as requested by the Chairman and CEO.
Informational Resource    Provides advice and counsel to the CEO and other senior management, and serves as an informational resource for other directors.

In addition to the above responsibilities, our Independent Lead Director also has regular touchpoints with our Chairman and CEO and other members of management to discuss critical matters and other ongoing topics, including acquisitions, divestitures, and other strategic decisions.

 

 

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Executive Sessions

In order to promote open discussion among independent directors, our board holds executive sessions of independent directors at least 2 times per year and at such other times as may be requested by any independent director. Our independent directors held 4 executive sessions during fiscal 2022, all of which were chaired and led by the Lead Independent Director.

Director Nominations

The nominating and corporate governance committee periodically reviews and recommends to our board the skills, experience, characteristics, and other criteria for identifying and evaluating directors. Our board expects directors to be open and forthright, to develop a deep understanding of the Company’s business, and to exercise sound judgment in fulfilling their oversight responsibilities. Directors should embrace the Company’s values and culture and should possess the highest levels of integrity.

The nominating and corporate governance committee evaluates the composition of our board annually to assess whether the skills, experience, characteristics, and other criteria established by our board are currently represented on our board as a whole and in individual directors, and to assess the criteria that may be needed in the future in light of the Company’s anticipated needs. The board and the nominating and corporate governance committee also actively seek to achieve a diversity of occupational and personal backgrounds on the board, including diversity with respect to demographics such as gender, race, ethnic and national background, geography, age, and sexual orientation. As part of the search process for each new director, the nominating and corporate governance committee

actively seeks out women and other diverse candidates to include in the pool from which board nominees are chosen. The nominating and corporate governance committee reviews the qualifications of director candidates and incumbent directors in light of the criteria approved by our board and recommends the Company’s candidates to our board for election by the Company’s stockholders at the applicable annual meeting. We also assess qualifications and characteristics of our directors, including racial and ethnic diversity, as part of our board’s annual self-evaluation process.

Procedures for Recommending Individuals to Serve as Directors

The nominating and corporate governance committee also considers director candidates recommended by our stockholders. Any stockholder who wishes to propose director nominees for consideration by our nominating and corporate governance committee, but does not wish to present such proposal at an annual meeting of stockholders, may do so at any time by directing a description of each nominee’s name and qualifications for board membership to the chair of the nominating and corporate governance committee by sending an email to Directors@Petco.com or in writing, c/o our Secretary, at Petco Health and Wellness Company, Inc., 10850 Via Frontera, San Diego, California 92127. The recommendation should contain all of the information regarding the nominee required under the “advance notice” provisions of our second amended and restated bylaws (“bylaws”) (which can be provided free of charge upon request by writing to our Secretary at the email or physical address listed above). The nominating and corporate governance committee evaluates nominee proposals submitted by stockholders in the same manner in which it evaluates other director nominees.

 

 

 

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Board Qualifications and Diversity

The following charts show how certain skills, experience, characteristics, and other criteria, including diversity of viewpoints and diversity with respect to gender and demographics, are currently represented on our board. The chart summarizing skills is not intended to be an exhaustive list for each director, but instead intentionally focuses on the primary skillsets each director contributes. We believe the combination of the skills and qualifications shown below demonstrates how our board is well-positioned to provide effective oversight and strategic advice to our management.

 

  LOGO LOGO LOGO LOGO

 

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LOGO LOGO LOGO
  Director Strategic
Planning/
Strategy
Development
Retail
Experience
Senior
Executive
Leadership
Accounting/
Financial
Reporting
Public
Company
Experience
Human
Capital
Management
Diversity
(Gender)
Diversity
(Race/
Ethnicity)
               

Ronald Coughlin, Jr.

 

 

 

 

 

 

               

Maximilian Biagosch

 

 

 

 

 

 

               

Cameron Breitner

 

 

 

 

 

 

 

 

 

               

Sabrina Simmons

 

 

 

               

Christy Lake

 

 

 

 

 

 

               

R. Michael (Mike) Mohan

 

 

 

               

Jennifer Pereira

 

 

 

 

 

 

               

Christopher J. Stadler

 

 

 

 

 

 

               

Gary Briggs

 

 

 

 

 

 

 

 

 

               

Nishad Chande

 

 

 

 

 

 

 

 

 

               

Mary Sullivan

 

 

 

 

 

 

Board Diversity Matrix (as of May     , 2023)

Total Number of Directors: 11

 

         

   Part I: Gender Identity

 

 

Female

 

 

Male

 

 

Non-Binary

 

 

Did Not Disclose Gender

 

         
Directors   4   6     1
         

   Part II: Demographic Background

 

 

Female

 

 

Male

 

 

Non-Binary

 

 

Did Not Disclose Gender

 

         

African American or Black

    1    
         

Alaskan Native or Native American

       
         

Asian

  2   2    
         

Hispanic or Latinx

  1      
         

Native Hawaiian or Pacific Islander

       
         

White

  3   5    
         

Two or More Races or Ethnicities

  1   2    
   

LGBTQ+

 
   

Did Not Disclose Demographic Background

  1

 

 

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Committees of our Board of Directors

 

Our board has established an audit committee, a compensation committee, and a nominating and corporate governance committee. These committees are each described below. Each of our board’s committees acts under a written charter, which was adopted and approved by our board of directors. Copies of the committees’ charters are available on our website at ir.petco.com/corporate-governance/documents-and-charters.

Committee Membership; Meetings and Attendance

During our last completed fiscal year:

 

    our board of directors held 4 meetings;

 

    our audit committee held 4 meetings;
    our compensation committee held 8 meetings; and

 

    our nominating and corporate governance committee held 4 meetings.

Each of our incumbent directors attended at least 75% of the meetings of our board of directors and the respective committees of which he or she was a member held during the period such director served as a director during fiscal 2022.

Directors are expected to attend the Annual Meeting absent unusual circumstances. Five of our incumbent directors attended our 2022 Annual Meeting.

 

 

Audit Committee

 

 

Members

 

Sabrina Simmons (Chair)

Gary Briggs

R. Michael (Mike) Mohan

 

Principal Responsibilities

 

Each of Gary Briggs, R. Michael (Mike) Mohan, and Sabrina Simmons qualifies as an “independent” director for purposes of the SEC and Nasdaq independence rules that are applicable to audit committee members. Each member of the audit committee is financially literate, and Sabrina Simmons also qualifies as an “audit committee financial expert” as defined by the SEC rules. Under its charter, our audit committee, among other things, has responsibility for:

 

•   assisting our board of directors in its oversight responsibilities regarding the integrity of our financial statements, our compliance with legal and regulatory requirements, the independent accountant’s qualifications and independence, our accounting and financial reporting processes, and the audits of our financial statements;

 

•   the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us;

 

•   preparing the report required by the SEC for inclusion in our annual proxy or information statement;

 

•   approving audit and non-audit services to be performed by the independent accountants;

 

•   reviewing and discussing with management and the independent auditor our annual audited and quarterly financial statements, including management’s discussion and analysis of financial condition and operations and the independent auditor’s reports related to the financial statements;

 

•   reviewing and discussing our practices with respect to risk assessment and risk management, and risks related to matters including our financial statements and financial reporting processes, compliance, information technology, and cybersecurity;

 

•   establishing and periodically reviewing policies and procedures for the review, approval, and ratification of related person transactions, as defined in applicable SEC rules, review related person transactions, and oversee other related person transactions governed by applicable accounting standards;

 

•   annually evaluating the performance of the audit committee and assessing the adequacy of the audit committee’s charter; and

 

•   performing such other functions as our board of directors may from time to time assign to the committee.

 

The audit committee has also established and oversees procedures for the receipt, retention, and treatment of complaints received by Petco regarding accounting, internal accounting controls, or auditing matters and the confidential, anonymous submission by Petco employees of concerns regarding questionable accounting or auditing matters.

 

 

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Compensation Committee

 

 

Members

 

Cameron Breitner (Chair)

Christy Lake

Maximilian Biagosch

 

Principal Responsibilities

 

Christy Lake qualifies as an “independent” director for purposes of the SEC and Nasdaq independence rules that are applicable to compensation committee members. As a controlled company, we rely on the exemption from the Nasdaq requirement that we have a compensation committee composed entirely of independent directors. Under its charter, our compensation committee, among other things, has responsibility for:

 

•   reviewing and approving the compensation and benefits of our CEO and other executive officers, or recommending such compensation for approval by our board of directors, as applicable;

 

•   periodically reviewing and recommending to the board the amount and form of non-employee director compensation;

 

•   appointing and overseeing the work performed by any compensation consultant, and, at least annually, assessing whether the work of compensation consultants involved in determining or recommending executive or director compensation has raised any conflict of interest that is required to be disclosed in our annual report and proxy statement;

 

•   overseeing assessment of the risks related to our compensation policies and programs applicable to officers and employees, and reporting to the board on the results of this assessment;

 

•   overseeing succession planning for positions held by senior management, including the CEO, and reviewing succession planning and management development at least annually with the board, including recommendations and evaluations of potential successors to fill these positions;

 

•   overseeing our strategies and policies related to human capital management, including with respect to matters such as diversity and inclusion, workplace environment and culture and talent development and retention;

 

•   annually evaluating the performance of the compensation committee and assessing the adequacy of the compensation committee’s charter; and

 

•   performing such other functions as our board of directors may from time to time assign to the committee.

Nominating and Corporate Governance Committee

 

 

Members

 

Gary Briggs (Chair)

Mary Sullivan

Cameron Breitner

 

Principal Responsibilities

 

Gary Briggs qualifies as an “independent” director for purposes of the SEC and Nasdaq independence rules that are applicable to nominating and corporate governance committees. As a controlled company, we rely on the exemption from the Nasdaq requirement that we have a nominating and corporate governance committee composed entirely of independent directors. Under its charter, our nominating and corporate governance committee, among other things, has responsibility for:

 

•   identifying individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors;

 

•   engaging in succession planning for our board of directors;

 

•   recommending to our board of directors our director candidates for election at the annual meeting of stockholders;

 

•   developing and recommending to our board of directors a set of corporate governance guidelines and principles;

 

•   overseeing and, where appropriate, making recommendations to our board of directors regarding sustainability matters relevant to our business, including Petco policies, activities, and opportunities;

 

•   overseeing our stockholder engagement program and making recommendations to the board regarding its involvement in stockholder engagement;

 

•   performing a leadership role in shaping our corporate governance;

 

•   annually evaluating the performance of the nominating and corporate governance committee and adequacy of the nominating and corporate governance committee’s charter; and

 

•   performing such other functions as our board of directors may from time to time assign to the committee.

 

 

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Strategy and Risk Oversight

Our board believes that effective risk management and control processes are critical to Petco’s safety and soundness, our ability to predict and manage the challenges that Petco and the pet category face and, ultimately, Petco’s long-term corporate success.

Management is responsible for the day-to-day oversight and management of strategic, operational, legal, compliance, cybersecurity, and financial risks, while our board, as a whole and through its committees, is responsible for the oversight of our risk management framework. Consistent with this approach, our enterprise risk steering committee comprised of key stakeholders throughout the Company works with management to identify, review, and update both the framework and certain specific short-, intermediate-, and long-term risks that we face, which are presented to our audit committee and board at regular audit committee and board meetings as part of management presentations that focus on particular business functions, operations, or strategies. Such presentations also identify steps taken by management to eliminate or mitigate such risks and report on how feedback from the audit committee and/or board regarding our enterprise risk management efforts (including how we address existing risks and identify significant emerging risks) is implemented. In this process, we also utilize a heat map that identifies the probability and impact of inherent risks that we face, which is presented to our audit committee and board and updated regularly. While our board is ultimately responsible for the risk oversight of our Company, our audit committee has primary responsibility for management and mitigation of the risks facing our Company, including major financial, cybersecurity, privacy, and control risks, and oversight of the measures initiated by management to monitor and control such risks. As part of the board’s role in overseeing our risk management program, the audit committee and board devote time and attention to cybersecurity-related risks. Specifically, at least twice a year and more frequently as needed, the audit committee and board receive reports on cybersecurity and information technology matters, and related risk exposures, initiatives, and readiness programs, among others, from management, including our Chief Administrative Officer and Chief Technology Officer. The audit committee also regularly updates the board on such matters, and the board periodically receives reports from management directly.

In addition, as part of the board’s strategic and risk oversight, the board oversees our ESG strategies. Throughout the year, the board receives reports from management, including our Vice President of Sustainability and Chief Strategy Officer, and our nominating and corporate governance committee on key ESG matters, our actions around being a responsible company and corporate citizen, and our ESG reporting, which demonstrates our commitment to transparency and accountability of our goals and progress.

Our audit committee also monitors compliance with legal and regulatory requirements and considers and approves or disapproves any related person transactions. Our compensation committee has responsibility to review the risks arising from our compensation

policies and practices applicable to all employees and evaluate policies and practices that could mitigate any such risk. Our nominating and corporate governance committee has responsibility to review risks relating to our corporate governance practices, including ESG and other sustainability matters. These committees provide regular reports on our risk management practices to our board. Our board believes that the Company’s current leadership structure supports its risk oversight function.

Stockholder Engagement

We conduct a proactive outreach effort with the governance teams of our major stockholders. Members of our management team have engaged with our stockholders to seek their input and feedback in an effort to remain well-informed regarding their perspectives and to help increase their understanding of our business. In particular, through these engagements, we leverage the discussions to cover topics of interest to our stockholders, including ESG matters.

As reflected in our principles of corporate governance, our Lead Independent Director is available for consultation with our stockholders. The feedback received from our stockholder outreach efforts is communicated to and considered by management and the board, and our engagement activities have produced valuable feedback that has helped inform our decisions and our strategy, when appropriate, particularly with respect to our ESG efforts and certain ESG initiatives that we’ve prioritized in connection with such feedback.

Communications with Directors

Stockholders and other interested parties who wish to communicate with our board or any individual director may do so by sending an email to Directors@Petco.com or in writing, c/o our Secretary, at Petco Health and Wellness Company, Inc., 10850 Via Frontera, San Diego, California 92127. Each communication will be reviewed to determine whether it is appropriate for presentation to our board or the applicable director(s). The purpose of this screening is to allow our board (or the applicable individual director(s)) to avoid having to consider irrelevant or inappropriate communications, such as advertisements, solicitations, product inquiries, or any offensive or otherwise inappropriate materials.

Code of Business Conduct and Ethics

Our board adopted a Code of Business Conduct and Ethics relating to the conduct of our business by all of our employees, executive officers (including our principal executive officer and principal financial officer/principal accounting officer (or persons performing similar functions)) and directors. This code satisfies the requirement that we have a “code of conduct” under the Nasdaq and SEC rules and is available on our website at ir.petco.com/corporate-governance/documents-and-charters. To the extent required under the Nasdaq and SEC rules, we intend to disclose future amendments to certain provisions of this code, or waivers of such provisions, applicable to any of our executive officers or directors, on our website identified above.

 

 

 

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Corporate Governance Guidelines

Our board also adopted corporate governance guidelines to formalize its governance practices, which serve as a framework within which our board and its committees operate. These guidelines cover a number of areas, including the role of our board of directors, board composition and leadership structure, director independence, director selection, qualification and election, director compensation, executive sessions, CEO evaluation, succession planning, annual board assessments, board committees, director orientation and continuing education, board communications with stockholders, and others. A copy of our corporate governance guidelines is available on our website at ir.petco.com/corporate-governance/documents-and-charters.

Fiscal Year 2022 Director Compensation

Under our director compensation program, members of our board of directors who are not employees or officers of Petco, our Principal Stockholder, CVC, CPP Investments, or their respective affiliates are entitled to receive the following:

 

    Annual cash retainer of $80,000;

 

    Cash fee of $35,000 for service as chairperson, or $10,000 for service other than as chairperson, of our audit committee;
    Cash fee of $25,000 for service as chairperson, or $10,000 for service other than as chairperson, of our compensation committee;

 

    Cash fee of $20,000 for service as chairperson, or $7,500 for service other than chairperson, of our nominating and corporate governance committee;

 

    Cash fee of $150,000 for service as the non-executive chair of our board of directors;

 

    Cash fee of $50,000 for service as the lead independent director of our board of directors; and

 

    Annual equity grant of restricted stock units (“RSUs”) under the Petco Health and Wellness Company, Inc. 2021 Equity Incentive Plan (the “2021 Plan”) with a value of approximately $150,000, subject to one-year cliff vesting on the day of the next annual meeting of stockholders.

In addition, our director compensation program provides each director with reimbursement for reasonable travel and miscellaneous expenses incurred in attending meetings and activities of our board of directors and its committees.

In accordance with our director compensation program, in June 2022, each eligible member of our board of directors received an annual grant of 9,915 RSUs, which will vest on the date of the Annual Meeting.

 

 

The table below describes the compensation provided to our independent, non-employee directors in fiscal 2022. Mr. Coughlin is not separately compensated for his service on our board of directors, and his fiscal 2022 compensation is described under “Executive Compensation—Executive Compensation Tables—Summary Compensation Table” below.

 

  

 

  

Fees Earned or Paid

in Cash ($)(1)

     Stock Awards ($)(2)              Total ($)          

Maximilian Biagosch (3)

                    

Cameron Breitner (3)

                    

Gary Briggs

   $ 110,000      $ 150,014      $ 260,014  

Nishad Chande (3)

                    

Christy Lake

   $ 90,000      $ 150,014      $ 240,014  

R. Michael (Mike) Mohan

   $ 140,000      $ 150,014      $ 290,014  

Jennifer Pereira (3)

                    

Sabrina Simmons

   $ 115,000      $ 150,014      $ 265,014  

Christopher J. Stadler (3)

                    

Mary Sullivan (3)

                    

 

  (1)

Amounts reported represent the annual cash fees earned by each independent, non-employee director in fiscal 2022.

 

  (2)

Amounts in this column represent the aggregate grant date fair value of the RSUs granted during fiscal 2022, calculated in accordance with FASB ASC Topic 718 based on the closing price of our Class A common stock on June 29, 2022, the date of grant, of $15.13. For additional information regarding the assumptions underlying this calculation, please read Note 12—Stockholders’ Equity to our consolidated financial statements for the fiscal year ended January 28, 2023 located in our Annual Report on Form 10-K for such fiscal year. As of January 28, 2023, Mr. Briggs and Ms. Lake each held 1,500,000 Common Series C Units in Scooby LP, our indirect parent (the “C Units”) originally granted in 2018 with a distribution threshold of $0.50, which are generally subject to the same terms as the C Units granted to our Named Executive Officers, as described under “Executive Compensation—Executive Compensation Tables—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—Common Series C Units” below. Additionally, as of January 28, 2023, each independent director held the following unvested RSUs: Mr. Briggs: 9,915; Ms. Lake: 9,915; Mr. Mohan: 9,915; and Ms. Simmons: 9,915.

 

  (3)

These directors are not eligible for compensation under our director compensation program and did not receive any compensation from us during fiscal 2022.

 

 

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PROPOSAL 1—ELECTION OF DIRECTORS

 

There are three Class III directors whose term of office expires at the Annual Meeting. Our nominating and corporate governance committee has recommended, and our board has approved, each of Gary Briggs, Nishad Chande, and Mary Sullivan as nominees for election as Class III directors at the Annual Meeting. If elected at the Annual Meeting, each of these nominees would serve until the 2026 annual meeting of stockholders and until his or her successor has been duly elected and qualified, or, if sooner, until his or her earlier death, resignation, removal, retirement, or disqualification. Information concerning these nominees and other continuing directors appears under “—Composition of the Board of Directors” above. Each of the nominees has consented to serve as a director, if elected, and all of the nominees are currently serving on our board of directors. We have no reason to believe that any of the nominees will be unavailable or, if elected, will decline to serve. If any nominee becomes unable or unwilling to stand for election as a director,

proxies will be voted for any substitute as designated by our board, or alternatively, our board may leave a vacancy on our board or reduce the size of our board.

Each director is elected by a plurality of the votes cast. “Plurality” means that the three nominees who receive the largest number of votes cast “For” such nominees are elected as directors. Only holders of Class A common stock and Class B-2 common stock are entitled to vote on this Proposal 1. Holders of Class B-1 common stock are not entitled to vote on this Proposal 1. Holders of Class A common stock and Class B-2 common stock may vote “For All,” “Withhold All,” or “For All Except” with respect to the nominees named in this Proposal 1. Any shares voted “Withhold All” and broker non-votes, if any, are not considered votes cast for the foregoing purpose and will have no effect on the outcome of the election.

 

 

   

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FOR ALL  

  

OUR BOARD, UPON RECOMMENDATION OF OUR NOMINATING AND CORPORATE GOVERNANCE COMMITTEE, UNANIMOUSLY RECOMMENDS A VOTE “FOR ALL” OF THE DIRECTOR NOMINEES NAMED ABOVE.

    

 

 

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INFORMATION REGARDING OUR EXECUTIVE OFFICERS

Below is a list of our executive officers and their respective ages and a brief account of the business experience of each of them.

 

 Name    Age    Position

Ronald Coughlin, Jr.

   56    Chief Executive Officer and Chairman

Brian LaRose

   50    Chief Financial Officer

Ilene Eskenazi

   51    Chief Legal and Human Resources Officer and Secretary

Amy College

   48    Chief Merchandising Officer

Katherine (Katie) Nauman

   41    Chief Marketing Officer

Darren MacDonald

   45    Chief Customer Officer

Justin Tichy

   51    Chief Pet Care Center Officer and Chief Operating Officer

John Zavada

   60    Chief Administrative Officer

Jason Heffelfinger

   43    Chief Services Officer

 

Ronald Coughlin’s biographical information can be found with the other director biographies in the “Board of Directors and Corporate Governance” section above.

Brian LaRose has served as our Chief Financial Officer since August 2021, and as our Senior Vice President, Finance from September 2020 to August 2021. Prior to joining us, Mr. LaRose served as Divisional CFO for HP’s 3D printing business unit. He previously led the separation management office during the separation of HP into two publicly traded Fortune 50 companies – at the time, the largest such split in U.S. history. During his 17 years with HP, Mr. LaRose also led HP’s SEC reporting group and managed investor relationships in over 15 countries. Mr. LaRose began his career with Deloitte’s mergers and acquisitions, and audit practices. Mr. LaRose is a member of the board of directors of the National Foundation for Autism Research, where he also serves as Treasurer. Mr. LaRose holds a bachelor’s degree from Colby College, and a master’s degree in business administration and a master’s degree in accounting from Northeastern University.

Ilene Eskenazi has served as our Chief Legal and Human Resources Officer and Secretary since January 2022, and as Chief Legal Officer and Corporate Secretary from September 2020 to January 2022. Prior to joining us, Ms. Eskenazi served from 2016 to 2020 as Global General Counsel and Chief Human Resources Officer at Boardriders, Inc. (formerly Quiksilver, Inc.), a leading action sports and lifestyle company. Prior to that, she served from 2013 to 2016 as Chief Legal Officer and Senior Vice President of Talent Operations and Performance at True Religion Apparel, Inc., an apparel and retail company. True Religion subsequently filed for Chapter 11 bankruptcy in July 2017, which it exited four months later. Before that, Ms. Eskenazi served as the General Counsel for Red Bull North America, Inc. between 2008 and 2013 and as the Deputy General Counsel at The Wonderful Company between 2002 and 2008. Since January 2022, Ms. Eskenazi has served on the board of directors of a.k.a Brands Holdings Corp., a brand accelerator of direct-to-consumer fashion brands. Ms. Eskenazi started her legal career at Skadden. Ms. Eskenazi holds a bachelor’s degree in philosophy from

the University of Michigan and a J.D. from the University of California, Los Angeles School of Law.

Amy College has served as our Chief Merchandising Officer since February 2022, and as Senior Vice President, Operations & Strategy and Territory General Manager from September 2019 to February 2022. Prior to joining us, Ms. College spent more than twenty years at Best Buy in various merchandising and category management leadership roles. As their Chief Category Officer for home theater, smart home, digital imaging and appliances, Ms. College led strategy, vendor partnerships, and the development of industry-leading customer experiences. Additionally, she held responsibilities in enterprise demand planning and forecasting, as well as vendor management, and served as a Board Member on the Best Buy Foundation. Ms. College holds a bachelor’s degree in business with an emphasis in marketing from the University of Minnesota.

Katherine (Katie) Nauman has served as our Chief Marketing Officer since August 2021, and as Vice President, Integrated Marketing from March 2020 to August 2021. Prior to joining us, Ms. Nauman served from July 2010 to February 2020 in numerous business-to-consumer and business-to-business global marketing positions at HP, including Head of Global Marketing for Z by HP. In this role, she led brand development, marketing strategy, product positioning, partner marketing, agency management and integrated campaigns across 170 countries. Ms. Nauman holds a bachelor’s degree in management from Purdue University.

Darren MacDonald has served as our Chief Customer Officer since August 2022, and as our Chief Digital & Innovation Officer from June 2019 to August 2022. Prior to joining us, Mr. MacDonald served from February 2016 to January 2017 as Senior Vice President of Jet.com, an e-commerce company, and from January 2017 to June 2019 as Group General Manager and Global Officer for U.S. at Walmart Inc., a multinational retail corporation. Prior to that, between April 2014 and February 2016, he was the Founder and CEO of Ingress Capital.

 

 

 

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Previously, he was the CEO of The Pronto Network, an IAC company, and also held a number of roles at Avery Dennison Corporation. Mr. MacDonald holds a bachelor’s degree from the University of California, Berkeley and a master’s degree in business administration from the University of California, Los Angeles.

Justin Tichy has served as our Chief Pet Care Center Officer and Chief Operating Officer since August 2022, and as our Chief Pet Care Center Officer from October 2018 to August 2022. Prior to joining us, Mr. Tichy served from May 2015 to October 2018 as President of Sales at Confie, one of the largest privately held insurance brokers in the United States. Previously, he held key leadership positions at Best Buy Co., Inc., Target Corp., and Walmart Inc. Mr. Tichy holds a bachelor’s degree in business management from Pennsylvania State University and a master’s degree in organizational management from the University of Phoenix.

John Zavada has served as our Chief Administrative Officer since July 2021, and as our Chief Information and Administrative Officer from September 2016 to July 2021. Prior to joining us, Mr. Zavada served from 2013 to 2016 as Senior Vice President and Chief Information Officer at Restoration Hardware. Previously, he filled Chief Information Officer roles at Guitar Center, Big Lots, Inc., Gottschalks Department Stores, and Victoria’s Secret Stores. Mr. Zavada holds a bachelor’s degree in business information systems from California State Polytechnic University.

Jason Heffelfinger has served as our Chief Services Officer since August 2022, and served in various roles from 2015 to 2022, most recently as Senior Vice President, Pet Services. Prior to joining us, Mr. Heffelfinger held leadership roles at 7-Eleven and Circuit City. Mr. Heffelfinger holds a bachelor’s degree from the University of Nebraska and an executive master’s degree in business administration from Southern Methodist University.

 

 

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This Compensation Discussion and Analysis, or CD&A, provides an overview of our executive compensation philosophy, objectives, and design and each element of our executive compensation program with regard to the compensation awarded to, earned by, or paid to our named executive officers (our “Named Executive Officers” or “NEOs”) during fiscal 2022, as well as certain changes we have made to our executive compensation program since the end of fiscal 2022. Our NEOs are employed by our indirect wholly owned subsidiary, Petco Animal Supplies Stores, Inc.

For fiscal 2022, our NEOs were:

 

 Name    Title

Ronald Coughlin, Jr.

   Chief Executive Officer

Brian LaRose

   Chief Financial Officer

Justin Tichy

   Chief Pet Care Center Officer and Chief Operating Officer (1)

Darren MacDonald

   Chief Customer Officer (2)

Amy College

   Chief Merchandising Officer (3)

 

  (1)

Mr. Tichy was previously Chief Pet Care Center Officer. His title was changed to Chief Pet Care Center Officer and Chief Operating Officer effective August 7, 2022.

 

  (2)

Mr. MacDonald was previously Chief Digital and Innovative Officer. His title was changed to Chief Customer Officer effective August 7, 2022.

 

  (3)

Ms. College was previously Senior Territory General Manager. She was promoted to Chief Supply Chain Officer effective January 30, 2022, and she was promoted to Chief Merchandising Officer effective February 13, 2022.

 

Principal Objectives of Our Compensation Program for Named Executive Officers

Our executive team is critical to our success and to building value for our stockholders. Our executive compensation program is designed to attract and retain highly skilled, performance-oriented executives who thrive in a culture focused on delivering purpose-driven results. We incentivize our senior leaders to deliver the highest levels of execution and business results, while also delivering on our mission of improving lives for pets, pet parents, and our own Petco partners. We carry out these objectives through the following attributes of our executive compensation program:

 

    We align executive compensation with achievement of operational and financial results, increases in stockholder value, and delivering on our mission.

 

    A significant portion of total compensation for our executives is at-risk and is delivered through short-term and long-term incentive programs that are designed to align their interests with those of our stockholders.

 

    We evaluate the competitiveness and effectiveness of our compensation programs against other comparable businesses based on industry, size, and other relevant criteria in making pay decisions.

 

    Total compensation for individual executives is influenced by a variety of factors, including each executive’s scope of responsibility, individual performance, skill set, experience, and expected future contributions.
    We attempt to create simple, straightforward compensation programs that our partners and stockholders can easily understand.

Process for Setting Executive Compensation

Role of our Compensation Committee and Management in Compensation Decisions

As described below, the primary elements of our executive compensation program are annual base salary, annual short-term cash incentives, long-term equity incentives, and other benefits and perquisites. Together, these items are complementary and serve the goals described above.

Our executive compensation program is developed and overseen by the compensation committee. The purpose of the compensation committee is to assist our board of directors in discharging its responsibilities relating to the compensation of our executive officers and directors, including by overseeing Petco’s overall compensation philosophy, policies, and programs, evaluating the compensation and performance of our executive officers, and reviewing, approving, and modifying the terms of our compensation and benefit plans and programs as appropriate. Subject in certain circumstances to approval by our board of directors, the compensation committee has the sole authority to make final decisions with respect to our executive compensation program. For more information regarding the authority and responsibilities of the compensation committee, please refer to the compensation committee’s charter, which is available via Petco’s Investor Relations website at ir.petco.com/corporate-governance/documents-and-charters.

 

 

 

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In making decisions regarding the allocation of compensation between short-term and long-term compensation, between cash and non-cash compensation, and among different forms of cash and non-cash compensation, the compensation committee takes into account the views and recommendations of management, in particular our CEO and Chief Legal and Human Resources Officer (except with respect to their own compensation). For fiscal 2022, our CEO made recommendations about annual base salary increases, annual short-term incentive targets, and long-term equity grants for our NEOs using market data and internal equity alignment while working within the parameters of our annual budget for base salary increases and the size of the equity pool.

Use of Compensation Consultants

During fiscal 2022, the compensation committee engaged Exequity as its independent compensation consultant. Exequity assisted the compensation committee in designing the executive compensation program for fiscal 2022, which included the establishment of our 2022 Peer Group (as defined below), a review and analysis of our executive compensation levels and practices relative to the 2022 Peer Group, remuneration of members of our board of directors, recommendations regarding the design of fiscal 2022 short-term and long-term compensation, and the establishment of the Executive Severance Plan (as defined below). After taking into consideration the factors listed in Nasdaq Listing Rule 5605(d)(3)(D), the compensation committee concluded that there are no conflicts of interest with respect to the engagement of Exequity by the compensation committee.

 

 

Peer Group

In July 2021, the compensation committee, with the assistance of Exequity, selected a peer group of companies in similar size and with whom we may compete for talent to inform our compensation decisions (the “Peer Group”). In determining appropriate compensation opportunities for our NEOs, the compensation committee reviewed competitive market data provided by Exequity regarding the compensation practices of our Peer Group. The following 16 companies comprised our Peer Group used in connection with the establishment of our 2022 executive compensation program:

 

Academy Sports and Outdoors, Inc.    National Vision Holdings, Inc.
Advance Auto Parts, Inc.    PriceSmart, Inc.
American Eagle Outfitters, Inc.    RH
Casey’s General Stores, Inc.    Sally Beauty Holdings, Inc.
Central Garden & Pet Company    Sprouts Farmers Market, Inc.
DICK’s Sporting Goods, Inc.    Tractor Supply Company
Foot Locker, Inc.    Ulta Beauty, Inc.
The Michaels Companies, Inc.    Williams-Sonoma, Inc.

In June 2022, the compensation committee adjusted the Peer Group to remove The Michaels Companies, Inc. due to their recent transition to a private company.

 

Internal Pay Equity and Other Factors

In setting base salary, annual short-term cash incentives, and long-term equity incentives, our compensation committee, in collaboration with the CEO, considers factors such as internal pay equity, the experience and length of service of the executive, relative responsibilities among members of our executive team, individual contributions by the executive, and business conditions.

For elements of compensation other than total direct compensation, such as severance and change in control benefits, our compensation committee has relied on information provided by Exequity, Peer Group compensation practices, and its own business experience and familiarity with market conditions in determining the appropriate level of protections for our NEOs.

Elements of Compensation

The main components of our executive compensation during fiscal 2022 included base salary, an annual cash incentive, long-term equity incentive awards, and other benefits and perquisites.

Base Salary

We pay our NEOs a base salary to provide them with a fixed, base level of compensation commensurate with the executive’s skill, competencies, experience, contributions, and performance, as well as general review of market compensation. Base salaries are generally reviewed annually, and the compensation committee makes adjustments to reflect individual and Petco performance as well as any survey and peer group data provided at such time. Our CEO and Chief Legal and Human Resources Officer make recommendations to our compensation committee regarding base salary adjustments for our executive officers (except with respect to their own salaries). These recommendations are generally based upon the executive’s individual contributions to Petco for the prior fiscal year, leadership and contribution to Petco performance, internal pay considerations, market conditions, and survey data. Our compensation committee takes all of these factors into account when making its decisions on base salaries but does not assign any specific weight to any one factor. In addition to the annual base salary review, our compensation committee may also adjust base salaries at other times during the year in connection with promotions or increased responsibilities or to maintain competitiveness in the market.

 

 

 

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During fiscal 2022, no changes were made to Mr. Coughlin’s base salary. On May 1, 2022, Mr. LaRose received a $17,000 merit increase, and on October 2, 2022, he received a further market-based increase of $108,000 to bring his salary to $700,000. Messrs. Tichy and MacDonald also received $25,000 merit increases on May 1, 2022 to bring their respective salaries to $625,000. In connection with her promotion to Chief Supply Chain Officer, Ms. College received a $23,600 base salary increase on January 30, 2022, and she received a further increase on February 13, 2022 of $125,000 in connection with her promotion to Chief Merchandising Officer. On December 11, 2022, Ms. College received an additional market-based increase of $25,000 to bring her salary to $600,000.

The chart below provides the base salary for each of our NEOs as of the end of fiscal 2022.

 

 Name   

Base Salary as of

1/28/2023

Ronald Coughlin, Jr.

     $ 1,100,000

Brian LaRose

     $ 700,000

Justin Tichy

     $ 625,000

Darren MacDonald

     $ 625,000

Amy College

     $ 600,000

Annual Cash Incentive Program

 

A hallmark of our compensation philosophy has been the belief that annual cash incentives should be based upon actual performance measured against specified key business and financial metrics. Our compensation committee adopts performance measures that are intended to align with market practices of the Peer Group and public companies in general.

Each of our NEOs participated in our annual incentive plan for fiscal 2022 (the “2022 AIP”) and was eligible to receive a target annual cash bonus equal to a percentage of his or her earned annual base salary. Under the 2022 AIP, each NEO’s annual cash bonus was based on a combination of corporate financial metrics (Adjusted EBITDA and total revenue) and individual performance, with

an overall requirement that Adjusted EBITDA achieve at least threshold level performance. Unlike prior years, business unit financial metrics were not utilized as a separate component under the 2022 AIP, and instead, the individual performance component was expanded for NEOs who exercise oversight over a particular business unit or function to include an assessment of such business unit’s or function’s performance during the year. This combination of performance measures aimed to align each NEO’s annual cash incentive opportunity with the financial results of our company-wide business, as well as an assessment of each NEO’s individual contributions towards our key strategic initiatives and business unit performance where applicable.

 

 

For fiscal 2022, the target annual cash incentive for each of our NEOs and the applicable weightings for each performance metric under the 2022 AIP were as follows:

 

Name

 

     Target Annual Cash     
Incentive

(% of Base Salary)

  Adjusted EBITDA   Total Revenue   Individual
Performance
 

Ronald Coughlin, Jr.

      125 %       40 %       40 %       20 %
 

Brian LaRose

      80 %       40 %       40 %       20 %
 

Justin Tichy

      80 %       35 %       35 %       30 %
 

Darren MacDonald

      80 %       35 %       35 %       30 %
 

Amy College (1)

                 

Pre-CMO Appointment

      60 %       50 %       50 %    
 

Post-CMO Appointment

      80 %       35 %       35 %       30 %

 

  (1)

In connection with her appointment as Chief Merchandising Officer, Ms. College’s target annual bonus was increased from 60% of her base salary, with such pro-rated portion of her bonus earned based on the performance measures applicable to her prior to her promotion, to 80% of her base salary, with such remaining portion of her bonus earned based on the performance measures applicable to her following her appointment.

 

 

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In establishing the threshold, target, and maximum performance level for each performance measure, our compensation committee established rigorous goals intended to drive growth. Threshold performance was established at a level that was above actual performance for the 2021 fiscal year, target performance was established at a level that would require over 13% growth in Adjusted EBITDA, and 10% growth in total revenue compared to 2021 fiscal year actual performance and maximum performance was established at a level that would require 19% growth in Adjusted EBITDA and over 15% growth in total revenue. In addition to the threshold, target, and maximum performance levels for each performance measure, our compensation committee also established an Adjusted EBITDA “gate” for fiscal 2022 of $603M, which was required to be achieved before any payout could be earned under the 2022 AIP for any of the performance measures (regardless of the performance of those other performance measures).

These performance goals were established in early fiscal 2022, prior to significant changes in the macroeconomic environment, including rising inflation and higher interest rates that continued throughout 2022, which impacted our expected results for fiscal 2022. Notably, our compensation committee did not make any adjustments to the 2022 AIP performance goals notwithstanding this challenging environment. As a result, our Adjusted EBITDA for fiscal 2022 of $582.3M (calculated consistent with the description provided in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023 under the heading “Reconciliation of Non-GAAP Financial Measures to GAAP Measures”) fell short of the Adjusted EBITDA “gate” under the 2022 AIP.

Executive performance is generally reviewed annually. Our CEO and our Chief Legal and Human Resources Officer review each NEO’s performance (other than their own) against individual performance goals and make recommendations to our compensation committee regarding individual performance achievement for the NEOs. These recommendations are generally based upon the NEO’s individual performance against People goals (including Voice of the Partner

results, diversity and inclusion measures, and strategic initiatives), internal strategic goals, and, for NEOs who exercise oversight over a particular business, an assessment of such business-related performance during the applicable fiscal year. Our compensation committee takes all of these factors into account when making its compensation decisions.

Because the Adjusted EBITDA “gate” was not achieved under the 2022 AIP, our compensation committee did not approve a payout of any annual cash incentive awards under the 2022 AIP to the NEOs notwithstanding above threshold achievement on the total revenue performance goal and NEO performance against individual performance goals.

Long-Term Equity Incentive Compensation

Fiscal 2022 Annual Awards

In April 2022, each of our NEOs, other than Mr. Coughlin, received an annual equity award, one-half of which was in the form of time-based RSUs and one-half in the form of time-based stock options. Mr. Coughlin received one-half of his award in performance share units (“PSUs”) in lieu of stock options. The time-based RSUs and stock options vest as to 34% on the first anniversary of the date of grant and 16.5% at the end of each six-month period thereafter through the third anniversary of the date of grant, and the stock options have an exercise price of $21.06, equal to the closing price of our Class A common stock on the date of grant.

Mr. Coughlin’s PSUs vest following the completion of a three-year performance period beginning January 30, 2022 and extending through February 1, 2025 (i.e., the 2022, 2023 and 2024 fiscal years), based on the Company’s adjusted earnings per share (weighted 50%) and total revenue (weighted 50%) performance during such performance period. The adjusted earnings per share and total revenue metrics are intended to incentivize Mr. Coughlin to maintain the company’s focus on driving profitable long-term growth. Mr. Coughlin’s PSUs may be earned from 0% to 200% of target, with a threshold payout equal to 50% of target.

 

 

The table below sets forth the number of RSUs, stock options and target PSUs granted to the NEOs in April 2022:

 

  Name    Annual RSUs    Annual Stock
Options
  

Annual PSUs

(at Target)

Ronald Coughlin, Jr.

       201,805               201,805

Brian LaRose

       28,491        69,445       

Justin Tichy

       28,491        69,445       

Darren MacDonald

       28,491        69,445       

Amy College

       23,742        57,871       

 

 

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Fiscal 2022 Retention Awards

In July 2022, Mr. LaRose, Mr. Tichy, and Ms. College each received a retention equity award of time-based RSUs. Like the annual awards, the time-based RSUs vest as to 34% on the first anniversary of the date of grant and 16.5% at the end of each six-month period thereafter through the third anniversary of the date of grant.

Also in July 2022, Mr. Tichy received a separate retention equity award of PSUs that vest in three tranches of 30%, 35% and 35% over three one-year performance periods. The first tranche was eligible to vest based on Pet Care Center EBITDA (weighted 50%) and Pet Care Center revenue (weighted 50%) during the portion of fiscal year 2022 beginning May 1, 2022, with a threshold payout of 50% and a maximum payout of 200%. The second tranche will vest based on performance during fiscal year 2023 based on Pet Care Center EBITDA (weighted 50%) and Pet Care Center revenue (weighted 50%) during fiscal year 2023, and the third tranche will vest based on performance during fiscal year 2024 based on performance measures established by the compensation committee at the beginning of fiscal year 2024.

In October 2022, Mr. MacDonald received a retention equity award of one-half time-based RSUs and one-half PSUs. The time-based RSUs vest as outlined above. The PSUs vest in three equal tranches of

one-third each over three one-year performance periods. The first tranche was eligible to vest based on enterprise active customers (weighted 40%), traceable enterprise net sales per active customer (weighted 40%), and Vital Care active accounts (weighted 20%) during fiscal year 2022, with a threshold payout of 50% and a maximum payout of 300%. The second tranche will vest based on performance during fiscal year 2023 based on enterprise active customers (weighted 40%), internal enterprise net sales per active customer (weighted 40%), and Vital Care active accounts (weighted 20%) during fiscal year 2023, and the third tranche will vest based on performance during fiscal year 2024 based on performance measures established by the compensation committee at the beginning of fiscal year 2024.

In December 2022, Mr. Coughlin received a special equity award of time-based stock options and each of our other NEOs received a special equity award of one-third time-based RSUs and two-thirds time-based stock options. The time-based RSUs and stock options utilize back-loaded vesting to encourage retention over the vesting period and will vest as to 10% on the six-month anniversary of the date of grant, as to 20% on the 12-month anniversary of the date of grant, as to 30% on the 18-month anniversary of the date of grant, and as to 40% on the 24-month anniversary of the date of grant.

 

 

In light of the challenging economic environment, a highly competitive external market for strong leadership talent, and the desire to encourage retention and continuity among our leadership, our compensation committee determined that the retention awards granted during fiscal 2022 were key to retaining these executive officers whose leadership our compensation committee viewed as instrumental for the Company, as well as for maintaining a robust pipeline of talent to support executive officer succession strategies. In addition, the PSUs granted to Messrs. Tichy and MacDonald were particularly important to ensure strong, direct alignment between the interests of these business unit owners and the performance of those business units that are at the core of Petco’s future success. Finally, the December stock option awards were designed to further align NEO and shareholder interests, as the stock options would only have value to the extent our share price appreciates from the date of grant through vesting and exercise of the award. The table below sets forth the number and type of retention equity awards granted to each NEO during fiscal 2022.

 

 Name    July/October
Retention RSUs
   July/October Retention
PSUs (at Target)
   December
Retention RSUs
   December Retention
Stock Options

Ronald Coughlin, Jr.

                            1,813,187

Brian LaRose

       17,171               91,075        366,301

Justin Tichy

       274,726        137,363        45,538        183,151

Darren MacDonald

       281,426        281,426        45,538        183,151

Amy College

       13,737               121,433        488,401

Results of Mr. Tichy’s 2022 Retention PSUs – Tranche 1

The first 30% tranche of Mr. Tichy’s retention PSUs granted during fiscal 2022 vested based on performance from May 1, 2022 through the end of fiscal 2022, resulting in the vesting of 55,030 PSUs (or 133.5% of the target PSUs allocated to this tranche). The table below sets forth the weighting of each metric and the resulting weighted payout percentage for the portion of fiscal 2022 beginning May 1, 2022.

 

 Performance Measure        Weighting       

Weighted

Payout

 

Pet Care Center EBITDA (1)

      50 %       84.1 %
 

Pet Care Center Revenue (2)

      50 %       49.4 %

Total Payout Percentage

     

 

 

 

 

 

      133.5 %

 

 

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  (1)

We do not externally report EBITDA at the business level for the Pet Care Center business. This metric, which includes internal allocations, was newly created in fiscal year 2022 and does not have a directly comparable 2021 performance level.

 

  (2)

We do not externally report revenue at the business level for the Pet Care Center business. Achievement of this metric at the target level required performance in excess of 2021 fiscal year performance.

Results of Mr. MacDonald’s 2022 Retention PSUs – Tranche 1

The first one-third tranche of Mr. MacDonald’s retention PSUs granted during fiscal 2022 vested based on performance during fiscal 2022, resulting in the vesting of 184,552 PSUs (or 196.9% of the target PSUs allocated to this tranche). The table below sets forth the threshold, target, and maximum levels of achievement for each performance measure, as well as our actual performance for fiscal 2022 and the resulting payout percentage.

 

 Performance Measure         Weighting       

Threshold

(50%)

  

Target

(100%)

  

Maximum

(300%)

   Actual
Performance
  

Weighted

Payout

 

Enterprise Active Customers (1)

       40 %       23.7 million        24.9 million    26.2 million    25.1 million        51.1 %
 

Traceable Enterprise Net Sales per Active Customer (2)

       40 %       $198.6        $209.0    $219.5    $213.7        85.8 %
 

Vital Care Active Accounts (3)

       20 %       0.296 million        0.320 million    0.352 million    0.481 million        60.0 %
 

 

      

 

 

 

 

 

     

 

 

 

 

 

      

 

 

 

 

 

   Total Payout Percentage        196.9 %

 

  (1)

Enterprise active customers is calculated as the total number of trackable unique customers (including Pals Loyalty members) that have completed at least one transaction with Petco across any of our channels during fiscal 2022, excluding Pupbox and Marketplace customers.

 

  (2)

Traceable Enterprise net sales per active customer (NSPAC) is calculated by dividing (i) the sales attached to any enterprise active customer during the fiscal year (excluding Party Vet, Pupbox, and Marketplace sales) by (ii) the number of enterprise active customers within fiscal 2022.

 

  (3)

Vital Care active accounts is calculated as the number of Vital Care subscriptions (now referred to as Vital Care Premier) considered active and not in cancelled status as of the last day of fiscal 2022.

 

Other Benefits and Perquisites

Health and Welfare Benefits

Our NEOs are eligible to participate in our health and welfare plans on the same terms offered to all of our salaried partners, with the exception of life insurance and disability coverage—which is provided at enhanced levels for all partners who serve as vice presidents or above.

Retirement Benefits

We have not maintained, and do not currently maintain, any defined benefit pension plans in which our NEOs participate. All of our NEOs are eligible to participate in our 401(k) plan, which is a broad-based, tax-qualified defined contribution retirement plan in which generally all of our partners who meet the age and service requirements can participate. Under the 401(k) plan, we make discretionary matching contributions, including to our NEOs, equal to 100% of the first 1% of compensation contributed and 50% on the next 2% of compensation contributed, subject to certain limits under the Internal Revenue Code of 1986, as amended (the “Code”), and partners vest ratably in matching contributions over a period of three years of service.

All of our NEOs are also eligible to participate in our nonqualified deferred compensation plan, which is a non-tax-qualified retirement plan that provides eligible partners with an opportunity to defer a portion of their annual base salary and/or bonus. Under the nonqualified deferred compensation plan, we make a discretionary matching contribution of 50% of an eligible partner’s contributions on the first 3% of base salary deferred (or, if the eligible partner is not yet

eligible to participate in our 401(k) plan, the first 6% of base salary deferred) and on the first 6% of annual bonus deferred. The nonqualified deferred compensation plan is described further under “Executive Compensation Tables—Nonqualified Deferred Compensation” below.

We believe that our retirement programs serve as an important tool to attract and retain our NEOs and other key partners. We also believe that offering the ability to create stable retirement savings encourages our NEOs and other key partners to make a long-term commitment to us.

Severance Benefits

We have entered into employment agreements or employment letters with each of our NEOs, which are described in more detail under “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” and “—Potential Payments Upon Termination or Change in Control—Employment Agreements” below. The employment agreements and employment letters have historically provided our NEOs with severance protection.

In September 2022, upon recommendation of the compensation committee and in consideration of the severance practices of companies in our Peer Group, our board of directors approved the Petco Health and Wellness Company, Inc. Executive Severance Plan (the “Executive Severance Plan”), which is described in more detail under “—Potential Payments Upon Termination or Change in Control—Executive Severance Plan” below. Prior to the implementation of the Executive Severance Plan, the company did not utilize a formal, consistent severance plan for its executive officers. The purpose of

 

 

 

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the Executive Severance Plan is to provide uniform severance benefits to eligible employees, which include each of the NEOs other than Mr. Coughlin (who will continue to receive the severance benefits under his employment agreement).

The compensation committee and our board believe the severance benefits offered under Mr. Coughlin’s employment agreement and in the Executive Severance Plan aid in attracting and retaining experienced executives and reflect fair compensation in the event of a qualifying termination.

Perquisites

During fiscal 2022, we provided our NEOs with limited perquisites, including financial counseling services and wellness exams. We provide these limited perquisites to ensure our compensation program, as a whole, remains competitive with companies for which we compete for talent. In addition, during fiscal 2022, due to security concerns generated from his position with our company, we covered the costs associated with certain security measures at Mr. Coughlin’s personal residence. Messrs. Tichy and MacDonald and Ms. College were also provided perquisites in fiscal 2022 associated with their required relocations to San Diego, as described in more detail under “Executive Compensation Tables—Summary Compensation Table” and “Executive Compensation Tables—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—Employment Agreements—Amy College” below.

2021 Employee Stock Purchase Plan

In connection with the consummation of our initial public offering, we adopted the Petco Health and Wellness Company, Inc. 2021 Employee Stock Purchase Plan (the “ESPP”). The purpose of the ESPP is to encourage and enable our eligible partners to acquire a proprietary interest in us through the ownership of our Class A common stock. The ESPP, and the rights of participants to make purchases thereunder, is intended to qualify under the provisions of Sections 421 and 423 of the Code. Our NEOs are eligible to participate in the ESPP and purchase a limited number of shares of Class A common stock at a 15% discount, on the same basis as our other partners.

Other Matters

Tax and Accounting Implications of Executive Compensation Decisions

Historically, we have not previously taken the deductibility limit imposed by Section 162(m) of the Code into consideration in making compensation decisions. However, as a public company, we may authorize compensation payments that exceed the deductibility limitation under Section 162(m) of the Code when we believe that such payments are appropriate to attract and retain executive talent. In addition, amounts in excess of the $1 million threshold paid pursuant to our existing employment agreements, employment letters, severance plan, and other arrangements may be nondeductible.

We account for the equity awards under the 2021 Plan and C Units (as defined and described in more detail below under “Executive Compensation Tables—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—Common Series C Units”) in accordance with the FASB ASC Topic 718, which requires us to estimate the expense of an award over the vesting period applicable to such award.

Risk Assessment

At the compensation committee’s request, Exequity provided an independent risk assessment of our compensation policies and programs. The assessment found that our executive and broad-based compensation programs do not create risks that are reasonably likely to have a material adverse effect on the Company. The compensation committee reviewed the results and does not believe that our executive and non-executive compensation programs encourage excessive or unnecessary risk taking, and any risk inherent in our compensation programs is unlikely to have a material adverse effect on us.

Prohibition on Hedging and Pledging

In connection with our initial public offering, we adopted an Insider Trading Policy pursuant to which, among other things, our directors, officers, and employees, and their respective family members and controlled entities, are prohibited from (i) engaging in speculative transactions (including short sales and puts or calls), (ii) hedging of Petco securities (including through the purchase of financial instruments such as prepaid variable forward contracts, equity swaps, collars, and exchange funds), and (iii) pledging Petco securities as collateral for a loan or holding Petco securities in a margin account.

 

 

 

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Stock Ownership Guidelines

In connection with our initial public offering, we adopted stock ownership guidelines applicable to our NEOs, other officers, and members of our board of directors to create alignment between our officers and directors and our long-term performance, as well as to minimize excess risk taking that might lead to short-term returns at the expense of long-term value creation. The stock ownership guidelines were established at the following levels:

 

  Title    Ownership Level

Chief Executive Officer

  

5x annual base salary

Chief Financial Officer

  

3x annual base salary

Other NEOs and Officers

  

2x annual base salary

Independent Directors

  

5x annual cash retainer

 

Under the stock ownership guidelines, the requisite ownership level must be achieved by the later of (i) five years following the consummation of our initial public offering or (ii) five years following the officer or director becoming subject to the applicable stock ownership guideline. Based on current holdings and outstanding, unvested equity awards, we expect all executives and directors will be in compliance with these guidelines within the applicable period. In determining ownership levels, we only include shares of our Class A common stock owned outright by the officer or director, unvested time-based restricted shares and restricted stock units, and shares of our Class A common stock owned by the officer or director through our retirement plan. Neither unexercised stock options (whether “in-the-money” or not) nor unearned performance-based equity, such as PSUs, are included in determining ownership levels.

Clawback Policy

In May 2021 we adopted a clawback policy applicable to our executive officers, including our NEOs, that is administered by our compensation committee. Under the clawback policy, in the event of a material restatement of our financial statements due to noncompliance with any financial reporting requirement under the securities laws, our compensation committee may clawback any incentive compensation received by the executives that is in excess of the incentive compensation that would have been received had such noncompliance not occurred. The clawback policy also provides that in the event of an executive’s misconduct, our compensation committee may clawback any outstanding incentive compensation and any incentive compensation granted to, earned by, or paid to the executive during the preceding three fiscal years. Incentive compensation includes annual bonuses, short- and long-term cash, equity and, equity-based incentive awards, in each case, whether vesting on the basis of time, performance, or a combination thereof. We intend to adopt a clawback policy consistent with the requirements of Exchange Act Rule 10D-1 prior to the effectiveness of final Nasdaq listing standards implementing such rule.

Fiscal 2023 Compensation Decisions

In March 2023, our compensation committee determined that no merit increases or market adjustments to base salaries or target bonus opportunities would be provided to the NEOs in spring 2023. In addition, no material changes were made to the annual incentive plan for the 2023 fiscal year as compared to the 2022 AIP. Although minor adjustments were made to target annual equity awards for certain NEOs, Mr. Coughlin did not receive any increase to his 2023 annual equity award.

For 2023, our compensation committee recommended, and our board of directors approved, annual equity awards to Messrs. Coughlin and LaRose that were (i) 50% time-based RSUs, and (ii) 50% PSUs. Awards were also approved for Messrs. Tichy and MacDonald and Ms. College that were (i) 75% time-based RSUs, and (ii) 25% PSUs. The time-based RSUs will vest on the same three-year vesting schedule applicable to awards granted during fiscal 2022. The PSUs granted to the NEOs are eligible to become earned in three equal tranches over three one-year performance periods (i.e., fiscal 2023, 2024, and 2025) but will not vest until after the final performance period. The first tranche of PSUs granted to Messrs. Coughlin and LaRose is eligible to become earned based on the Company’s return on invested capital (ROIC) (weighted 50%) and total revenue (weighted 50%) during fiscal year 2023, with a threshold payout of 25% and a maximum payout of 200%, and the first tranche of PSUs granted to Messrs. Tichy and MacDonald and Ms. College is eligible to become earned based on the Company’s operating cash flow, with a threshold payout of 25% and a maximum payout of 200%. The second tranche will be eligible to become earned based on performance during fiscal year 2024 based on performance measures established by the compensation committee at the beginning of fiscal year 2024, and the third tranche will be eligible to become earned based on performance during fiscal year 2025 based on performance measures established by the compensation committee at the beginning of fiscal year 2025.

 

 

 

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Compensation Committee Report

The compensation committee has reviewed the Compensation Discussion and Analysis section of this proxy statement and discussed that section with management. Based on its review and discussions with management, the compensation committee recommended to our board of directors that the Compensation Discussion and Analysis be included in this proxy statement. This report is provided by the following members of our board of directors, who compose the compensation committee:

Cameron Breitner, Chairperson

Maximilian Biagosch

Christy Lake

Executive Compensation Tables

Summary Compensation Table

The table below sets forth the compensation earned by or granted to our NEOs during fiscal 2022, fiscal 2021, and fiscal 2020. Ms. College was not an NEO for years prior to fiscal 2022.

 

Name and Principal Position       Year           Salary ($)        

    Bonus    

($)

   

Stock

    Awards    

($)(1)

   

Option

    Awards    

($)(2)

   

Non-Equity

Incentive Plan

    Compensation    

($)(3)

   

All Other

    Compensation    

($)(4)

        Total ($)      

Ronald Coughlin, Jr.

  2022   $ 1,100,000           $ 8,500,026     $ 9,900,001           $ 90,426     $ 19,590,453  

Chief Executive Officer

  2021   $ 1,100,000                       $ 2,750,000     $ 175,740     $ 4,025,740  
 

 

  2020   $ 768,526     $ 1,624,881     $ 14,647,787     $ 8,750,000           $ 107,129     $ 25,898,323  

Brian LaRose

  2022   $ 623,058           $ 1,850,034       2,600,008           $ 20,506     $ 5,093,606  

Chief Financial Officer

  2021   $ 492,500           $ 800,014           $ 628,711     $ 9,488     $ 1,930,713  

Justin Tichy

  2022   $ 618,750           $ 5,700,041     $ 1,600,009           $ 60,037     $ 7,978,837  

Chief Operating Officer

  2021   $ 600,000     $ 500,000                 $ 960,000     $ 20,376     $ 2,080,376  
 

 

  2020   $ 474,715     $ 451,704     $ 1,569,926     $ 1,125,005           $ 2,397     $ 3,623,747  

Darren MacDonald

  2022   $ 618,750           $ 5,099,030     $ 1,600,009           $ 75,485     $ 7,393,274  

Chief Customer Officer

  2021   $ 600,000                       $ 5,040,094     $ 41,980     $ 5,682,074  
 

 

  2020   $ 540,579     $ 1,342,736     $ 1,125,000     $ 1,125,005     $ 2,420,000     $ 41,644     $ 6,594,964  

Amy College

  2022   $ 573,558           $ 2,033,352     $ 3,166,675           $ 234,854     $ 6,008,439  

Chief Merchandising Officer

   

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

  (1)

Amounts in this column represent the aggregate grant date fair value of the RSUs and PSUs granted during fiscal 2022, fiscal 2021, and fiscal 2020, calculated in accordance with FASB ASC Topic 718. For fiscal 2020, amounts in this column also include the aggregate grant date fair value of C Units (as defined and described in more detail below under “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—Common Series C Units”), calculated in accordance with FASB ASC Topic 718. For fiscal 2022, the grant date fair values of the RSUs, Mr. Coughlin’s PSUs, and the first annual tranche of Mr. Tichy’s and Mr. MacDonald’s PSUs were based on the closing price of our Class A common stock on each date of grant as follows: (i) April 26, 2022, $21.07; (ii) July 19, 2022, $14.56; (iii) October 18, 2022, $10.66; and (iv) December 5, 2022, $10.98. The grant date fair value of Mr. Coughlin’s fiscal 2022 PSUs, assuming achievement of performance at the maximum level is $8,504,063, and the grant date fair values of the first annual tranche of Mr. Tichy’s and Mr. MacDonald’s fiscal 2022 PSUs, assuming achievement of performance at the maximum levels, are $1,998,004 and $1,200,006, respectively. For additional information regarding the assumptions underlying this calculation, please read Note 12 to our consolidated financial statements for the fiscal year ended January 28, 2023 located in our Annual Report on Form 10-K for such fiscal year. The performance goals for the second and third annual tranches of Mr. Tichy’s and Mr. MacDonald’s 2022 PSUs were not established in fiscal 2022, and thus, such awards do not yet have a grant date fair value under FASB ASC Topic 718. In accordance with SEC requirements, such tranches will be reported as fiscal 2023 and fiscal 2024 compensation as the applicable performance goals are established.

 

  (2)

Amounts in this column represent the aggregate grant date fair value of the stock options granted under the 2021 Plan during fiscal 2022 and 2020, calculated in accordance with FASB ASC Topic 718. For additional information regarding the assumptions underlying this calculation, please read Note 12—Stockholders’ Equity to our consolidated financial statements for the fiscal year ended January 28, 2023 located in our Annual Report on Form 10-K for such fiscal year.

 

 

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  (3)

Amounts in this column for 2022 represent the payouts under the 2022 AIP, as described in more detail under “Compensation Discussion and Analysis—Elements of Compensation—Annual Cash Incentive Program” above.

 

  (4)

Amounts reported in the “All Other Compensation” column for 2022 include (i) matching contributions under our 401(k) plan made during fiscal 2022, (ii) matching contributions under our nonqualified deferred compensation plan made during fiscal 2022, (iii) life insurance premiums paid by us for the benefit of the NEOs, and (iv) additional amounts, each as set forth in the following table:

 

  Name   

Petco

401(k)

    Match ($)    

    

Petco

NQDC

    Match ($)    

    

Life

    Insurance    

Premiums

($)

    

    Additional    

Amounts

($)(1)

    

All Other

    Compensation    

Total ($)

 

Ronald Coughlin, Jr.

   $ 1,642      $ 65,047      $ 1,236      $ 22,501      $ 90,426  

Brian LaRose

   $ 6,364      $ 12,906      $ 1,236             $ 20,506  

Justin Tichy

          $ 8,906      $ 1,236      $ 49,895      $ 60,037  

Darren MacDonald

   $ 4,610      $ 29,000      $ 1,236      $ 40,639      $ 75,485  

Amy College

   $ 3,811             $ 1,236      $ 229,807      $ 234,854  

 

  (1)

Additional amounts represent (i) for Mr. Coughlin, a work from home stipend, expenses relating to executive wellness benefits, and expenses related to certain security costs at his personal residence, (ii) for Mr. Tichy, a monthly housing stipend and related tax gross-up ($21,876), a work from home stipend, and expenses relating to executive wellness benefits, (iii) for Mr. MacDonald, a monthly housing stipend and related tax gross-up ($13,342), a work from home stipend, and expenses relating to executive wellness benefits, and (iv) for Ms. College, a travel allowance, a moving allowance ($100,000), and a monthly housing stipend ($53,900) and related tax gross-up ($52,834).

2022 Grants of Plan-Based Awards Table

The following table includes information regarding annual cash incentive awards under the 2022 AIP and RSUs, PSUs, and stock options under the 2021 Plan, in each case, granted to the NEOs during fiscal 2022.

 

                Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards (1)
    Estimated Future Payouts
Under Equity Incentive
Plan Awards
   

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units

(#)

   

All Other
Option
Awards:
Number of
Securities
Underlying
Options

(#)

    Exercise
or Base
Price of
Option
Awards
($)
    Grant Date
Fair Value
of Stock
and Option
Awards
($)(2)
 
 Name   Grant
Date
   

Approval
Date

    Threshold
($)
   

Target

($)

    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
 

Ronald Coughlin, Jr.

                       

2022 AIP

 

 

 

 

 

 

 

 

  $ 412,500     $ 1,375,000     $ 2,750,000    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PSUs (3)

    4/26/22       4/26/22    

 

 

 

 

 

 

 

 

 

 

 

    100,903       201,805       403,610    

 

 

 

 

 

 

 

 

 

 

 

  $ 4,250,013  

RSUs (4)

    4/26/22       4/26/22    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    201,805    

 

 

 

 

 

 

 

  $ 4,250,013  

Stock Options (5)

    12/5/22       11/30/22      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    1,813,187     $ 10.98     $ 9,900,001  

Brian LaRose

                       

2022 AIP

      $ 149,534     $ 498,446     $ 996,893                

RSUs (4)

    4/26/22       4/26/22                   28,491         $ 600,020  

RSUs (4)

    7/19/22       6/29/22                   17,171         $ 250,010  

RSUs (6)

    12/5/22       11/30/22                   91,075         $ 1,000,004  

Stock Options (7)

    4/26/22       4/26/22                     69,445     $ 21.06     $ 600,005  

Stock Options (5)

    12/5/22       11/30/22      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    366,301     $ 10.98     $ 2,000,003  

Justin Tichy

                       

2022 AIP

 

 

 

 

 

 

 

 

  $ 129,938     $ 495,000     $ 990,000    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PSUs (9)

    7/19/22       6/29/22    

 

 

 

 

 

 

 

 

 

 

 

    20,605       41,209       82,418    

 

 

 

 

 

 

 

 

 

 

 

  $ 600,003  

RSUs (4)

    4/26/22       4/26/22    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    28,491    

 

 

 

 

 

 

 

  $ 600,020  

RSUs (4)

    7/19/22       6/29/22    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    274,726    

 

 

 

 

 

 

 

  $ 4,000,011  

RSUs (6)

    12/5/22       11/30/22    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    45,538    

 

 

 

 

 

 

 

  $ 500,007  

Stock Options (7)

    4/26/22       4/26/22    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    69,445     $ 21.06     $ 600,005  

Stock Options (5)

    12/5/22       11/30/22      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    183,151     $ 10.98     $ 1,000,004  

 

 

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                Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards (1)
    Estimated Future Payouts
Under Equity Incentive
Plan Awards
   

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units

(#)

   

All Other
Option
Awards:
Number of
Securities
Underlying
Options

(#)

    Exercise
or Base
Price of
Option
Awards
($)
    Grant Date
Fair Value
of Stock
and Option
Awards
($)(2)
 
 Name   Grant
Date
   

Approval
Date

    Threshold
($)
   

Target

($)

    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
 

Darren MacDonald

                       

2022 AIP

      $ 129,938     $ 495,000     $ 990,000                

PSUs (8)

    10/18/22       9/29/22             46,858       93,715       281,145           $ 999,002  

RSUs (4)

    4/26/22       4/26/22                   28,491         $ 600,020  

RSUs (4)

    10/18/22       9/29/22                   281,426         $ 3,000,001  

RSUs (6)

    12/5/22       11/30/22                   45,538         $ 500,007  

Stock Options (7)

    4/26/22       4/26/22                     69,445     $ 21.06     $ 600,005  

Stock Options (5)

    12/5/22       11/30/22      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    183,151     $ 10.98     $ 1,000,004  

Amy College

                       

2022 AIP

 

 

 

 

 

 

 

 

  $ 120,707     $ 455,385     $ 915,962    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RSUs (4)

    4/26/22       4/26/22    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    23,742    

 

 

 

 

 

 

 

  $ 500,007  

RSUs (4)

    7/19/22       6/29/22    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    13,737    

 

 

 

 

 

 

 

  $ 200,011  

RSUs (6)

    12/5/22       11/30/22    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    121,433    

 

 

 

 

 

 

 

  $ 1,333,334  

Stock Options (7)

    4/26/22       4/26/22    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    57,871     $ 21.06     $ 500,005  

Stock Options (5)

    12/5/22       11/30/22      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    488,401     $ 10.98     $ 2,666,669  

 

(1)

Amounts in these columns represent the threshold, target, and maximum potential payouts under the 2022 AIP. The threshold potential payments assume threshold achievement of each financial performance measure, with no payout related to individual performance (which has no threshold). Please read “Compensation Discussion and Analysis—Elements of Compensation—Annual Cash Incentive Program” above for more information regarding the 2022 AIP.

 

(2)

Amounts in this column represent the aggregate grant date fair value of the RSUs, PSUs, and stock options granted during fiscal 2022, calculated in accordance with FASB ASC Topic 718. For additional information regarding the assumptions underlying this calculation, please read Note 12 to our consolidated financial statements for the fiscal year ended January 28, 2023 located in our Annual Report on Form 10-K for such fiscal year. Please read “Compensation Discussion and Analysis—Elements of Compensation—Long-Term Equity Incentive Compensation” above for more information regarding these grants.

 

(3)

These PSUs will vest following the three-year performance period ending February 1, 2025, based the Company’s adjusted earnings per share and total revenue performance during such performance period, subject to the NEO’s continued employment through such vesting date. The amounts in this row represent the threshold, target, and maximum number of PSUs that may be earned.

 

(4)

These RSUs will vest as to 34% on the first anniversary of the grant date and as to 16.5% at the end of each six-month period thereafter, subject to the NEO’s continued employment through each vesting date.

 

(5)

These stock options will vest as to 10% on the six-month anniversary of the grant date, as to 20% on the 12-month anniversary of the grant date, as to 30% on the 18-month anniversary of the grant date, and as to 40% on the 24-month anniversary of the grant date, subject to the NEO’s continued employment through each vesting date.

 

(6)

These RSUs will vest as to 10% on the six-month anniversary of the grant date, as to 20% on the 12-month anniversary of the grant date, as to 30% on the 18-month anniversary of the grant date, and as to 40% on the 24-month anniversary of the grant date, subject to the NEO’s continued employment through each vesting date.

 

(7)

These stock options will vest as to 34% on the first anniversary of the grant date and as to 16.5% at the end of each six-month period thereafter, subject to the NEO’s continued employment through each vesting date.

 

(8)

These PSUs vested following the end of fiscal 2022 at 196.9% of target. The amounts in this row represent the threshold, target, and maximum number of PSUs that may be earned, with threshold assuming threshold achievement of each performance measure. Although the full three-year award was approved in October 2022, because the applicable performance targets were not established during fiscal 2022, the fiscal 2023 and fiscal 2024 tranches of these PSUs will be reported as fiscal 2023 and fiscal 2024 grants in accordance with SEC guidance.

 

(9)

These PSUs vested following the end of fiscal 2022 at 133.5% of target. The amounts in this row represent the threshold, target, and maximum number of PSUs that may be earned, with threshold assuming threshold achievement of each performance measure. Although the full three-year award was approved in June 2022, because the applicable performance targets were not established during fiscal 2022, the fiscal 2023 and fiscal 2024 tranches of these PSUs will be reported as fiscal 2023 and fiscal 2024 grants in accordance with SEC guidance.

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

Common Series C Units

 

Prior to our initial public offering, our NEOs received equity incentives in the form of Common Series C Units in Scooby LP, our indirect parent (the “C Units”). C Units are intended to qualify as “profits interests” for U.S. income tax purposes. The C Units are designed to align the NEOs’ interests with the interests of our equity holders and represent

interests in the future profits (once a certain level of proceeds has been generated) in Scooby LP (and its operating entities). We historically granted C Units to new executives upon hire, or a short time thereafter, and to our existing executives from time to time. Scooby LP and our board of directors determined the appropriate

 

 

 

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number of C Units for each grant by giving consideration to external factors (such as make-whole awards for employees forfeiting compensation opportunities from their prior employers, as was the case for Mr. Coughlin), internal pay equity, retention needs, promotions, and the particular challenges facing Petco at the time of grant. Like stock options, the C Units only generate payments to recipients if the value of Petco increases after the C Units are granted, and any subsequent decrease in the value of Petco will likewise decrease the value potentially realizable by the recipients. C Units that were granted in the past, and particularly those granted during periods of lower company performance, typically have lower Distribution Thresholds (as defined below) and thus the greatest potential opportunity for appreciation.

C Units are granted with a “Distribution Threshold,” which acts similarly to an exercise price for a stock option such that the holder will only realize value following returns to investors in excess of such amount. The Distribution Threshold has traditionally been reviewed and set on a periodic basis in conjunction with an outside valuation. C Units generally vest in equal annual installments over five years following the date of grant or vesting commencement date and are subject to accelerated vesting in connection with a change in control and certain other events, as described under “—Potential Payments Upon Termination or Change in Control—C Units” below. The C Units remained outstanding following our initial public offering in January 2021, and no additional C Units have been or will be awarded since our initial public offering.

Although the Distribution Threshold acts similarly to an exercise price for a stock option, the NEOs do not have the ability to “exercise” the C Units. Unlike a vested stock option which generally provides the NEO with discretion of when to exercise and realize income, NEOs will only realize value with respect to their vested C Units when distributions are made by Scooby LP, which is generally within the control of our sponsors and conditioned upon the sale of our Class A common stock held by our sponsors. As a result, the NEOs did not realize any value from their C Units in connection with our initial public offering and have not realized any value from the C Units since our initial public offering, as no Distribution Thresholds have been met to date.

Employment Agreements

Ronald Coughlin, Jr.

Effective upon our initial public offering, we entered into an amended and restated employment agreement with Mr. Coughlin, which set forth his then-current base salary, annual bonus target subject to the achievement of board-approved performance goals, and other customary terms and conditions. Under this agreement, Mr. Coughlin is eligible for certain payments upon certain terminations of employment, as described under “Potential Payments Upon Termination or Change in Control—Employment Agreements—Ronald Coughlin, Jr.” below. Mr. Coughlin’s agreement also subjects him to covenants regarding non-solicitation of our partners and our customers, vendors, distributors, and strategic partners while Mr. Coughlin is employed by us and for one year thereafter.

Brian LaRose

Mr. LaRose is party to an employment letter agreement with us dated August 18, 2020, with certain compensation terms that were superseded in connection with his promotion in August 2021. Mr. LaRose’s employment letter agreement sets forth his initial base salary, initial annual bonus target subject to the achievement of performance goals, and other customary terms and conditions. Under his employment letter agreement, the sign-on bonus that Mr. LaRose received in 2020 ceased to be subject to repayment on August 18, 2022.

Justin Tichy

In connection with his appointment, we entered into an employment letter agreement with Mr. Tichy on September 17, 2018, which sets forth his initial base salary, initial annual bonus target subject to achievement of performance goals, an initial signing bonus, and other customary terms and conditions.

Darren MacDonald

In connection with his appointment, we entered into an employment agreement with Mr. MacDonald on May 25, 2019, which sets forth his initial base salary, initial annual bonus target subject to achievement of performance goals, relocation assistance, and other customary terms and conditions. The agreement also subjects Mr. MacDonald to covenants regarding non-solicitation of our partners and our customers, vendors, distributors, and strategic partners while Mr. MacDonald is employed by us and for one year thereafter.

Amy College

Ms. College is party to an employment letter agreement with us dated April 18, 2019, with certain compensation terms that were amended in connection with her promotion in February 2022. Ms. College’s employment letter agreement sets forth her initial base salary, initial annual bonus target subject to the achievement of performance goals, and other customary terms and conditions. The February 2022 amendment provides Ms. College with a number of benefits associated with her relocation of her primary residence to San Diego, including (i) net monthly housing assistance of $7,700 for up to two years, (ii) certain automobile reimbursements or payments for up to two years, which Ms. College did not use in Fiscal 2022, (iii) travel support of $20,000 per year for up to two years, and (iv) a $100,000 payment, which was paid on July 5, 2022, intended to assist with other costs associated with relocating to San Diego. In addition, the February 2022 amendment provides that Ms. College will be eligible for financial planning and tax preparation services and an annual comprehensive wellness exam.

In addition to the employment agreements, each NEO is also party to our standard Confidentiality and Inventions Agreement, which, among other things, provides us standard protections regarding the confidentiality of our proprietary information and our ownership of intellectual property.

 

 

 

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Outstanding Equity Awards at 2022 Fiscal Year-End

The following table reflects information regarding outstanding unvested C Units, stock options, PSUs, RSUs, and restricted stock held by our NEOs as of January 28, 2023.

 

      Option Awards      Stock Awards  
Name    Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
     Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
     Option
Exercise
Price
     Option
Exercise
Date
     Number of
Shares or
Units of
Stock That
Have Not
Vested (#)
     Market Value of
Shares or Units
of Stock That
Have Not
Vested ($)(19)
     Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested (#)
     Equity Incentive
Plan Awards:
Market or Payout
Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested ($)(19)
 

Ronald Coughlin, Jr.

                       

C Units (1)(2)

                 30,000,000      $ 17,700,000        

Stock Options (3)

     837,500        412,500      $ 18.00        1/13/31              

Stock Options (4)

            1,813,187      $ 10.98        12/5/32              

RSUs (5)

                 68,750      $ 807,125        

RSUs (6)

                 201,805      $ 2,369,191        

PSUs (7)

                                                           201,805      $ 2,369,191  

Brian LaRose

                       

C Units (1)(8)

                 1,200,000      $ 888,000        

Stock Options (3)

     20,100        9,900      $ 18.00        1/31/31              

Stock Options (9)

            69,445      $ 21.06        4/26/32              

Stock Options (4)

            366,301      $ 10.98        12/5/32              

RSUs (5)

                 8,984      $ 105,472        

RSUs (10)

                 23,667      $ 277,851        

RSUs (6)

                 28,491      $ 334,484        

RSUs (11)

                 17,171      $ 201,588        

RSUs (12)

                                         91,075      $ 1,069,221                    

Justin Tichy

                       

C Units (1)(17)

                 2,000,000      $ 1,445,000        

Stock Options (3)

     107,679        53,036      $ 18.00        1/31/31              

Stock Options (9)

            69,445      $ 21.06        4/26/32              

Stock Options (4)

            183,151      $ 10.98        12/5/32              

RSUs (5)

                 20,626      $ 242,149        

RSUs (6)

                 28,491      $ 334,484        

RSUs (11)

                 274,726      $ 3,225,283        

RSUs (12)

                 45,538      $ 534,616        

PSUs (18)

                                         55,030      $ 646,052                    

Darren MacDonald

                       

C Units (1)(13)

                 2,000,000      $ 1,680,000        

Stock Options (3)

     107,679        53,036      $ 18.00        1/31/31              

Stock Options (9)

            69,445      $ 21.06        4/26/32              

Stock Options (4)

            183,151      $ 10.98        12/5/32              

RSUs (5)

                 20,626      $ 242,149        

RSUs (6)

                 28,491      $ 334,484        

RSUs (14)

                 281,426      $ 3,303,941        

RSUs (12)

                 45,538      $ 534,616        

Restricted Stock (15)

                 27,651      $ 324,623        

PSUs (16)

                                         184,552      $ 2,166,640                    

Amy College