UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 1, 1999
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-14678
ROSS STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1390387
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8333 Central Avenue, Newark, 94560-3433
California (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, (510) 505-4400
including area code
Former name, former address and N/A
former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
The number of shares of Common Stock, with $.01 par value,
outstanding on May 29, 1999 was 45,661,134.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROSS STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($000) May 1, January 30, May 2,
ASSETS 1999 1999 1998
(Unaudited) (Note A) (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 33,307 $ 80,083 $ 29,725
Accounts receivable 15,199 11,566 10,513
Merchandise inventory 516,107 466,460 460,578
Prepaid expenses and other 16,301 15,825 15,304
_______ _______ _______
Total Current Assets 580,914 573,934 516,120
PROPERTY AND EQUIPMENT
Land and buildings 48,937 48,789 24,183
Fixtures and equipment 225,571 217,629 196,609
Leasehold improvements 146,020 142,716 145,849
Construction-in-progress 30,878 32,023 24,563
_______ _______ _______
451,406 441,157 391,204
Less accumulated depreciation and amortization 201,613 192,445 186,951
_______ _______ _______
249,793 248,712 204,253
Deferred income taxes and other assets 50,439 47,660 40,934
_______ _______ _______
TOTAL ASSETS $881,146 $870,306 $761,307
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $253,473 $248,103 $216,013
Accrued expenses and other 122,549 114,151 93,164
Accrued payroll and benefits 31,262 40,885 27,773
_______ _______ _______
Total Current Liabilities 407,284 403,139 336,950
Long-term liabilities 45,570 42,464 40,085
STOCKHOLDERS' EQUITY
Common stock 458 462 478
Additional paid-in capital 217,867 215,831 199,008
Retained earnings 209,967 208,410 184,786
_______ _______ _______
428,292 424,703 384,272
________ ________ ________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $881,146 $870,306 $761,307
See notes to condensed consolidated financial statements.
3
ROSS STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended
____________________
May 1, May 2,
($000 except per share data, unaudited) 1999 1998
Sales $550,825 $484,276
Costs and Expenses
Cost of goods sold and occupancy 379,378 336,816
General, selling and administrative 106,192 94,057
Depreciation and amortization 9,320 7,882
Interest income (162) (135)
494,728 438,620
Earnings before taxes 56,097 45,656
Provision for taxes on earnings 21,934 17,806
Net earnings $34,163 $27,850
Net earnings per share:
Basic $.74 $.58
Diluted $.73 $.57
Weighted average shares outstanding:
Basic 45,964 47,849
Diluted 46,740 48,814
Stores open at end of period 355 331
See notes to condensed consolidated financial statements.
4
ROSS STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
May 1, May 2,
($000, unaudited) 1999 1998
CASH FLOWS FROM OPERATING ACTIVITES
Net earnings $34,163 $27,850
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Depreciation and amortization of property and equipment 9,320 7,882
Other amortization 2,498 2,412
Change in assets and liabilities:
Merchandise inventory (49,647) (41,753)
Other current assets - net (4,109) (2,587)
Accounts payable 8,376 16,651
Other current liabilities - net (10,882) (3,698)
Other 1,025 1,519
_________ ________
Net cash provided by (used in) operating activities (9,256) 8,276
CASH FLOWS FROM INVESTING ACTIVITES
Additions to property and equipment (17,247) (11,519)
________ ________
Net cash used in investing activities (17,247) (11,519)
CASH FLOWS FROM FINANCING ACTIVITES
Borrowing under lines of credit 15,600 5,700
Issuance of common stock related to stock plans 3,118 3,937
Repurchase of common stock (36,000) (30,418)
Dividends paid (2,991) (2,620)
________ ________
Net cash used in financing activities (20,273) (23,401)
________ ________
Net decrease in cash and cash equivalents (46,776) (26,644)
Cash and cash equivalents:
Beginning of year 80,083 56,369
_______ ________
End of quarter $33,307 $29,725
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $42 $55
Income taxes paid $19,535 $3,934
See notes to condensed consolidated financial statements.
5
ROSS STORES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended May 1, 1999 and May 2, 1998
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared from the records of the company
without audit and, in the opinion of management, include all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position at May 1, 1999
and May 2, 1998; the interim results of operations for the three
months ended May 1, 1999 and May 2, 1998; and changes in cash
flows for the three months ended May 1, 1999 and May 2, 1998.
The balance sheet at January 30, 1999, presented herein, has been
derived from the audited financial statements of the company for
the fiscal year then ended. Certain reclassifications have been
made to the 1998 presentation to conform to the 1999
presentation.
Accounting policies followed by the company are described in Note
A to the audited consolidated financial statements for the fiscal
year ended January 30, 1999. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted for purposes of the interim condensed
consolidated financial statements. The interim condensed
consolidated financial statements should be read in conjunction
with the audited consolidated financial statements, including
notes thereto, for the year ended January 30, 1999.
The results of operations for the three-month period herein
presented are not necessarily indicative of the results to be
expected for the full year.
The condensed consolidated financial statements at May 1, 1999
and May 2, 1998, and for the three months then ended, have been
reviewed, prior to filing, by the registrant's independent
accountants whose report covering their review of the financial
statements is included in this report on page 6.
6
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders of Ross Stores, Inc.
Newark, California
We reviewed the accompanying condensed consolidated balance
sheets of Ross Stores, Inc. (the "Company") as of May 1, 1999 and
May 2, 1998, and the related condensed consolidated statements of
earnings and cash flows for the three-month periods then ended.
These condensed consolidated financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data, and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to such condensed consolidated
financial statements for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Ross
Stores, Inc. as of January 30, 1999, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for
the year then ended (not presented herein); and in our report
dated March 12, 1999, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of January 30, 1999 is fairly stated, in all
material respects, in relation to the consolidated balance sheet
from which it has been derived.
/s/Deloitte & Touche LLP
San Francisco, CA
May 21, 1999
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
This section and other parts of this Form 10-Q contain forward-
looking statements that involve risks and uncertainties. The
Company's actual results may vary significantly from the results
discussed in the forward-looking statements. Factors that might
cause such differences include, but are not limited to, those
discussed in the subsection entitled "Forward-Looking Statements
and Factors Affecting Future Performance" below. The following
discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto included
elsewhere in this Form 10-Q and the consolidated financial
statements in the Company's 1998 Form 10-K. All information is
based on the Company's fiscal calendar.
RESULTS OF OPERATIONS
PERCENTAGE OF SALES
Three Months Ended
May 1, May 2,
1999 1998
SALES
Sales ($000) $550,825 $484,276
Sales growth 13.7% 9.4%
Comparable store sales 7% 4%
growth
COSTS AND EXPENSES
Cost of goods sold and occupancy 68.9% 69.6%
General, selling and administrative 19.3% 19.4%
Depreciation and amortization 1.7% 1.6%
Interest income (0%) (0%)
NET EARNINGS 6.2% 5.8%
Sales
The increase in sales for the three months ended May 1, 1999,
compared to the same period in the prior year, reflects an
increase in the number of stores open during the current period
as well as an increase in comparable store sales.
Costs and Expenses
Cost of goods sold and occupancy expenses as a percentage of
sales for the three months ended May 1,1999 decreased compared to
the same period in the prior year, primarily due to (i) leverage
on occupancy costs realized from the increase in comparable store
sales; and (ii) improved merchandise margins, mainly from higher
initial markups.
The decrease in general, selling and administrative expenses as a
percentage of sales for the three months ended May 1, 1999,
compared to the same period in the prior year, primarily reflects
leverage realized from the increase in comparable store sales.
8
Net Earnings
The increase in net earnings as a percentage of sales in the
three months ended May 1, 1999, compared to the same period in
the prior year, is primarily due to the improvement in the cost
of goods sold and occupancy expenses ratio.
Income Taxes Paid
The company paid $19.5 million in income taxes in the quarter
ended May 1, 1999, versus $3.9 million in the quarter ended May
2, 1998. This increase in income taxes paid primarily resulted
from the timing of certain tax deductions taken by the company
related to its employee common stock plans. The Company's
effective tax rate in each quarter was approximately 39%.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The primary uses of cash during the three months ended May 1,
1999 were for (i) the purchase of inventory; (ii) the repurchase
of the company's common stock; and (iii) capital expenditures for
new stores, improvements to existing locations, improvements in
management information systems, and various expenditures to
improve the central office and distribution centers.
Total consolidated inventories increased 12% at May 1, 1999 from
May 2, 1998, due mainly to a 7% increase in the number of stores
open at the end of each period and a planned increase in the
level of packaway merchandise.
The increase in accounts payable at May 1, 1999 from May 2, 1998
resulted mainly from the higher level of inventory purchases over
the prior year. The increase in accrued expenses and other in
these same periods is due primarily to higher sales tax accruals,
an increase in short-term borrowings and an increase in income
taxes payable.
In January 1999, the company announced a $120 million common
stock repurchase program. In the three months ended May 1, 1999,
the company repurchased approximately 828,000 shares for an
aggregate purchase price of approximately $36 million.
The company believes it can fund its operating cash requirements
and capital needs for the balance of this fiscal year (and for
the next fiscal year) through internally generated cash, trade
credit, established bank lines and lease financing.
YEAR 2000 MATTERS
The year 2000 issue is the result of computer programs being
written using two digits rather than four to define the
applicable year. Certain information technology systems and their
associated software ("IT Systems"), and certain equipment that
uses programmable logic chips to control aspects of their
operation ("embedded chip equipment"), may recognize "00" as a
year other than the year 2000. Some IT Systems and embedded chip
equipment used by the company and by third parties who do
business with the company contain two-digit programming to define
a year. The year 2000 issue could result, at the company and
elsewhere, in system failures or miscalculations causing
disruptions of operations, including, among other things, a
temporary inability to process transactions or to engage in other
normal business activities.
Readiness for Year 2000
The company is addressing its year 2000 issue, including efforts
relating to IT Systems and embedded chip equipment used within
the company, efforts to address issues the company faces if third
parties who do business with the company are not prepared for the
year 2000, and contingency planning. In 1997, the company created
a corporation-wide year 2000 task force
9
representing all business and staff units with the goal of
achieving an uninterrupted transition into the year 2000. The
company is using both internal and external resources to
identify, correct, upgrade or replace and test its IT Systems and
embedded chip equipment for year 2000 compliance.
The company uses a variety of IT Systems, internally developed
and third-party provided software and embedded chip equipment,
depending upon business function and location. For these IT
Systems, software and embedded chip equipment, the company has
divided its year 2000 efforts into four phases: (i)
identification and inventorying of IT Systems and embedded chip
equipment with potential year 2000 problems; (ii) assessment of
scope of year 2000 issues for, and assigning priorities to, each
item based on its importance to the company's operations; (iii)
remediation of year 2000 issues in accordance with assigned
priorities, by correction, upgrade, replacement or retirement;
(iv) testing for and validation of year 2000 compliance,
including integration testing. Phases (i) and (ii) are complete
across all business functions and locations. The company has
categorized as "mission critical" those IT Systems and embedded
chip equipment whose failure would cause cessation of store
operations, or could otherwise have a sustained and significant
detrimental financial impact on the company. All mission
critical IT Systems either are currently in phase (iv) or have
been completed through phase (iv). The majority of embedded chip
equipment is in phase (iv). As of May 1999, over 90% of the
company's mission critical IT Systems were determined to be year
2000 compliant, or replacements, changes, upgrades or workarounds
have been identified, tested and deployed. The company is in the
process of conducting a comprehensive program of integration
testing of its IT Systems in order to ensure that all systems
still work together properly and without year 2000 problems.
This integration testing began in the third quarter of 1998 and
will be completed by mid-1999.
The company's operations are also dependent on the year 2000
readiness of third parties that do business with the company. In
particular, the company's IT Systems interact with commercial
electronic transaction processing systems to handle customer
credit card purchases and other point-of-sale transactions, and
the company is dependent on third-party suppliers of such
infrastructure elements as, but not limited to,
telecommunications services, electric power, water and banking
facilities. The company does not depend to any significant
degree on any single merchandise vendor or upon electronic
transaction processing with individual vendors for merchandise
purchases. The company has identified and initiated formal
communications with these third parties to determine the extent
to which the company will be vulnerable to such parties' failure
to resolve their own year 2000 issues. The company has received
responses from over 90% of those suppliers and merchandise
vendors that it believes are highly critical to its year 2000-
remediation efforts. As a follow-up, the company plans to seek
to determine whether the supplier is taking appropriate steps to
achieve year 2000 readiness and to be prepared to continue
functioning effectively as a supplier in accordance with the
company's business needs. The company is assessing its risks
with respect to failure by third parties to be year 2000
compliant and intends to seek to mitigate those risks. The
company is also developing contingency plans, discussed below, to
address issues related to suppliers the company determines are
not making sufficient progress toward becoming year 2000
compliant.
Costs
The company estimates that its IT Systems and embedded chip
equipment will be year 2000 compliant by mid-1999. Aggregate
costs for work related to year 2000 efforts in fiscal 1998 and
1999 currently are anticipated to total approximately $12.0
million, including about $6.0 million for capital investments in
IT Systems and embedded chip equipment, and are expected to be
funded through operating cash flows. Operating costs related to
year 2000 compliance projects will be incurred over several
quarters and will be expensed as incurred. In 1998, the company
incurred approximately $4.0 million in expenses related to year
2000, with approximately $2.0 million expected in fiscal 1999.
Capital expenditures in 1998 totaled approximately $4.0 million
with approximately $2.0 million in capital expenditures expected
in fiscal 1999.
The company's estimates of the costs of achieving year 2000
compliance and the date by which year 2000 compliance will be
achieved are based on management's best estimates, which were
derived using numerous assumptions about future events including
the continued availability of certain resources, third-party
modification plans and other factors. However, there can be no
assurance that these estimates will be achieved, and actual
results could differ materially from these estimates. Specific
factors that might cause such material differences include, but
are not limited to, the availability and cost of personnel
trained in year 2000 remediation work, the ability to locate and
correct all relevant computer codes, the success achieved by the
company's suppliers in reaching year 2000 readiness, the timely
availability of necessary replacement items and similar
uncertainties.
Risks
The company expects to implement the changes necessary to address
the year 2000 issue for IT Systems and embedded chip equipment
used within the company. The company presently believes that,
with modifications to existing software, conversions to new
software, and appropriate remediation of embedded chip equipment,
the year 2000 issue with respect to the company's IT Systems and
embedded chip equipment is not reasonably likely to pose
significant operational problems for the company. However, if
unforeseen difficulties arise or such modifications, conversions
and replacements are not completed timely, or if the company's
vendors' or suppliers' systems are not modified to become year
2000 compliant, the year 2000 issue may have a material impact on
the results of operations and financial condition of the company.
The company is presently unable to assess the likelihood that the
company will experience significant operational problems due to
unresolved year 2000 problems of third parties that do business
with the company. Although the company has not been put on
notice that any known third-party problem will not be timely
resolved, the company has limited information and no assurance of
additional information concerning the year 2000 readiness of
third parties. The resulting risks to the company's business are
very difficult to assess due to the large number of variables
involved. If third parties fail to achieve year 2000 compliance,
year 2000 problems could have a material impact on the company's
operations. Similarly, there can be no assurance that the
company can timely mitigate its risks related to a supplier's
failure to resolve its year 2000 issues. If such mitigation is
not achievable, year 2000 problems could have a material impact
on the company's operations.
Contingency Plans
The company presently believes that its most reasonably likely
worst-case year 2000 scenarios would relate to the possible
failure in one or more geographic regions of third party systems
over which the company has no control and for which the company
has no ready substitute, such as, but not limited to, power and
telecommunications services. For example, if such services were
to fail, it could be necessary for the company to temporarily
close stores in the affected geographic areas. The company has
in place a business resumption plan that addresses recovery from
various kinds of disasters, including recovery from significant
interruptions to data flows and distribution capabilities at the
company's major data systems centers and major distribution
centers. The company is using that plan as a starting point for
developing specific year 2000 contingency plans, which will
generally emphasize locating alternate sources of supply, methods
of distribution and ways of processing information. The company
expects its year 2000 contingency plans will be substantially
complete by the end of the second quarter of fiscal year 1999.
However, there can be no assurance that the company will be able
to complete its contingency planning on that schedule.
11
FORWARD-LOOKING STATEMENTS AND FACTORS AFFECTING FUTURE
PERFORMANCE
This report includes a number of forward-looking statements,
which reflect the company's current beliefs and estimates with
respect to future events and the company's future financial
performance, operations and competitive strengths. The words
"expect," "anticipate," "estimate," "believe" and similar
expressions identify forward-looking statements.
The company's continued success depends, in part, upon its
ability to increase sales at existing locations, to open new
stores and to operate stores on a profitable basis. There can be
no assurance that the company's existing strategies and store
expansion program will result in a continuation of revenue and
profit growth. Future economic and industry trends that could
potentially impact revenue and profitability remain difficult to
predict.
As a result, the forward-looking statements that are contained
herein are subject to certain risks and uncertainties that could
cause the company's actual results to differ materially from
historical results or current expectations. These factors
include, without limitation, ongoing competitive pressures in the
apparel industry, obtaining acceptable store locations, the
company's ability to continue to purchase attractive name-brand
merchandise at desirable discounts, successful implementation of
the company's merchandise diversification strategy, the company's
ability to successfully extend its geographic reach, unseasonable
weather trends, changes in the level of consumer spending on or
preferences in apparel or home-related merchandise and greater
than planned costs, including those that could be related to
necessary modifications to or replacements of the company's IT
Systems and embedded chip equipment to enable them to process
information with dates or date ranges spanning the year 2000 and
beyond. If unforeseen difficulties arise or such modifications
and replacements are not completed timely, or if the company's
vendors' or suppliers' IT Systems and embedded chip equipment are
not modified to become year 2000 compliant, the year 2000 issue
may have a material impact on the operations of the company. In
addition, the company's corporate headquarters, one of its
distribution centers and 44% of its stores are located in
California. Therefore, a downturn in the California economy or a
major natural disaster there could significantly affect the
company's operating results and financial condition.
In addition to the above factors, the apparel industry is highly
seasonal. The combined sales of the company for the third and
fourth (holiday) fiscal quarters are historically higher than the
combined sales for the first two fiscal quarters. The company
has realized a significant portion of its profits in each fiscal
year during the fourth quarter. Intensified price competition,
lower than anticipated consumer demand or other factors, if they
were to occur during the third and fourth quarters, and in
particular during the fourth quarter, could adversely affect the
company's fiscal year results.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Management believes that the market risk associated with the
company's ownership of market-risk sensitive financial
instruments (including interest rate risk and equity price risk)
as of May 1, 1999 is not material.
12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Incorporated herein by reference to the list of Exhibits
contained in the Exhibit Index that begins on page 13 of
this Report.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed by
the undersigned thereunto duly authorized.
ROSS STORES, INC.
Registrant
Date: June 14, 1999 /s/John G. Call
John G. Call, Senior Vice President,
Chief Financial Officer and Principal
Accounting Officer
13
INDEX TO EXHIBITS
Exhibit
Number Exhibit
3.1 Corrected First Restated Certificate of Incorporation,
incorporated by reference to Exhibit 3.1 to the Form 10-
K filed by Ross Stores for its year ended January 30,
1999.
3.2 Amended By-laws, dated August 25, 1994, incorporated by
reference to Exhibit 3.2 to the Form 10-Q filed by Ross
Stores for its quarter ended July 30, 1994.
10.36 Consulting Agreement between Ross Stores and Stuart G.
Moldaw, effective as of April 1, 1999, through March
31, 2002.
10.37 Employment Agreement between Ross Stores and Michael
Hamilton, effective as of March 1, 1999, through March
1, 2002.
10.38 Employment Agreement between Ross Stores and James
Fassio, effective as of April 1, 1999, through April 1,
2002.
15 Letter re: Unaudited Interim Financial Information.
27 Financial Data Schedules (submitted for SEC use only).
EXHIBIT 15
June 14, 1999
Ross Stores, Inc.
Newark, California
We have made a review, in accordance with standards established
by the American Institute of Certified Public Accountants, of the
unaudited interim condensed consolidated financial statements of
Ross Stores, Inc. for the three-month periods ended May 1, 1999,
and May 2, 1998, as indicated in our independent accountants'
report dated May 21, 1999; because we did not perform an audit,
we expressed no opinion on that information.
We are aware that our report referred to above, which is included
in your Quarterly Report on Form 10-Q for the quarter ended May1,
1999 is incorporated by reference in Registration Statements
Nos. 33-61373, 33-51916, 33-51896, 33-51898, 33-41415, 33-41413,
33-29600, 333-56831, and 333-06119 of Ross Stores, Inc. on Form S-8.
We are also aware that the aforementioned report, pursuant to
Rule 436(c) under the Securities Act of 1933, is not considered a
part of the Registration Statement prepared or certified by an
accountant or a report prepared or certified by an accountant
within the meaning of Sections 7 and 11 of that Act.
Yours truly,
/s/Deloitte & Touche LLP
San Francisco, California
5
0000745732
ROSS STORES, INC.
1,000
3-MOS
JAN-29-2000
JAN-31-1999
MAY-01-1999
33,307
0
15,199
0
516,107
580,914
451,406
201,613
881,146
407,284
0
0
0
458
427,834
881,146
550,825
550,825
379,378
494,728
0
0
(162)
56,097
21,934
34,163
0
0
0
34,163
0.74
0.73
CONSULTING AGREEMENT
BETWEEN
ROSS STORES, INC.
AND STUART G. MOLDAW
This Agreement is made as of April 1, 1999 (the "Effective Date")
through March 31, 2002 (the Completion Date"), by and between
Ross Stores, Inc., a Delaware corporation ("Ross") and Stuart G.
Moldaw ("Consultant"). This Agreement amends and restates the
prior agreement, dated April 1, 1997, and any subsequent oral
modifications.
RECITAL
Consultant desires to perform, and Ross desires to have
Consultant perform, consulting services as an independent
contractor to Ross.
NOW, THEREFORE, the parties agree as follows:
1. SERVICES
1.1 Performance. Consultant agrees to perform consulting
services for Ross as deemed necessary.
1.2 Payment.
(a) Ross agrees to pay Consultant $20,000 per calendar
quarter, payable on the first day of each calendar quarter.
(b) Ross agrees to pay the salary and benefits for a
Financial Administrator for the period in which consulting
services are rendered.
(c) Pursuant to the terms of that certain Split-Dollar
Agreement by and among Ross, Stuart G. Moldaw and Citicorp Trust
South Dakota dated as of February 8, 1999, Ross agrees to pay a
portion of the premiums of the Split-Dollar Life Insurance Policy
No. VP60622150 with Pacific Life Insurance Company (the "Policy")
through the Completion Date of this Agreement.
(d) Consultant and his spouse will be eligible to
participate in Ross' medical plan and supplemental medical plan.
Ross agrees to pay the annual premiums of the medical plans for
consultant and his spouse.
2. RELATIONSHIP OF PARTIES
2.1 Independent Contractor. Consultant is an independent
contractor and not an agent or employee of Ross. Consultant will
perform consulting services specified by Ross, but Consultant
will determine, in Consultant's sole discretion, the manner and
means by which the services are accomplished, subject to the
requirement that Consultant shall at all times comply with
applicable law. Ross has no right or authority to control the
manner or means by which the services are accomplished.
Consultant may represent, perform services for, or be employed by
such additional clients, persons or companies as Consultant sees
fit.
2.2 Employment Taxes and Benefits. Consultant will report
as self-employment income all compensation received by Consultant
pursuant to this Agreement. Consultant will indemnify Ross and
hold it harmless from and against all claims, damages, losses and
expenses, including reasonable fees and expenses of attorneys and
other professionals, relating to any obligation imposed by law on
Ross to pay any withholding taxes, social security, unemployment
or disability insurance, or similar items in connection with
compensation received by Consultant pursuant to this Agreement.
Consultant will not be entitled to receive any vacation or
illness payments, or to participate in any plans, arrangements,
or distributions by Company pertaining to any bonus, stock
option, profit sharing, insurance or similar benefits for
Company's employees except as expressly provided in this
Agreement.
3. TERMINATION
3.1 Termination. Either Ross or Consultant may terminate
this Agreement at any time, for any reason or no reason, by
giving 30 days' prior written notice to the other party.
3.2 Confidential Information. Consultant agrees during the
term of his consultancy and thereafter to take all steps
necessary to hold Ross' confidential information in strict
confidence and not to disclose such confidential information.
Upon the termination of this Agreement for any reason, Consultant
will promptly notify Ross of all confidential information in
Consultant's possession and, in accordance with Ross'
instructions, will promptly deliver to Ross all such confidential
information.
4. GENERAL
4.1 Governing Law: Severability. This Agreement will be
governed by and construed in accordance with laws of the State of
California excluding that body of law pertaining to conflict of
laws. If any provision of this Agreement is for any reason found
to be unenforceable, the remainder of this Agreement will
continue in full force and effect.
4.2 Successors and Assigns. Neither this Agreement nor any
of the rights or obligations of Consultant arising under this
Agreement may be assigned or transferred without Ross' prior
written consent. This Agreement will be for the benefit of Ross'
successors and assigns, and will be binding on Consultant's heirs
and legal representatives.
4.3 Notices. Any notices under this Agreement will be sent
by certified or registered mail, return receipt requested, to the
address specified below or such other address as the party
specifies in writing. Such notice will be effective upon its
mailing as specified.
4.4 Complete Understanding: Modification. This Agreement,
together with the Policy, constitutes the complete and exclusive
understanding and agreement of the parties and supersedes all
prior understandings and agreement, whether written or oral, with
respect to the subject matter hereof. Any waiver, modification
or amendment of any provision of this Agreement will be effective
only if in writing and signed by the parties hereto.
IN WITNESS WHEREOF, the parties have signed this Agreement as of
the Effective Date.
ROSS STORES, INC. CONSULTANT
By: /s/Michael Balmuth /s/Stuart G. Moldaw
Michael Balmuth Stuart G. Moldaw
Vice Chairman and
Chief Executive
Officer
Address: Address:
8333 Central Avenue c/o Gymboree Corporation
Newark, CA 94560-3433 700 Airport Blvd., Suite 200
Burlingame, CA 94010
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made effective as of April 1,
1999, by and between Ross Stores, Inc. (the "Company") and James
Fassio (the "Executive"). The Executive is presently employed by
the Company as Senior Vice President, Property Development and it
is now the intention of the Company and the Executive to enter
into a written employment agreement. Accordingly, the Company
and the Executive enter into this Agreement.
1. Term. The employment of the EXECUTIVE by the Company will
continue as of the effective date hereof and end on April 1,
2002, unless extended or terminated in accordance with this
Agreement. For so long as the EXECUTIVE is employed by the
Company, upon the written request of the EXECUTIVE, the
Company's Chief Executive Officer shall request that the Board of
Directors of the Company ("Board") consider extending the
EXECUTIVE's employment with the Company. The initial such
request must be delivered to the Chief Executive Officer no later
than February 1, 2001 and subsequent requests must be delivered
at least twelve months before the end of any extended term of
this Agreement. The Chief Executive Officer shall advise the
EXECUTIVE, in writing, within thirty (30) days following the
EXECUTIVE's written request, whether the requested extension has
been approved. The failure of the Chief Executive Officer to
provide such written advice shall constitute approval of the
EXECUTIVE's request for extension. If the EXECUTIVE's request
for an extension is approved, this Agreement shall be extended
two additional years.
2. Position and Duties. The EXECUTIVE shall serve as Senior
Vice President, Property Development of the Company. The
EXECUTIVE shall report directly to the Company's Chief Operating
Officer. The EXECUTIVE shall devote substantially all of his
working time and efforts to the business and affairs of the
Company. During the term of his employment, the EXECUTIVE may
engage in outside activities provided those activities do not
conflict with his duties and responsibilities hereunder, and
provided further that the EXECUTIVE gives written notice to the
Board of any significant outside business activity in which he
plans to become involved, whether or not such activity is pursued
for profit. The EXECUTIVE may not render services to or invest
in any business competitive with any existing or contemplated
business of the Company except with respect to personal
investments in securities, limited partnerships or similar
passive investment interests that are publicly traded subject to
the restrictions set forth in paragraph 9.
3. Place of Performance. The EXECUTIVE shall be employed at
the Company's offices in Newark, California except for required
travel on the Company's business.
4. Compensation and Related Matters.
a. Salary. During his employment, the Company shall pay the
EXECUTIVE a monthly salary of $30,000 less applicable withholding
($360,000 on an annualized basis). This salary shall be payable
in equal installments in accordance with the Company's normal
payroll practices applicable to senior officers. Subject to the
first sentence of this paragraph, the EXECUTIVE's salary may be
adjusted upward from time to time by the Company in accordance
with normal business practices of the Company. In the event of
the occurrence of a Change of
2
Control (as defined in paragraph 6(f) hereof), then during the
period commencing on the effective date of the Change of Control
and expiring two years thereafter (the "Remaining Term"), the
EXECUTIVE shall receive as additional salary the aggregate amount
of $500,000 per year (the "Additional Salary") which shall be
payable in equal installments during the Remaining Term in
accordance with the Company's normal payroll policies applicable
for senior officers. The provisions of paragraph 1 ("Term") of
the Agreement notwithstanding, the EXECUTIVE's employment by the
Company under this Agreement shall continue until the later of
(a) the expiration of the Remaining Term or (b) the expiration of
any extension pursuant to paragraph 1. If any portion of the
Additional Salary is subject to the tax ("Excise Tax") imposed by
Section 4999 of the Internal Revenue Code, the Company shall
reimburse the EXECUTIVE in such amounts so that, after deduction
of any Excise Taxes paid by the EXECUTIVE and any federal, state
or local income tax and Excise Taxes paid upon such
reimbursements, the net amounts retained by the EXECUTIVE are
equal to the Additional Salary. For all purposes of paragraph 8
hereof ("Compensation and Benefits Upon Termination"), the
Additional Salary shall be included within the term "salary" as
used in such paragraph 8. Notwithstanding the above, the
Additional Salary shall not be included in base salary for
purposes of determining any payments under the Company's
Incentive Compensation Plan. The EXECUTIVE's entitlement to this
Additional Salary is expressly conditioned upon the EXECUTIVE's
compliance with the terms of this Agreement.
b. Bonus. During his employment the Company shall pay the
EXECUTIVE an annual bonus in accordance with the terms of a bonus
incentive plan that covers the EXECUTIVE (or any replacement plan
of substantially equivalent or greater value that may
subsequently be established and in effect at the time for such
action).
c. Expenses. During his employment the EXECUTIVE shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by him in performing services hereunder,
including all reasonable expenses of travel and living while away
from home, provided that such expenses are incurred and accounted
for in accordance with the policies and procedures established by
the Company.
d. Other Benefits. The EXECUTIVE shall be entitled to continue
to participate in all of the Company's employee benefit plans and
arrangements in effect on the date hereof in which the EXECUTIVE
now participates (including without limitation each pension and
retirement plan and arrangement, supplemental pension and
retirement plan, deferred compensation plan, short-term and
long-term incentive plan, stock option plan, life insurance and
health-and-accident plan and arrangement, medical insurance plan,
physical examination program, dental care plan, accidental death
and disability plan, survivor income plan, relocation plan,
financial, tax and legal counseling programs, and vacation plan).
The Company shall not make any changes in such plans or
arrangements which would adversely affect the EXECUTIVE's rights
or benefits thereunder, unless such change occurs pursuant to a
program applicable to all senior executives of the Company and
does not result in a proportionately greater reduction in the
rights of, or benefits to, the EXECUTIVE as compared with any
other senior executive of the Company. The EXECUTIVE shall be
entitled to participate in or receive benefits under any employee
benefit plan or arrangement made available by the Company in the
future to its executives and key management employees, subject
to, and on a basis consistent with, the terms, conditions and
overall administration of such plans and arrangements. Except as
3
otherwise specifically provided herein, nothing paid to the
EXECUTIVE under any plan or arrangement presently in effect or
made available in the future shall be in lieu of the salary or
bonus payable under subsections (a) and (b).
e. Vacations. The EXECUTIVE shall be entitled to the number of
vacation days in each calendar year, and to compensation in
respect of earned but unused vacation days, determined in
accordance with the Company's vacation plan. The EXECUTIVE shall
also be entitled to all paid holidays given by the Company to its
executives. Unused vacation days shall not be forfeited once
they have been earned and, if still unused at the time of the
EXECUTIVE's termination of employment with the Company, shall be
promptly paid to the EXECUTIVE at their then-current value, based
on the EXECUTIVE's rate of pay at the time of his termination of
employment.
f. Services Furnished. The Company shall furnish the EXECUTIVE
with office space and such services as are suitable to the
EXECUTIVE's position and adequate for the performance of his
duties.
5. Confidential Information.
a. The EXECUTIVE agrees not to disclose, either while in the
Company's employ or at any time thereafter, to any person not
employed by the Company, or not engaged to render services to the
Company, any confidential information obtained while in the
employ of the Company, including, without limitation, any of the
Company's inventions, processes, methods of distribution or
customers or trade secrets; provided, however, that this
provision shall not preclude the EXECUTIVE from use or disclosure
of information known generally to the public or from disclosure
required by law or court order.
b. The EXECUTIVE agrees that upon leaving the Company's employ,
he will make himself reasonably available to answer questions
from Company officers regarding his former duties and
responsibilities and the knowledge he obtained in connection
therewith. In addition, he will not take with him, without the
prior written consent of any officer authorized to act in the
matter by the Board, any study, memoranda, drawing, blueprint,
specification or other document of the Company, its subsidiaries,
affiliates and divisions, which is of a confidential nature
relating to the Company, its subsidiaries, affiliates and
divisions.
c. The EXECUTIVE understands and agrees that his obligation
pursuant to this paragraph 5 shall survive the termination of
this Agreement and his termination of employment for any reason
under this Agreement.
6. Termination. The EXECUTIVE's employment may be terminated
during the term of this Agreement only as follows:
a. Death. The EXECUTIVE's employment shall terminate upon his
death.
b. Disability. If, as a result of the EXECUTIVE's incapacity
due to physical or mental illness, the EXECUTIVE shall have been
absent from his duties hereunder on a full-time
basis for the entire period of six consecutive months, and within
thirty days after written notice
4
of termination is given by the Company or the EXECUTIVE (which
may occur before or after the end of such six-month period), the
EXECUTIVE shall not have returned to the performance of his
duties hereunder on a full-time basis, the EXECUTIVE's employment
shall terminate. A termination of employment pursuant to this
paragraph 6(b) shall be deemed an involuntary termination for
purposes of this Agreement or any plan or practice of the
Company.
c. Cause. The Company may terminate the EXECUTIVE's employment
for Cause. The Company shall have "Cause" to terminate the
EXECUTIVE's employment upon (A) the continued failure by the
EXECUTIVE to substantially perform his duties hereunder (other
than a failure resulting from a disability as defined in
subsection (b)) after written notice is delivered by the Company
that specifically identifies the manner in which the EXECUTIVE
has not substantially performed his duties, or (B) the engaging
by the EXECUTIVE in knowing, illegal or grossly negligent conduct
which is materially injurious to the Company monetarily or
otherwise.
d. Without Cause. The Company may terminate the EXECUTIVE's
employment at any time without cause. A termination "without
cause" is a termination of the EXECUTIVE's employment by the
Company for any reason other than those set forth in subsections
(a)[Death], (b)[Disability] or (c)[For Cause] of this paragraph.
e. Termination by Executive for Good Reason. The EXECUTIVE may
terminate his employment with the Company for Good Reason which
shall be deemed to occur if he terminates his employment within
six months after (i) written notice of a failure by the Company
to comply with any material provision of this Agreement which
failure has not been cured within ten days after such written
notice of noncompliance has been given by the EXECUTIVE to the
Company; (ii) a significant diminishment in the nature or scope
of the authority, power, function or duty attached to the
position which the EXECUTIVE currently maintains without the
express written consent of the EXECUTIVE; or (iii) the Company
requires that the EXECUTIVE relocate his place of employment or
residence outside of the San Francisco Bay Area.
f. Termination Following Change of Control. The EXECUTIVE may
terminate his employment with the Company within six months after
a Change of Control, which shall be deemed to have occurred in
the event of: (i) the direct or indirect sale or exchange by
the stockholders of the Company of all or substantially all of
the stock of the Company, in a single or series of related
transactions, after which sale or exchange the stockholders of
the Company immediately prior to such transactions do not retain,
directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Company; (ii) a merger in
which the Company is a party after which merger the stockholders
of the Company do not retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock of the
surviving company; or (iii) the sale, exchange, or transfer of
all or substantially all of the Company's assets (other than a
sale, exchange, or transfer to one or more corporations where the
stockholders of the Company before such sale, exchange, or
transfer retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the corporation(s)
to which the assets were transferred). Provided, however, that
the EXECUTIVE shall not be entitled to terminate his employment
under this subsection in the event that the purchaser of the
Company, or any successor by merger, consolidation or otherwise,
or the entity to which all or a significant portion of the
5
Company's assets have been transferred, shall have expressly
assumed in writing all duties and obligations of the Company
under this Agreement.
g. Voluntary Termination. The EXECUTIVE may voluntarily
terminate his employment with the Company at any time. A
termination of employment by the EXECUTIVE pursuant to paragraph
6(e)[For Good Reason] or (f)[Change of Control] shall not be
deemed a voluntary termination by the EXECUTIVE for purposes of
this Agreement or any plan or practice of the Company but shall
be deemed an involuntary termination.
h. Non-Renewal. If the EXECUTIVE fails to request an
extension of this Agreement in accordance with paragraph 1, or if
the Board shall fail to approve such request, this Agreement
shall automatically expire at the end of its term. Such
expiration shall not entitle the EXECUTIVE to any compensation or
benefits except as earned by the EXECUTIVE through the date of
expiration of this Agreement and set forth in paragraph 8(e).
The parties shall have no further obligations to each other
thereafter except as set forth in paragraphs 5 and 11.
7. Notice and Effective Date of Termination.
a. Notice. Any termination of the EXECUTIVE's employment by
the Company or by the EXECUTIVE during the term of this Agreement
(other than as a result of death) shall be communicated by
written notice of termination to the other party hereto. Such
notice shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the EXECUTIVE's employment under that provision.
b. Date of Termination. The date of termination shall be:
(i) if the EXECUTIVE's employment is terminated by his death,
the date of his death;
(ii) if the EXECUTIVE's employment is terminated pursuant to
paragraph 6(b)[Disability], the date of termination shall be the
31st day following delivery of the notice of termination;
(iii) if the EXECUTIVE's employment is terminated for any
other reason by either party, the date on which a notice of
termination is delivered to the other party; and
(iv) if the Agreement expires pursuant to paragraph 6(h)[Non-
Renewal], the parties' employment relationship shall terminate on
the last day of the term of this Agreement without any notice.
6
8. Compensation and Benefits Upon Termination.
a. Disability, Without Cause or For Good Reason. If the
EXECUTIVE's employment terminates pursuant to paragraph
6(b)[Disability], (d)[Without Cause] or (e)[For Good Reason], the
Company shall:
(i) Salary: continue to pay the EXECUTIVE his then-current
salary through the remaining term of this Agreement as defined in
paragraph 1;
(ii) Bonus: continue to pay the EXECUTIVE an annual bonus(es)
throughout such remaining term; each such bonus shall be in an
amount equal to the greater of (A) the EXECUTIVE's bonus during
the year prior to his termination or (B) the bonus that the
EXECUTIVE would have earned under the Company's bonus plan in the
year that he was terminated had he remained in its employment;
provided, however, that such post-termination bonuses shall not
exceed the lesser of the 100% targeted amounts for those bonus
payments in the prior and then-current year, and such bonuses
shall not be paid until due under the Company's present bonus
plan;
(iii) Stock Options: with respect to any stock options
granted to the EXECUTIVE by the Company, the EXECUTIVE shall
immediately become vested in any unvested stock options upon such
termination; and
(iv) Restricted Stock: with respect to any restricted stock
granted to the EXECUTIVE by the Company which has not become
vested as of such termination, the EXECUTIVE shall immediately
become vested in a pro rata portion of such unvested stock
determined on the basis of the number of full months that have
elapsed from the date of grant of such restricted stock. Such
pro rata vesting shall be determined separately with respect to
each portion of any restricted stock grant that is subject to a
different restriction lapse date. That is, for each portion of
any restricted stock grant that is subject to a different
restriction lapse date, the EXECUTIVE shall immediately become
vested in the number of shares that equals (i) the quantity A
divided by B times C minus (ii) the number of shares that have
previously vested [(A/B x C)-D], where A is the number of full
months that have elapsed from the date of grant to and including
the date of termination, B is the number of months between the
date of grant and the restriction lapse date, C is the number of
shares that would otherwise become vested on that restriction
lapse date and D is the number of shares that have previously
vested. As a hypothetical example, presume the EXECUTIVE had
been granted 30,000 shares of restricted stock on April 1, 1999,
and that the restrictions on that grant lapse as to 10,000 shares
on April 1, 2000, 5,000 shares on April 1, 2001, and 15,000
shares on April 1, 2002. If the EXECUTIVE's employment
terminated pursuant to paragraph 6(b) on September 1, 1999 (i.e.,
at a time when no shares had previously vested), the EXECUTIVE
would immediately become vested under this subsection (iv) in
5,000 of the shares whose restrictions were to lapse on April 1,
2000, 1,250 of the shares whose restrictions were to lapse on
April 1, 2001, and 2,500 of the shares whose restrictions were to
lapse on April 1, 2002.
The Company shall have no further obligations to the EXECUTIVE as
a result of such termination except as set forth in paragraph 11.
7
b. For Cause. If the EXECUTIVE's employment is terminated for
cause as defined in paragraph 6(c)(A)[Failure to Perform], the
EXECUTIVE shall receive the post-termination compensation and
benefits described in paragraph 8(a)[Compensation and Benefits
Upon Disability, Termination Without Cause or For Good Reason].
If the EXECUTIVE's employment is terminated for cause as defined
in paragraph 6(c)(B)[Materially Injurious Conduct], he shall only
receive the post-termination compensation and benefits described
in paragraph 8(d) [Compensation and Benefits Upon Voluntary
Termination].
c. Change of Control. Upon a Change of Control (whether or
not the EXECUTIVE's employment terminates), the EXECUTIVE shall
immediately become vested in any shares of restricted stock
granted to the EXECUTIVE by the Company which had not vested
prior to the Change of Control. In addition, if the EXECUTIVE's
employment terminates pursuant to paragraph 6(f)[Change of
Control], the Company shall:
(i) Salary: continue to pay the EXECUTIVE his then-current
salary through the remaining term of this Agreement as defined in
paragraph 1;
(ii) Bonus: continue to pay the EXECUTIVE his annual bonus(es)
throughout such remaining term; each such bonus shall be in an
amount equal to the greater of (A) the EXECUTIVE's bonus during
the year prior to his termination or (B) the bonus that the
EXECUTIVE would have earned under the Company's bonus plan in the
year that he was terminated had he remained in its employment;
provided, however, that such post-termination bonuses shall not
exceed the lesser of the 100% targeted amounts for those bonus
payments in the prior and then-current year, and such bonuses
shall not be paid until due under the Company's present bonus
plan; and
(iii) Stock Options: with respect to any stock options
granted to the EXECUTIVE by the Company, the EXECUTIVE shall
immediately become vested in any unvested stock options upon such
termination.
The Company shall reimburse the EXECUTIVE for any excise taxes
paid by the EXECUTIVE pursuant to Internal Revenue Code section
4999 as a result of any "excess parachute payments" that he
receives from the Company as determined under section 280G of
said Code. This reimbursement shall not include any additional
amount to cover the EXECUTIVE's income or other taxes on such
reimbursement. The Company shall have no further obligations to
the EXECUTIVE as a result of such termination except as set forth
in paragraph 11.
d. Death or Voluntary Termination. If the EXECUTIVE's
employment terminates pursuant to paragraph 6(a)[Death] or
6(g)[Voluntary Termination], he (or his designee or his estate)
shall be paid his salary through his termination date and not
thereafter. He (or his designee or his estate) shall not be
entitled to any bonus payments which were not fully earned prior
to his termination date, and he (or his designee or his estate)
shall not be entitled to any pro-rated bonus payment for the year
in which his employment terminates. Any stock options granted to
the EXECUTIVE by the Company will continue to vest only through
the date on which his employment terminates (provided, however,
that if the EXECUTIVE's employment terminates as a result of his
voluntary termination (but not as a result of his death) within
six months after a Change of Control, the EXECUTIVE shall
immediately become fully-vested in
8
any unvested stock options previously granted to him by the
Company) and any restricted stock that was granted to the
EXECUTIVE by the Company that is unvested as of the date on which
his employment terminates will automatically be reacquired by the
Company and the EXECUTIVE (or his designee or his estate) shall
have no further rights with respect to such restricted stock.
The Company shall have no further obligations to the EXECUTIVE as
a result of the termination of his employment pursuant to
paragraph 6(a)[Death] or 6(g)[Voluntary Termination] except as
set forth in paragraph 11.
e. Non-Renewal. If the Agreement expires as set forth in
paragraph 6(h)[Non-Renewal], the Company shall have no further
obligations to the EXECUTIVE except as set forth in paragraph 11
and except that with respect to any restricted stock granted to
the EXECUTIVE by the Company which has not become vested as of
such expiration date, the EXECUTIVE shall immediately become
vested in a pro rata portion of such unvested stock determined on
the basis of the number of full months that have elapsed from the
date of grant of such restricted stock (as described more fully
in paragraph 8(a)(iv)).
9. Employment and Post-Employment Restrictions. The Company
and the EXECUTIVE acknowledge that the Company has a special
interest in and derives significant benefit from the unique
skills and experience of the EXECUTIVE. In addition, the
EXECUTIVE will use and have access to some of the Company's
proprietary and valuable Confidential Information during the
course of the EXECUTIVE's employment. Accordingly, except as
hereafter noted, during the term of the EXECUTIVE's employment
with the Company and in the event that the EXECUTIVE voluntarily
terminates his employment with the Company prior to April 1,
2002, the EXECUTIVE agrees that for a period of three years
following his voluntary termination pursuant to paragraph 6(g),
he shall not provide any labor, work, services or assistance to
(whether as an officer, director, employee, partner, agent,
owner, independent contractor, stockholder or otherwise)
Burlington Coat Factory Warehouse Corporation, Dillard Department
Stores, Inc., Filene's Basement Corp., The Federated Stores, The
May Department Stores Company, The TJX Companies, Inc. and Value
City Department Stores, Inc. as well as all subsidiaries,
divisions and/or the surviving entity of any of the above that do
business in the retail industry in the case of a merger or
acquisition. However, this subsection shall not prohibit the
EXECUTIVE from making any investment of 1% or less of the equity
securities of any publicly-traded corporation that is engaged in
any business of the type or character engaged in by the Company.
The preceding sentence shall have no force and effect in the
event that (i) the EXECUTIVE's employment with the Company is
terminated (1) by the Company pursuant to paragraph 6(c)[with
Cause], 6(d)[without Cause] or (2) by the EXECUTIVE pursuant to
either paragraph 6(e)[Termination by the Executive for Good
Reason] or paragraph 6(f)[Termination Following Change of
Control] or (ii) the Company fails to approve or grant an
extension of this Agreement in accordance with paragraph 1
hereof.
During the term of the EXECUTIVE's employment with the
Company and for a period of three years following the termination
of that employment for any reason, the EXECUTIVE shall not
directly or indirectly solicit any other employee of the Company
to terminate his or her employment with the Company.
10. Exercise of Stock Options Following Termination. If the
EXECUTIVE's employment terminates pursuant to paragraph
6(a)[Death] or (b)[Disability], he (or his estate)
9
may exercise his right to purchase any vested stock under the
stock options granted to him by the Company for up to one year
following the date of his termination, but not later than the
termination date of such options. In all other instances, he may
exercise that right for up to three months following the date of
his termination, but not later than the termination date of such
options. All such purchases must be made by the EXECUTIVE in
accordance with the applicable stock option plans and agreements
between the parties.
11. Insurance and Indemnity. The Company shall, to the extent
permitted by law, include the EXECUTIVE during the term of this
Agreement under any directors and officers liability insurance
policy maintained for its directors and officers, with coverage
at least as favorable to the EXECUTIVE in amount and each other
material respect as the coverage of other directors and officers
covered thereby. This obligation to provide insurance and
indemnify the EXECUTIVE shall survive expiration or termination
of this Agreement with respect to proceedings or threatened
proceedings based on acts or omissions of the EXECUTIVE occurring
during the EXECUTIVE's employment with the Company or with any
affiliated company. Such obligations shall be binding upon the
Company's successors and assigns and shall inure to the benefit
of the EXECUTIVE's heirs and personal representatives.
12. Successors; Binding Agreement. This Agreement and all
rights of the EXECUTIVE hereunder shall inure to the benefit of
and be enforceable by the EXECUTIVE's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the EXECUTIVE should die
while any amounts would still be payable to him hereunder all
such amounts shall be paid in accordance with the terms of this
Agreement to the EXECUTIVE's written designee, or if there be no
such designee, to the EXECUTIVE's estate.
13. Notice. For the purposes of this Agreement, notices,
demands and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have been
duly given when delivered or (unless otherwise specified) mailed
by United States registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the EXECUTIVE: James Fassio
c/o Ross Stores, Inc.
8333 Central Avenue
Newark, CA 94560-3433
If to the Company: Ross Stores, Inc.
8333 Central Avenue
Newark, CA 94560-3433
Attention: Corporate Secretary
or to such other address as any party may have furnished to the
other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
14. Modification or Waiver; Entire Agreement. No provision of
this Agreement may be modified or waived except in a document
signed by the EXECUTIVE and the chairman of the Compensation
Committee of the Board or such other person as may be designated
by the Board.
10
This Agreement, along with any stock option or restricted stock
agreements between the parties, constitute the entire agreement
between the parties regarding their employment relationship. No
agreements or representations, oral or otherwise, with respect to
the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement.
15. Governing Law; Severability. The validity, interpretation,
construction and performance of this Agreement shall be governed
by the laws of the State of California. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement.
16. Severability. In the event any provision of this Agreement
shall be found unenforceable by an arbitrator or a court of
competent jurisdiction, the provision shall be deemed modified to
the extent necessary to allow enforceability of the provision as
so limited, it being intended that the Company shall receive the
benefits contemplated herein to the fullest extent permitted by
law. If a deemed modification is not satisfactory in the
judgment of such arbitrator or court, the unenforceable provision
shall be deemed deleted, and the validity and enforceability of
the remaining provisions shall not be affected thereby.
17. Mitigation. In the event the EXECUTIVE's employment with
the Company terminates for any reason other than death, the
EXECUTIVE shall be obligated to seek other employment following
such termination in order to mitigate payments that the Company
may be required to make to him or for his benefit hereunder.
Such obligation shall not apply during any period in which the
EXECUTIVE is disabled. If the EXECUTIVE obtains other employment
during any period in which he is entitled to receive continued
salary or bonus payments under paragraph 8, any salary or bonus
payments earned by the EXECUTIVE during such period shall reduce
the Company's obligation to pay continued salary and/or bonus
payments under paragraph 8 by the amount of the salary and/or
bonus payments so earned by the EXECUTIVE.
18. Withholding. All payments required to be made by the
Company hereunder to the EXECUTIVE or his estate or beneficiaries
shall be subject to the withholding of such amounts as the
Company may reasonably determine it should withhold pursuant to
any applicable law. To the extent permitted, the EXECUTIVE may
provide all or any part of any necessary withholding by
contributing Company stock with value, determined on the date
such withholding is due, equal to the number of shares
contributed multiplied by the closing Nasdaq price on the date
preceding the date the withholding is determined.
19. Arbitration. In the event of any dispute or claim relating
to or arising out of the parties' employment relationship or this
Agreement (including, but not limited to, any claims of breach of
contract, wrongful termination or age, race, sex, disability or
other discrimination), all such disputes shall be fully, finally
and exclusively resolved by binding arbitration conducted by the
American Arbitration Association in San Francisco, California;
provided, however, that this arbitration provision shall not
apply to any disputes or claims relating to or arising out of the
misuse or misappropriation of the Company's trade secrets or
proprietary information or to any disputes or claims relating to
or arising out of the EXECUTIVE's failure to comply with the
requirements of paragraph 9 regarding Employment and Post-
Employment Restrictions.
11
20. Attorneys' Fees. Each party shall bear its own attorneys'
fees and costs incurred in any action or dispute arising out of
this Agreement.
21. Miscellaneous. No right or interest to, or in, any payments
shall be assignable by the EXECUTIVE; provided, however, that
this provision shall not preclude the EXECUTIVE from designating
in writing one or more beneficiaries to receive any amount that
may be payable after the EXECUTIVE's death and shall not preclude
the legal representative of the EXECUTIVE's estate from assigning
any right hereunder to the person or persons entitled thereto.
This Agreement shall be binding upon and shall inure to the
benefit of the EXECUTIVE, his heirs and legal representatives and
the Company and its successors.
IN WITNESS WHEREOF, the parties have executed this
Employment Agreement effective as of the date and year first
above written.
ROSS STORES, INC.
/s/ James Fassio
James Fassio By: /s/ Melvin A. Wilmore
Title: President & COO
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made effective as of March 1, 1999,
by and between Ross Stores, Inc. (the "Company") and Michael
Hamilton (the "Executive").
1. Term. The employment of the EXECUTIVE by the Company will
commence as of the effective date hereof and end on March 1,
2002, unless extended or terminated in accordance with this
Agreement. For so long as the EXECUTIVE is employed by the
Company, upon the written request of the EXECUTIVE, the Company's
Chief Executive Officer shall request that the Board of Directors
of the Company ("Board") consider extending the EXECUTIVE's
employment with the Company. The initial such request must be
delivered to the Chief Executive Officer no later than February
1, 2001 and subsequent requests must be delivered at least twelve
months before the end of any extended term of this Agreement.
The Chief Executive Officer shall advise the EXECUTIVE, in
writing, within thirty (30) days following the EXECUTIVE's
written request, whether the requested extension has been
approved. The failure of the Chief Executive Officer to provide
such written advice shall constitute approval of the EXECUTIVE's
request for extension. If the EXECUTIVE's request for an
extension is approved, this Agreement shall be extended two
additional years.
2. Position and Duties. The EXECUTIVE shall serve as the
Senior Vice President, Stores of the Company. The EXECUTIVE
shall report directly to the Company's Chief Operating Officer.
The EXECUTIVE shall devote substantially all of his working time
and efforts to the business and affairs of the Company. During
the term of his employment, the EXECUTIVE may engage in outside
activities provided those activities do not conflict with his
duties and responsibilities hereunder, and provided further that
the EXECUTIVE gives written notice to the Board of any
significant outside business activity in which he plans to become
involved, whether or not such activity is pursued for profit.
The EXECUTIVE may not render services to or invest in any
business competitive with any existing or contemplated business
of the Company except with respect to personal investments in
securities, limited partnerships or similar passive investment
interests that are publicly traded subject to the restrictions
set forth in paragraph 9.
3. Place of Performance. The EXECUTIVE shall be employed at
the Company's offices in Newark, California except for required
travel on the Company's business.
4. Compensation and Related Matters.
a. Salary. During his employment, the Company shall pay the
EXECUTIVE a monthly salary of $33, 333.33, less applicable
withholding ($400,000.00 on an annualized basis). This salary
shall be payable in equal installments in accordance with the
Company's normal payroll practices applicable to senior officers.
Subject to the first sentence of this paragraph, the EXECUTIVE's
salary may be adjusted upward from time to time by the Company in
accordance with normal business practices of the Company. In
the event of the occurrence of a Change of Control (as defined in
paragraph 6(f) hereof), then during the period commencing on the
effective date of the Change of Control and expiring two years
thereafter (the "Remaining
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Term"), the EXECUTIVE shall receive as additional salary the
aggregate amount of $500,000 per year (the "Additional Salary")
which shall be payable in equal installments during the Remaining
Term in accordance with the Company's normal payroll policies
applicable for senior officers. The provisions of paragraph 1
("Term") of the Agreement notwithstanding, the EXECUTIVE's
employment by the Company under this Agreement shall continue
until the later of (a) the expiration of the Remaining Term or
(b) the expiration of any extension pursuant to paragraph 1. If
any portion of the Additional Salary is subject to the tax
("Excise Tax") imposed by Section 4999 of the Internal Revenue
Code, the Company shall reimburse the EXECUTIVE in such amounts
so that, after deduction of any Excise Taxes paid by the
EXECUTIVE and any federal, state or local income tax and Excise
Taxes paid upon such reimbursements, the net amounts retained by
the EXECUTIVE are equal to the Additional Salary. For all
purposes of paragraph 8 hereof ("Compensation and Benefits Upon
Termination"), the Additional Salary shall be included within the
term "salary" as used in such paragraph 8. The EXECUTIVE's
entitlement to this Additional Salary is expressly conditioned
upon the EXECUTIVE's compliance with the terms of this Agreement.
b. Bonus. During his employment the Company shall pay the
EXECUTIVE an annual bonus in accordance with the terms of a bonus
incentive plan that covers the EXECUTIVE (or any replacement plan
of substantially equivalent or greater value that may
subsequently be established and in effect at the time for such
action).
c. Expenses. During his employment the EXECUTIVE shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by him in performing services hereunder,
including all reasonable expenses of travel and living while away
from home, provided that such expenses are incurred and accounted
for in accordance with the policies and procedures established by
the Company.
d. Other Benefits. The EXECUTIVE shall be entitled to continue
to participate in all of the Company's employee benefit plans and
arrangements in effect on the date hereof in which the EXECUTIVE
now participates (including without limitation each pension and
retirement plan and arrangement, supplemental pension and
retirement plan, deferred compensation plan, short-term and
long-term incentive plan, stock option plan, life insurance and
health-and-accident plan and arrangement, medical insurance plan,
physical examination program, dental care plan, accidental death
and disability plan, survivor income plan, relocation plan,
financial, tax and legal counseling programs, and vacation plan).
The Company shall not make any changes in such plans or
arrangements which would adversely affect the EXECUTIVE's rights
or benefits thereunder, unless such change occurs pursuant to a
program applicable to all senior executives of the Company and
does not result in a proportionately greater reduction in the
rights of, or benefits to, the EXECUTIVE as compared with any
other senior executive of the Company. The EXECUTIVE shall be
entitled to participate in or receive benefits under any employee
benefit plan or arrangement made available by the Company in the
future to its executives and key management employees, subject
to, and on a basis consistent with, the terms, conditions and
overall administration of such plans and arrangements. Except as
otherwise specifically provided herein, nothing paid to the
EXECUTIVE under any plan or arrangement presently in effect or
made available in the future shall be in lieu of the salary or
bonus payable under subsections (a) and (b).
3
e. Vacations. The EXECUTIVE shall be entitled to the number of
vacation days in each calendar year, and to compensation in
respect of earned but unused vacation days, determined in
accordance with the Company's vacation plan. The EXECUTIVE shall
also be entitled to all paid holidays given by the Company to its
executives. Unused vacation days shall not be forfeited once
they have been earned and, if still unused at the time of the
EXECUTIVE's termination of employment with the Company, shall be
promptly paid to the EXECUTIVE at their then-current value, based
on the EXECUTIVE's rate of pay at the time of his termination of
employment.
f. Services Furnished. The Company shall furnish the EXECUTIVE
with office space and such services as are suitable to the
EXECUTIVE's position and adequate for the performance of his
duties.
5. Confidential Information.
a. The EXECUTIVE agrees not to disclose, either while in the
Company's employ or at any time thereafter, to any person not
employed by the Company, or not engaged to render services to the
Company, any confidential information obtained while in the
employ of the Company, including, without limitation, any of the
Company's inventions, processes, methods of distribution or
customers or trade secrets; provided, however, that this
provision shall not preclude the EXECUTIVE from use or disclosure
of information known generally to the public or from disclosure
required by law or court order.
b. The EXECUTIVE agrees that upon leaving the Company's employ
he will make himself reasonably available to answer questions
from Company officers regarding his former duties and
responsibilities and the knowledge he obtained in connection
therewith. In addition, he will not take with him, without the
prior written consent of any officer authorized to act in the
matter by the Board, any study, memoranda, drawing, blueprint,
specification or other document of the Company, its subsidiaries,
affiliates and divisions, which is of a confidential nature
relating to the Company, its subsidiaries, affiliates and
divisions.
c. The EXECUTIVE understands and agrees that his obligation
pursuant to this paragraph 5 shall survive the termination of
this Agreement and his termination of employment for any reason
under this Agreement.
6. Termination. The EXECUTIVE's employment may be terminated
during the term of this Agreement only as follows:
a. Death. The EXECUTIVE's employment shall terminate upon his
death.
b. Disability. If, as a result of the EXECUTIVE's incapacity
due to physical or mental illness, the EXECUTIVE shall have been
absent from his duties hereunder on a full-time basis for the
entire period of six consecutive months, and within thirty days
after written notice of termination is given by the Company or
the EXECUTIVE (which may occur before or after the end of such
six-month period), the EXECUTIVE shall not have returned to the
performance of his duties hereunder on a full-time basis, the
EXECUTIVE's employment shall terminate. A
4
termination of employment pursuant to this paragraph 6(b) shall
be deemed an involuntary termination for purposes of this
Agreement or any plan or practice of the Company.
c. Cause. The Company may terminate the EXECUTIVE's employment
for Cause. The Company shall have "Cause" to terminate the
EXECUTIVE's employment upon (A) the continued failure by the
EXECUTIVE to substantially perform his duties hereunder (other
than a failure resulting from a disability as defined in
subsection (b)) after written notice is delivered by the Company
that specifically identifies the manner in which the EXECUTIVE
has not substantially performed his duties, or (B) the engaging
by the EXECUTIVE in knowing, illegal or grossly negligent conduct
which is materially injurious to the Company monetarily or
otherwise.
d. Without Cause. The Company may terminate the EXECUTIVE's
employment at any time without cause. A termination "without
cause" is a termination of the EXECUTIVE's employment by the
Company for any reason other than those set forth in subsections
(a)[Death], (b)[Disability] or (c)[For Cause] of this paragraph.
e. Termination by Executive for Good Reason. The EXECUTIVE may
terminate his employment with the Company for Good Reason which
shall be deemed to occur if he terminates his employment within
six months after (i) written notice of a failure by the Company
to comply with any material provision of this Agreement which
failure has not been cured within ten days after such written
notice of noncompliance has been given by the EXECUTIVE to the
Company; (ii) a significant diminishment in the nature or scope
of the authority, power, function or duty attached to the
position which the EXECUTIVE currently maintains without the
express written consent of the EXECUTIVE; or (iii) the Company
requires that the EXECUTIVE relocate his place of employment or
residence outside of the San Francisco Bay Area.
f. Termination Following Change of Control. The EXECUTIVE may
terminate his employment with the Company within six months after
a Change of Control, which shall be deemed to have occurred in
the event of: (i) the direct or indirect sale or exchange by the
stockholders of the Company of all or substantially all of the
stock of the Company, in a single or series of related
transactions, after which sale or exchange the stockholders of
the Company immediately prior to such transactions do not retain,
directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Company; (ii) a merger in
which the Company is a party after which merger the stockholders
of the Company do not retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock of the
surviving company; or (iii) the sale, exchange, or transfer of
all or substantially all of the Company's assets (other than a
sale, exchange, or transfer to one or more corporations where the
stockholders of the Company before such sale, exchange, or
transfer retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the corporation(s)
to which the assets were transferred). Provided, however, that
the EXECUTIVE shall not be entitled to terminate his employment
under this subsection in the event that the purchaser of the
Company, or any successor by merger, consolidation or otherwise,
or the entity to which all or a significant portion of the
Company's assets have been transferred, shall have expressly
assumed in writing all duties and obligations of the Company
under this Agreement.
5
g. Voluntary Termination. The EXECUTIVE may voluntarily
terminate his employment with the Company at any time. A
termination of employment by the EXECUTIVE pursuant to paragraph
6(e)[For Good Reason] or (f)[Change of Control] shall not be
deemed a voluntary termination by the EXECUTIVE for purposes of
this Agreement or any plan or practice of the Company but shall
be deemed an involuntary termination.
h. Non-Renewal. If the EXECUTIVE fails to request an
extension of this Agreement in accordance with paragraph 1, or if
the Board shall fail to approve such request, this Agreement
shall automatically expire at the end of its term. Such
expiration shall not entitle the EXECUTIVE to any compensation or
benefits except as earned by the EXECUTIVE through the date of
expiration of this Agreement and set forth in paragraph 8(e).
The parties shall have no further obligations to each other
thereafter except as set forth in paragraphs 5 and 11.
7. Notice and Effective Date of Termination.
a. Notice. Any termination of the EXECUTIVE's employment by
the Company or by the EXECUTIVE during the term of this Agreement
(other than as a result of death) shall be communicated by
written notice of termination to the other party hereto. Such
notice shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the EXECUTIVE's employment under that provision.
b. Date of Termination. The date of termination shall be:
(i) if the EXECUTIVE's employment is terminated by his death,
the date of his death;
(ii) if the EXECUTIVE's employment is terminated pursuant to
paragraph 6(b)[Disability], the date of termination shall be the
31st day following delivery of the notice of termination;
(iii) if the EXECUTIVE's employment is terminated for any
other reason by either party, the date on which a notice of
termination is delivered to the other party; and
(iv) if the Agreement expires pursuant to paragraph 6(h)[Non-
Renewal], the parties' employment relationship shall terminate on
the last day of the term of this Agreement without any notice.
8. Compensation and Benefits Upon Termination.
a. Disability, Without Cause or For Good Reason. If the
EXECUTIVE's employment terminates pursuant to paragraph
6(b)[Disability], (d)[Without Cause] or (e)[For Good Reason], the
Company shall:
(i) Salary: continue to pay the EXECUTIVE his then-current
salary through the remaining term of this Agreement as defined in
paragraph 1;
6
(ii) Bonus: continue to pay the EXECUTIVE an annual bonus(es)
throughout such remaining term; each such bonus shall be in an
amount equal to the greater of (A) the EXECUTIVE's bonus during
the year prior to his termination or (B) the bonus that the
EXECUTIVE would have earned under the Company's bonus plan in the
year that he was terminated had he remained in its employment;
provided, however, that such post-termination bonuses shall not
exceed the lesser of the 100% targeted amounts for those bonus
payments in the prior and then-current year, and such bonuses
shall not be paid until due under the Company's present bonus
plan;
(iii) Stock Options: with respect to any stock options
granted to the EXECUTIVE by the Company, the EXECUTIVE shall
immediately become vested in any unvested stock options upon such
termination; and
(iv) Restricted Stock: with respect to any restricted stock
granted to the EXECUTIVE by the Company which has not become
vested as of such termination, the EXECUTIVE shall immediately
become vested in a pro rata portion of such unvested stock
determined on the basis of the number of full months that have
elapsed from the date of grant of such restricted stock. Such
pro rata vesting shall be determined separately with respect to
each portion of any restricted stock grant that is subject to a
different restriction lapse date. That is, for each portion of
any restricted stock grant that is subject to a different
restriction lapse date, the EXECUTIVE shall immediately become
vested in the number of shares that equals (i) the quantity A
divided by B times C minus (ii) the number of shares that have
previously vested [(A/B x C)-D], where A is the number of full
months that have elapsed from the date of grant to and including
the date of termination, B is the number of months between the
date of grant and the restriction lapse date, C is the number of
shares that would otherwise become vested on that restriction
lapse date and D is the number of shares that have previously
vested. As a hypothetical example, presume the EXECUTIVE had
been granted 30,000 shares of restricted stock on March 1, 1999,
and that the restrictions on that grant lapse as to 10,000 shares
on March 1, 2000, 5,000 shares on March 1, 2001, and 15,000
shares on March 1, 2002. If the EXECUTIVE's employment
terminated pursuant to paragraph 6(b) on September 1, 1999 (i.e.,
at a time when no shares had previously vested), the EXECUTIVE
would immediately become vested under this subsection (iv) in
5,000 of the shares whose restrictions were to lapse on March 1,
2000, 1,250 of the shares whose restrictions were to lapse on
March 1, 2001, and 2,500 of the shares whose restrictions were to
lapse on March 1, 2002.
The Company shall have no further obligations to the EXECUTIVE as
a result of such termination except as set forth in paragraph 11.
b. For Cause. If the EXECUTIVE's employment is terminated for
cause as defined in paragraph 6(c)(A)[Failure to Perform], the
EXECUTIVE shall receive the post-termination compensation and
benefits described in paragraph 8(a)[Compensation and Benefits
Upon Disability, Termination Without Cause or For Good Reason].
If the EXECUTIVE's employment is terminated for cause as defined
in paragraph 6(c)(B)[Materially Injurious Conduct], he shall only
receive the post-termination compensation and benefits described
in paragraph 8(d) [Compensation and Benefits Upon Voluntary
Termination].
7
c. Change of Control. Upon a Change of Control (whether or
not the EXECUTIVE's employment terminates), the EXECUTIVE shall
immediately become vested in any shares of restricted stock
granted to the EXECUTIVE by the Company which had not vested
prior to the Change of Control. In addition, if the EXECUTIVE's
employment terminates pursuant to paragraph 6(f)[Change of
Control], the Company shall:
(i) Salary: continue to pay the EXECUTIVE his then-current
salary through the remaining term of this Agreement as defined in
paragraph 1;
(ii) Bonus: continue to pay the EXECUTIVE his annual bonus(es)
throughout such remaining term; each such bonus shall be in an
amount equal to the greater of (A) the EXECUTIVE's bonus during
the year prior to his termination or (B) the bonus that the
EXECUTIVE would have earned under the Company's bonus plan in the
year that he was terminated had he remained in its employment;
provided, however, that such post-termination bonuses shall not
exceed the lesser of the 100% targeted amounts for those bonus
payments in the prior and then-current year, and such bonuses
shall not be paid until due under the Company's present bonus
plan; and
(iii) Stock Options: with respect to any stock options
granted to the EXECUTIVE by the Company, the EXECUTIVE shall
immediately become vested in any unvested stock options upon such
termination.
The Company shall reimburse the EXECUTIVE for any excise taxes
paid by the EXECUTIVE pursuant to Internal Revenue Code section
4999 as a result of any "excess parachute payments" that he
receives from the Company as determined under section 280G of
said Code. This reimbursement shall not include any additional
amount to cover the EXECUTIVE's income or other taxes on such
reimbursement. The Company shall have no further obligations to
the EXECUTIVE as a result of such termination except as set forth
in paragraph 11.
d. Death or Voluntary Termination. If the EXECUTIVE's
employment terminates pursuant to paragraph 6(a)[Death] or
6(g)[Voluntary Termination], he (or his designee or his estate)
shall be paid his salary through his termination date and not
thereafter. He (or his designee or his estate) shall not be
entitled to any bonus payments which were not fully earned prior
to his termination date, and he (or his designee or his estate)
shall not be entitled to any pro-rated bonus payment for the year
in which his employment terminates. Any stock options granted to
the EXECUTIVE by the Company will continue to vest only through
the date on which his employment terminates (provided, however,
that if the EXECUTIVE's employment terminates as a result of his
voluntary termination (but not as a result of his death) within
six months after a Change of Control, the EXECUTIVE shall
immediately become fully-vested in any unvested stock options
previously granted to him by the Company) and any restricted
stock that was granted to the EXECUTIVE by the Company that is
unvested as of the date on which his employment terminates will
automatically be reacquired by the Company and the EXECUTIVE (or
his designee or his estate) shall have no further rights with
respect to such restricted stock. The Company shall have no
further obligations to the EXECUTIVE as a result of the
termination of his employment pursuant to paragraph 6(a)[Death]
or 6(g)[Voluntary Termination] except as set forth in paragraph
11.
8
e. Non-Renewal. If the Agreement expires as set forth in
paragraph 6(h)[Non-Renewal], the Company shall have no further
obligations to the EXECUTIVE except as set forth in paragraph 11
and except that with respect to any restricted stock granted to
the EXECUTIVE by the Company which has not become vested as of
such expiration date, the EXECUTIVE shall immediately become
vested in a pro rata portion of such unvested stock determined on
the basis of the number of full months that have elapsed from the
date of grant of such restricted stock (as described more fully
in paragraph 8(a)(iv)).
9. Employment and Post-Employment Restrictions. The Company
and the EXECUTIVE acknowledge that the Company has a special
interest in and derives significant benefit from the unique
skills and experience of the EXECUTIVE. In addition, the
EXECUTIVE will use and have access to some of the Company's
proprietary and valuable Confidential Information during the
course of the EXECUTIVE's employment. Accordingly, except as
hereafter noted, during the term of the EXECUTIVE's employment
with the Company and in the event that the EXECUTIVE voluntarily
terminates his employment with the Company prior to March 1,
2002, the EXECUTIVE agrees that for a period of three years
following his voluntary termination pursuant to paragraph 6(g),
he shall not provide any labor, work, services or assistance to
(whether as an officer, director, employee, partner, agent,
owner, independent contractor, stockholder or otherwise)
Burlington Coat Factory Warehouse Corporation, Dillard Department
Stores, Inc., Filene's Basement Corp., The Federated Stores, The
May Department Stores Company, The TJX Companies, Inc. and Value
City Department Stores, Inc. as well as all subsidiaries,
divisions and/or the surviving entity of any of the above that do
business in the retail industry in the case of a merger or
acquisition. However, this subsection shall not prohibit the
EXECUTIVE from making any investment of 1% or less of the equity
securities of any publicly-traded corporation that is engaged in
any business of the type or character engaged in by the Company.
The preceding sentence shall have no force and effect in the
event that (i) the EXECUTIVE's employment with the Company is
terminated (1) by the Company pursuant to paragraph 6(c)[with
Cause], 6(d)[without Cause] or (2) by the EXECUTIVE pursuant to
either paragraph 6(e)[Termination by the Executive for Good
Reason] or paragraph 6(f)[Termination Following Change of
Control] or (ii) the Company fails to approve or grant an
extension of this Agreement in accordance with paragraph 1
hereof.
During the term of the EXECUTIVE's employment with the
Company and for a period of three years following the termination
of that employment for any reason, the EXECUTIVE shall not
directly or indirectly solicit any other employee of the Company
to terminate his or her employment with the Company.
10. Exercise of Stock Options Following Termination. If the
EXECUTIVE's employment terminates pursuant to paragraph
6(a)[Death] or (b)[Disability], he (or his estate) may exercise
his right to purchase any vested stock under the stock options
granted to him by the Company for up to one year following the
date of his termination, but not later than the termination date
of such options. In all other instances, he may exercise that
right for up to three months following the date of his
termination, but not later than the termination date of such
options. All such purchases must be made by the EXECUTIVE in
accordance with the applicable stock option plans and agreements
between the parties.
9
11. Insurance and Indemnity. The Company shall, to the extent
permitted by law, include the EXECUTIVE during the term of this
Agreement under any directors and officers liability insurance
policy maintained for its directors and officers, with coverage
at least as favorable to the EXECUTIVE in amount and each other
material respect as the coverage of other directors and officers
covered thereby. This obligation to provide insurance and
indemnify the EXECUTIVE shall survive expiration or termination
of this Agreement with respect to proceedings or threatened
proceedings based on acts or omissions of the EXECUTIVE occurring
during the EXECUTIVE's employment with the Company or with any
affiliated company. Such obligations shall be binding upon the
Company's successors and assigns and shall inure to the benefit
of the EXECUTIVE's heirs and personal representatives.
12. Successors; Binding Agreement. This Agreement and all
rights of the EXECUTIVE hereunder shall inure to the benefit of
and be enforceable by the EXECUTIVE's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the EXECUTIVE should die
while any amounts would still be payable to him hereunder all
such amounts shall be paid in accordance with the terms of this
Agreement to the EXECUTIVE's written designee, or if there be no
such designee, to the EXECUTIVE's estate.
13. Notice. For the purposes of this Agreement, notices,
demands and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have been
duly given when delivered or (unless otherwise specified) mailed
by United States registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the EXECUTIVE: Michael Hamilton
c/o Ross Stores, Inc.
8333 Central Avenue
Newark, CA 94560-3433
If to the Company: Ross Stores, Inc.
8333 Central Avenue
Newark, CA 94560-3433
Attention: Corporate Secretary
or to such other address as any party may have furnished to the
other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
14. Modification or Waiver; Entire Agreement. No provision of
this Agreement may be modified or waived except in a document
signed by the EXECUTIVE and the chairman of the Compensation
Committee of the Board or such other person as may be designated
by the Board. This Agreement, along with any stock option or
restricted stock agreements between the parties, constitute the
entire agreement between the parties regarding their employment
relationship. No agreements or representations, oral or
otherwise, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this
Agreement.
15. Governing Law; Severability. The validity, interpretation,
construction and performance of this Agreement shall be governed
by the laws of the State of California. The
10
invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other
provision of this Agreement.
16. Severability. In the event any provision of this Agreement
shall be found unenforceable by an arbitrator or a court of
competent jurisdiction, the provision shall be deemed modified to
the extent necessary to allow enforceability of the provision as
so limited, it being intended that the Company shall receive the
benefits contemplated herein to the fullest extent permitted by
law. If a deemed modification is not satisfactory in the
judgment of such arbitrator or court, the unenforceable provision
shall be deemed deleted, and the validity and enforceability of
the remaining provisions shall not be affected thereby.
17. Mitigation. In the event the EXECUTIVE's employment with
the Company terminates for any reason other than death, the
EXECUTIVE shall be obligated to seek other employment following
such termination in order to mitigate payments that the Company
may be required to make to him or for his benefit hereunder.
Such obligation shall not apply during any period in which the
EXECUTIVE is disabled. If the EXECUTIVE obtains other employment
during any period in which he is entitled to receive continued
salary or bonus payments under paragraph 8, any salary or bonus
payments earned by the EXECUTIVE during such period shall reduce
the Company's obligation to pay continued salary and/or bonus
payments under paragraph 8 by the amount of the salary and/or
bonus payments so earned by the EXECUTIVE.
18. Withholding. All payments required to be made by the
Company hereunder to the EXECUTIVE or his estate or beneficiaries
shall be subject to the withholding of such amounts as the
Company may reasonably determine it should withhold pursuant to
any applicable law. To the extent permitted, the EXECUTIVE may
provide all or any part of any necessary withholding by
contributing Company stock with value, determined on the date
such withholding is due, equal to the number of shares
contributed multiplied by the closing Nasdaq price on the date
preceding the date the withholding is determined.
19. Arbitration. In the event of any dispute or claim relating
to or arising out of the parties' employment relationship or this
Agreement (including, but not limited to, any claims of breach of
contract, wrongful termination or age, race, sex, disability or
other discrimination), all such disputes shall be fully, finally
and exclusively resolved by binding arbitration conducted by the
American Arbitration Association in San Francisco, California;
provided, however, that this arbitration provision shall not
apply to any disputes or claims relating to or arising out of the
misuse or misappropriation of the Company's trade secrets or
proprietary information or to any disputes or claims relating to
or arising out of the EXECUTIVE's failure to comply with the
requirements of paragraph 9 regarding Employment and Post-
Employment Restrictions.
20. Attorneys' Fees. Each party shall bear its own attorneys'
fees and costs incurred in any action or dispute arising out of
this Agreement.
21. Miscellaneous. No right or interest to, or in, any payments
shall be assignable by the EXECUTIVE; provided, however, that
this provision shall not preclude the EXECUTIVE from designating
in writing one or more beneficiaries to receive any amount that
may be payable after the EXECUTIVE's death and shall not preclude
the legal representative of the EXECUTIVE's estate from assigning
any right hereunder to the person or persons entitled
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thereto. This Agreement shall be binding upon and shall inure to
the benefit of the EXECUTIVE, his heirs and legal representatives
and the Company and its successors.
IN WITNESS WHEREOF, the parties have executed this
Employment Agreement effective as of the date and year first
above written.
ROSS STORES, INC.
/s/ Michael Hamilton
Michael Hamilton By: /s/ Melvin A. Wilmore
Title: President & COO
