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 July 31, 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 Identification No.)
incorporation or organization)
8333 Central Avenue, Newark, California 94560-3433
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, (510) 505-4400
including area code
Former name, former address and former N/A
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 August 28, 1999 was 45,235,261.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROSS STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
July 31, January 30, August 1,
($000) 1999 1999 1998
ASSETS
(Unaudited) (Note A) (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 30,119 $ 80,083 $ 31,972
Accounts receivable 14,824 11,566 11,722
Merchandise inventory 522,904 466,460 468,952
Prepaid expenses and other 16,177 15,825 15,440
________ _______ _______
Total Current Assets 584,024 573,934 528,086
PROPERTY AND EQUIPMENT
Land and buildings 49,111 48,789 48,748
Fixtures and equipment 228,456 217,629 197,679
Leasehold improvements 147,488 142,716 132,306
Construction-in-progress 38,672 32,023 32,856
_______ _______ _______
463,727 441,157 411,589
Less accumulated depreciation and amortization 208,708 192,445 177,271
_______ _______ _______
255,019 248,712 234,318
Deferred income taxes and other assets 51,772 47,660 40,318
_______ ________ ________
TOTAL ASSETS $890,815 $870,306 $802,722
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $245,182 $248,103 $212,249
Accrued expenses and other 85,522 95,059 83,448
Accrued payroll and benefits 37,466 40,885 29,699
Income taxes payable 21,803 19,092 12,620
Short-term debt 17,200 - 27,500
_______ _______ _______
Total Current Liabilities 407,173 403,139 365,516
Long-term debt - - 10,000
Long-term liabilities 47,703 42,464 41,119
STOCKHOLDERS' EQUITY
Common stock 453 462 472
Additional paid-in capital 222,666 215,831 200,688
Retained earnings 212,820 208,410 184,927
_______ _______ _______
435,939 424,703 386,087
_______ _______ _______
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $890,815 $870,306 $802,722
See notes to condensed consolidated financial statements.
3
ROSS STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended Six Months Ended
July 31, August 1, July 31, August 1,
($000, except per share data, unaudited) 1999 1998 1999 1998
Sales $614,576 $536,975 $1,165,401 $1,021,251
Costs and Expenses
Cost of goods sold and occupancy 424,143 371,996 803,521 708,812
General, selling and administrative 117,677 103,355 223,869 197,412
Depreciation and amortization 9,132 8,230 18,452 16,112
Interest expense 182 265 20 130
_______ _______ _________ _______
551,134 483,846 1,045,862 922,466
Earnings before taxes 63,442 53,129 119,539 98,785
Provision for taxes on earnings 24,806 20,720 46,740 38,526
________ ________ __________ __________
Net earnings $ 38,636 $ 32,409 $ 72,799 $ 60,259
Net earnings per share:
Basic $ .85 $ .68 $ 1.59 $ 1.26
Diluted $ .83 $ .67 $ 1.56 $ 1.24
Weighted average shares outstanding:
Basic 45,566 47,455 45,765 47,652
Diluted 46,367 48,358 46,551 48,582
Stores open at end of period 363 339 363 339
See notes to condensed consolidated financial statements.
4
ROSS STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
July 31, August 1,
($000, unaudited) 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $72,799 $60,259
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Depreciation and amortization of property and equipment 18,452 16,112
Other amortization 4,984 4,663
Change in assets and liabilities:
Merchandise inventory (56,445) (50,127)
Other current assets - net (3,609) (3,931)
Accounts payable 85 12,886
Other current liabilities - net (1,066) 6,668
Other 2,201 3,109
_______ ________
Net cash provided by operating activities 37,401 49,639
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (35,421) (49,825)
________ ________
Net cash used in investing activities (35,421) (49,825)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing under lines of credit 17,200 27,500
Proceeds of long-term debt - 10,000
Issuance of common stock related to stock plans 8,803 6,347
Repurchase of common stock (71,988) (62,825)
Dividends paid (5,959) (5,233)
________ ________
Net cash used in financing activities (51,944) (24,211)
NET DECREASE IN CASH AND CASH EQUIVALENTS (49,964) (24,397)
Cash and cash equivalents:
Beginning of year 80,083 56,369
------- ______
End of quarter $30,119 $31,972
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $105 $307
Income taxes paid $43,741 $21,947
See notes to condensed consolidated financial statements.
5
ROSS STORES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended July 31, 1999 and August 1, 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 July 31, 1999
and August 1, 1998; the results of operations for the three and six months ended
July 31, 1999 and August 1, 1998; and changes in cash flows for the six months
ended July 31, 1999 and August 1, 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 and six-month periods herein
presented are not necessarily indicative of the results to be expected for the
full year.
NOTE B - SUBSEQUENT EVENT - STOCK SPLIT
On August 26, 1999, the company's Board of Directors approved a 2-for-1 split of
the company's common stock, to be effected in the form of a 100% stock dividend
paid on or about September 22, 1999, to all stockholders of record as of the
close of business on September 7, 1999.
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 July 31, 1999 and August 1, 1998, and the
related condensed consolidated statements of earnings for the three-month and
six-month periods then ended and the related condensed consolidated statements
of cash flows for the six-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
August 20, 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
PERCENTAGES OF SALES
Three Months Ended Six Months Ended
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
SALES
Sales ($000) $614,576 $536,975 $1,165,401 $1,021,251
Sales growth 14.5% 9.4% 14.1% 9.4%
Comparable store sales growth 7% 4% 7% 4%
Cost of goods sold and occupancy 69.0% 69.3% 68.9% 69.4%
General, selling and administrative 19.1% 19.2% 19.2% 19.3%
Depreciation and amortization 1.5% 1.5% 1.6% 1.6%
Interest expense 0.0% 0.0% 0.0% 0.0%
NET EARNINGS 6.3% 6.0% 6.2% 5.9%
Sales
The increase in sales for the three and six months ended July 31,
1999, compared to the same periods 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 and six months ended July 31,1999, decreased compared to the
same periods 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 and six months ended July 31, 1999,
compared to the same periods in the prior year, primarily reflects
leverage realized from the increase in comparable store sales,
partially offset by higher incentive plan costs.
8
Net Earnings
The increase in net earnings as a percentage of sales in the three and
six months ended July 31, 1999, compared to the same periods 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 $43.7 million in income taxes in the six months ended
July 31, 1999, versus $21.9 million in the six months ended August 1,
1998. This increase in income taxes paid primarily resulted from the
timing of certain tax deductions taken by the company related to its
employee-related common stock plans, as well as higher earnings. The
Company's effective tax rate in both periods was approximately 39%.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The primary uses of cash during the six months ended July 31, 1999
were for (i) the repurchase of the company's common stock; (ii) the
purchase of inventory; 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 July 31, 1999 from
August 1, 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 July 31,
1999 from August 1, 1998 resulted mainly from the higher level of
inventory purchases over the prior year.
In January 1999, the company announced a $120 million common stock
repurchase program. In the six months ended July 31, 1999, the company
repurchased approximately 1,575,000 shares for an aggregate purchase
price of approximately $72 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 has addressed 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 representing all business and staff units
with the goal of achieving an uninterrupted transition into the year
2000. The company used both internal and external resources to
identify, correct,
9
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 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), (ii) and (iii) 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. Testing of embedded chip equipment has been completed
through phase (iv). All mission critical IT Systems either are
currently in phase (iv) or have been completed through phase (iv). As
of August 1999, over 95% of the company's mission critical IT Systems
were determined to be year 2000 compliant, or replacements, changes,
upgrades or workarounds had 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 is
expected to be completed by the end of September 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 completed 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 all of those suppliers and merchandise vendors that it believes
are highly critical to its year 2000-remediation efforts. The company
sought 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 has also developed 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 the end of September 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 will 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
10
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 used that plan as a starting point
for developing specific year 2000 contingency plans, which generally
emphasized locating alternate sources of supply, methods of
distribution and ways of processing information. The company's year
2000 contingency plans are substantially complete. During the third
and fourth quarter of 1999, the company intends to make necessary
preparations to be ready to execute the contingency plans, if needed.
However, there can be no assurance that the company will be able to
complete its contingency preparations 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 43% 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 July 31, 1999 and
January 30, 1999 is not material.
12
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held on May 27, 1999 (the "1999
Annual Meeting"), the stockholders of the company voted on and
approved the following proposals:
Proposal 1 to elect three Class I directors (Stuart G. Moldaw, George
P. Orban and Donald H. Seiler) for a three-year term.
Proposal 2 to amend the 1991 Outside Directors Stock Option Plan to
adjust (i) the size of option grants to reflect changes in the
company's capital structure, and (ii) the date of annual option
grants.
Proposal 3 to ratify the appointment of Deloitte & Touche as the
company's independent certified public accountants for the fiscal year
ended January 29, 2000.
1999 ANNUAL MEETING ELECTION RESULTS -
PROPOSAL 1: ELECTION OF DIRECTORS
DIRECTOR IN FAVOR WITHHELD BROKER NON-VOTE
Stuart G. Moldaw 40,692,242 322,514 N/A
George P. Orban 40,841,870 122,886 N/A
Donald H. Seiler 40,777,498 237,258 N/A
PROPOSAL 2: AMENDMENTS TO THE 1991 OUTSIDE DIRECTORS STOCK OPTION PLAN
IN FAVOR AGAINST ABSTAIN BROKER NON-VOTE
37,434,571 3,255,714 41,813 282,658
PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE AS
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDED
JANUARY 29, 2000
IN FAVOR AGAINST ABSTAIN BROKER NON-VOTE
40,990,094 7,550 17,112 0
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 14 of this
Report.
13
(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: September 10, 1999 /s/John G. Call
John G. Call, Senior Vice President, Chief
Financial Officer, Corporate Secretary and
Principal Accounting Officer
14
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.
10.39 Employment Agreement between Ross Stores, Inc. and Michael Wilson,
effective as of May 1, 1999, through January 31, 2003.
10.40 1991 Outside Directors Stock Option Plan, as amended May 27, 1999.
15 Letter re: Unaudited Interim Financial Information.
27 Financial Data Schedules (submitted for SEC use only).
EXHIBIT 15
September 10, 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 and six-month periods ended
July 31, 1999 and August 1, 1998, as indicated in our independent
accountants' report dated August 20, 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 July
31, 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
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made effective as of May 1,
1999, by and between Ross Stores, Inc. (the "Company") and
Michael Wilson (the "Executive").
1. Term. The employment of the EXECUTIVE by the Company will
commence as of the effective date hereof and end on January 31,
2003, 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, Distribution and Transportation of the
Company. The EXECUTIVE shall report directly to the Company's
Chief Executive 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. Initially, the EXECUTIVE shall be
employed at the Company's Carlisle, Pennsylvania Distribution
Center except for required travel on the Company's business. The
EXECUTIVE acknowledges that the Company will be planning for and
establishing a third distribution center (the "New DC") and that
EXECUTIVE will be involved in such planning of the New DC. It is
anticipated that upon completion of the New DC and at the request
of the Company, the Executive will relocate his residence to the
proximate geographical area of the New DC. Within six (6) months
after the Company has determined the geographic location of the
New DC, the EXECUTIVE agrees to provide the Company with written
confirmation (the "Relocation Confirmation Notice"), that the
EXECUTIVE will relocate his residence upon completion of the New
DC.
4. Compensation and Related Matters.
a. Salary. During his employment the Company shall pay the
EXECUTIVE a monthly salary of $27,083.33, less applicable
withholding ($325,000 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 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 in
addition to the monthly salary provided pursuant to the first
sentence of this paragraph 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
at the time immediately prior to the Change of Control. The
provisions of paragraph 1 ("Term") of the Agreement
notwithstanding, in the event of a Change of Control, the
EXECUTIVE's employment by the Company under this Agreement shall
continue at least 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 substantial performance of his duties
pursuant to this Agreement as measured by EXECUTIVE's performance
prior to the effective date of the Change of Control.
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). In addition to the annual bonus described in the
preceding sentence, EXECUTIVE shall be entitled to a signing
bonus in the amount of $100,000, payable on the effective date of
this Agreement. In the event EXECUTIVE terminates his employment
without cause, pursuant to Paragraph 6(d), within the first 24
months of the effective date of this Agreement, he shall
reimburse the Company for the net amount of the signing bonus.
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. Upon completion of the New DC, the Company shall
reimburse the EXECUTIVE for all expenses incurred in relocating
his residence in accordance with the Company's Executive
Relocation Policy.
d. Other Benefits. The EXECUTIVE shall be entitled to
participate in all of the Company's employee benefit plans and
arrangements in effect on the date hereof in which other
executives of the Company, at the same executive level as the
EXECUTIVE, participate (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).
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 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, and EXECUTIVE does
not cure his failure to substantially perform his duties within
ten days of such written notice, 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 Central Pennsylvania.
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.
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] or 6(d)[Without Cause], 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;
(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.
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 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], then except as set forth in
paragraph 8(e), 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)). The provision of this paragraph 8(e) notwithstanding,
if, after providing the Company with the Relocation Confirmation
Notice, the Company advises the EXECUTIVE that it does not wish
him to relocate his residence (upon completion of the New DC),
then, upon expiration of this Agreement as set forth in paragraph
6(h) [Non-Renewal], and for the six (6) month period after such
expiration, the Company will pay all reasonable costs incurred by
the EXECUTIVE in relocating his residence to another location in
the Continental United States, 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.
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 restrictions contained in 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(b)[Disability], 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.
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 Wilson
c/o Ross Stores, Inc.
______________________
______________________
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 Pennsylvania. 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. 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 that is at
a level of responsibility and complexity similar to the position
and duties assumed by the EXECUTIVE pursuant to this Agreement
and that is consistent with the EXECUTIVE's level of education,
experience, and training, 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.
17. 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 regarding mandatory withholding. 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.
18. 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 New York, New York; 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.
19. Attorneys' Fees. Each party shall bear its own attorneys'
fees and costs incurred in any action or dispute arising out of
this Agreement.
20. 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/ Michael Wilson
Michael Wilson By: /s/ Melvin A. Wilmore
Title: President & COO
ROSS STORES, INC.
1991 OUTSIDE DIRECTORS STOCK OPTION PLAN
(As Amended Through May 27, 1999)
1. Purpose. The Ross Stores, Inc. 1991 Outside Directors
Stock Option Plan (the "Plan") is established effective as of
March 18, 1991 (the "Effective Date") to create additional
incentive for the non-employee directors of Ross Stores, Inc. and
any successor corporation thereto (collectively referred to as
the "Company"), to promote the financial success and progress of
the Company.
2. Administration. The Plan shall be administered by the
Board of Directors of the Company (the "Board") and/or by a duly
appointed committee of the Board having such powers as shall be
specified by the Board. Any subsequent references herein to the
Board shall also mean the committee if such committee has been
appointed and, unless the powers of the committee have been
specifically limited, the committee shall have all of the powers
of the Board granted herein, including, without limitation, the
power to terminate or amend the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law.
All questions of interpretation of the Plan or of any options
granted under the Plan (an "Option") shall be determined by the
Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan and/or any Option.
Any officer of the Company shall have the authority to act on
behalf of the Company with respect to any matter, right,
obligation, or election which is the responsibility of or which
is allocated to the Company herein, provided the officer has
apparent authority with respect to such matter, right,
obligation, or election.
3. Eligibility and Type of Option. Options may be granted
only to directors of the Company who are not employees of the
Company or any parent and/or subsidiary corporations of the
Company. Options granted to eligible directors of the Company
("Outside Directors") shall be nonqualified stock options; that
is, options which are not treated as having been granted under
section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). For purposes of the Plan, a parent corporation and a
subsidiary corporation shall be as defined in sections 424(e) and
424(f) of the Code. A person granted an Option is hereinafter
referred to as an "Optionee."
4. Shares Subject to Option. Options shall be options for
the purchase of the authorized but unissued common stock of the
Company (the "Stock"), subject to adjustment as provided in
paragraph 7 below. The maximum number of shares of Stock which
may be issued under the Plan shall be three hundred fifty
thousand (350,000) shares. In the event that any outstanding
Option for any reason expires or is terminated or canceled and/or
shares of Stock subject to repurchase are repurchased by the
Company, the shares allocable to the unexercised portion of such
Option, or such repurchased shares, may again be subjected to an
Option grant.
5. Terms, Conditions and Form of Options. Options granted
pursuant to the Plan shall be evidenced by written agreements
specifying the number of shares of Stock covered page 2
thereby, in substantially the forms indicated below with respect
to each category of grant and incorporated herein by reference
(the "Option Agreements"). Options shall comply with and be
subject to the following terms and conditions:
(a) Automatic Grant of Options. Subject to execution
by an Outside Director of the appropriate Option Agreement,
Options shall be granted automatically and without further action
of the Board as set forth below:
(i) Prior to 1999 Annual Stockholders Meeting.
Prior to the annual meeting of the stockholders of the Company to
be held on May 27, 1999 or any adjournment thereof (the "1999
Annual Meeting"), or if the amendment to the Plan set forth in
subparagraph (ii) below is not approved by the stockholders at
such annual meeting, Options shall be granted as follows:
(1) On the Effective Date, each present
Outside Director shall be granted an Option to purchase five
thousand (5,000) shares of Stock. (To be evidenced by the Option
Agreement attached as Exhibit A and as in effect prior to the
1999 Annual Meeting.)
(2) Furthermore, on the Effective Date, each
present Outside Director shall be granted an additional option to
purchase that number of shares of Stock equal to one thousand
(1,000) multiplied by the number of such Outside Director's full
years of past service as a non-employee director ending on the
Effective Date. The preceding sentence shall not apply to
Outside Directors elected after the Effective Date. (To be
evidenced by the Option Agreement attached as Exhibit B and as in
effect prior to the 1999 Annual Meeting.)
(3) After the Effective Date, each new
Outside Director shall be granted an Option to purchase five
thousand (5,000) shares of Stock upon the date such Outside
Director is first elected to serve on the Board. (To be
evidenced by the Option Agreement attached as Exhibit A and as in
effect prior to the 1999 Annual Meeting.)
(4) Each Outside Director shall be granted
an additional Option to purchase one thousand (1,000) shares of
Stock upon each Anniversary Date of such Outside Director. (To
be evidenced by the Option Agreement attached as Exhibit C and as
in effect prior to the 1999 Annual Meeting.)
(5) The Anniversary Date of an Outside
Director who was first elected to the Board prior to the
Effective Date shall be March 18, commencing with March 18, 1992.
The Anniversary Date of an Outside Director who is first elected
to the Board on or after the Effective Date shall be the date
which is twelve (12) months after such election and successive
anniversaries thereof.
(6) Notwithstanding any other provision of
the Plan, no Option shall be granted to any individual who is no
longer serving as an Outside Director of the Company on an
Anniversary Date which would otherwise be a date of grant.
3
(ii) Following 1999 Annual Stockholders Meeting.
Subject to the approval by the stockholders of the Company at the
1999 Annual Meeting of the amendment to the Plan set forth in
this subparagraph (ii), Options shall be granted as follows:
(1) On the date of the 1999 Annual Meeting,
each person serving as an Outside Director immediately following
such meeting shall be granted an Option to purchase two thousand
(2,000) shares of Stock. (To be evidenced by the Option
Agreement attached as Exhibit C.)
(2) Each person who is newly elected or
appointed as an Outside Director after the date of the 1999
Annual Meeting shall be granted on the day of such initial
election or appointment an Option to purchase ten thousand
(10,000) shares of Stock. (To be evidenced by the Option
Agreement attached as Exhibit A.)
(3) Each Outside Director previously granted
an Option on or after the date of the 1999 Annual Meeting
pursuant to this subparagraph (ii) shall be granted, on the date
of each annual meeting of the stockholders of the Company held
after the 1999 Annual Meeting and immediately following which
such person remains an Outside Director, an Option to purchase
two thousand (2,000) shares of Stock; provided, however, that an
Outside Director granted an initial Option pursuant to
subparagraph (ii)(2) above after the December 1 immediately
preceding the date of an annual meeting of the stockholders of
the Company shall not be granted an annual Option pursuant to
this subparagraph with respect to such annual meeting. (To be
evidenced by the Option Agreement attached as Exhibit C.)
(iii) Right to Decline Option.
Notwithstanding the foregoing, any person may elect not to
receive an Option by delivering written notice of such election
to the Board no later than the day prior to the date such Option
would otherwise be granted. A person declining an Option shall
receive no payment or other consideration in lieu of such
declined Option. A person who has declined an Option may revoke
such election by delivering written notice of such revocation to
the Board no later than the day prior to the date such Option
would be granted pursuant to this paragraph 5(a).
(b) Option Exercise Price. The option exercise price
per share of Stock for an Option shall be the fair market value
of the common stock of the Company, as determined by the closing
price of a share of such common stock on the National Association
of Securities Dealers Automated Quotations system (the "NASDAQ
System") or other national securities exchange on which the
shares of such common stock are then trading, on the date of the
granting of the Option. If the date of the granting of the
Option does not fall on a day on which the common stock of the
Company is trading on the NASDAQ System or other national
securities exchange, the date on which the option exercise price
per share shall be established shall be the last day on which the
common stock of the Company was so traded prior to the date of
the granting of the Option. Notwithstanding the foregoing, an
Option may be granted with an option exercise price lower than
the minimum exercise price set forth above if such Option is
granted pursuant to an assumption or substitution for another
option in a manner qualifying with the provisions of section
424(a) of the Code.
4
(c) Exercise Period of Options. Any Option granted
pursuant to the Plan shall be exercisable for a term of ten (10)
years.
(d) Payment of Option Price. Payment of the option
exercise price for the number of shares of Stock being purchased
pursuant to any Option shall be made (i) in cash, by check or in
cash equivalent, or (ii) by the assignment in a form acceptable
to the Company of the proceeds of a sale of some or all of the
shares being acquired upon the exercise of an Option (including,
without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by
the Board of Governors of the Federal Reserve System).
The Company reserves, at any and all times, the right, in
the Company's sole and absolute discretion, to establish, decline
to approve and/or terminate any program and/or procedures for the
exercise of Options by means of an assignment of the proceeds of
a sale of some or all of the shares of Stock to be acquired upon
such exercise.
(e) Stockholder Approval. Any Option granted pursuant
to the Plan shall be subject to obtaining stockholder approval of
the Plan at the first annual meeting of stockholders after the
Effective Date. Notwithstanding the foregoing, stockholder
approval shall not be necessary in order to grant any Option
granted on the Effective Date; provided, however, that the
exercise of any such Option shall be subject to obtaining
stockholder approval of the Plan.
6. Authority to Vary Terms. The Board shall have the
authority from time to time to vary the terms of the Option
Agreements set forth as Exhibit A, Exhibit B, and Exhibit C,
respectively, either in connection with the grant of an
individual Option or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and
conditions of such revised or amended standard form or forms of
stock option agreement shall be in accordance with the terms of
the Plan. Such authority shall include, but not by way of
limitation, the authority to grant Options which are immediately
exercisable subject to the Company's right to repurchase any
unvested shares of Stock acquired by the Optionee on exercise of
an Option in the event such Optionee's service as a director of
the Company is terminated for any reason.
7. Effect of Change in Stock Subject to Plan. Appropriate
adjustments shall be made in the number and class of shares of
Stock which may be issued under the Plan and any outstanding
Options, in the number and class of shares of Stock subject to
Options to be granted automatically pursuant to paragraph
5(a)(ii) above, and in the option exercise price of any
outstanding Options in the event of a stock dividend, stock
split, reverse stock split, combination, reclassification, or
like change in the capital structure of the Company. No
adjustment shall be made pursuant to this paragraph to the number
of shares of Stock subject to the automatic grant of an Option
pursuant to paragraph 5(a)(i) above.
8. Ownership Change and Transfer of Control. An
"Ownership Change" shall be deemed to have occurred in the event
any of the following occurs with respect to the Company:
(a) the direct or indirect sale or exchange by the
stockholders of the Company of all or substantially all of the
stock of the Company;
5
(b) a merger in which the Company is a party; or
(c) 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).
A "Transfer of Control" shall mean an Ownership Change in
which the stockholders of the Company before such Ownership
Change do not retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the Company.
In the event of a Transfer of Control, any unexercisable
portion of an outstanding Option shall be immediately exercisable
and vested as of a date prior to the Transfer of Control. The
exercise and vesting of any Option that is permissible solely by
reason of this paragraph 8 shall be conditioned upon the
consummation of the Transfer of Control. In addition, the
surviving, continuing, successor, or purchasing corporation or
parent corporation thereof, as the case may be (the "Acquiring
Corporation"), may either assume the Company's rights and
obligations under outstanding Options or substitute for
outstanding Options substantially equivalent options for the
Acquiring Corporation's stock. Any Options which are neither
assumed by the Acquiring Corporation in connection with the
Transfer of Control nor exercised as of the date of the Transfer
of Control shall terminate effective as of the date of the
Transfer of Control.
9. Transferability of Options.
(a) Except as provided in paragraph 9(b) below, an
Option may be exercised during the lifetime of the Optionee only
by the Optionee or the Optionee's guardian or legal
representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution.
(b) Notwithstanding the foregoing, with the consent of
the Board and subject to any conditions or restrictions as the
Board may impose, in its sole discretion, an Optionee may
transfer during the Optionee's lifetime all or any portion of the
Option to one or more family members. For this purpose, the term
"family member" shall have the meaning assigned such term in
General Instruction A.1(a)(5) to the Form S-8 Registration
Statement under the Securities Act of 1933, as effective April 7,
1999, or any successor thereto. No transfer or purported
transfer of the Option shall be effective unless and until: (i)
the Optionee has delivered to the Board a written request
describing the terms and conditions of the proposed transfer in
such form as the Board may require, (ii) the Board has approved
such request in writing, and (iii) each permitted family member
transferee to whom the Option or any interest therein is to be
transferred has agreed in writing (in a form satisfactory to the
Company) to be bound by all of the applicable terms and
conditions of the Plan and the Option Agreement evidencing such
Option and any additional restrictions or conditions as the Board
may require, and (iv) the Optionee has made adequate provision,
in the sole determination of the Company, for satisfaction of the
tax withholding obligations, if any, of the Company that may
arise with
6
respect to the transferred portion of the Option. With respect
to the transferred portion of the Option, all of the terms and
conditions of the Plan and the Option Agreement shall apply to
the family member transferee and not to the original Optionee,
except for (i) the provision of service to the Company, (ii)
provision for the Company's tax withholding obligations, if any,
and (iii) subsequent transfer of the Option except as provided in
the following sentence. A permitted family member transferee
shall be prohibited from making a subsequent transfer of a
transferred Option except as provided in paragraph 9(a) or, with
the consent of the Board, to the original Optionee or to another
family member. The Company shall have no obligation to notify a
family member transferee of any termination of the transferred
Option, including an early termination resulting from the
termination of service of the original Optionee. Exercise of a
transferred Option by a family member transferee shall be subject
to compliance with all applicable federal, state and foreign
securities laws; however, the Company shall have no obligation to
register such Options and/or shares with any federal, state or
foreign securities commission or agency.
10. Termination or Amendment of Plan. The Board, including
any duly appointed committee of the Board, may terminate or amend
the Plan at any time; provided, however, that without the
approval of the Company's stockholders, there shall be (a) no
increase in the total number of shares of Stock covered by the
Plan (except by operation of the provisions of paragraph 7
above), (b) no material change in the class of persons eligible
to receive Options, and (c) no material change in the amount,
timing or exercise price formula of automatic grants of Options
pursuant to paragraph 5(a) above. In any event, no amendment may
adversely affect any then outstanding Option, or any unexercised
portion thereof, without the consent of the Optionee.
IN WITNESS WHEREOF, the undersigned Secretary of the Company
certifies that the foregoing sets forth the Ross Stores, Inc.
1991 Outside Directors Stock Option Plan as amended by the Board
of Directors of the Company through May 27, 1999.
John G. Call
John G. Call
Senior Vice President,
Chief Financial Officer and
Corporate Secretary
5
0000745732
ROSS STORES, INC.
1,000
6-MOS
JAN-29-2000
JUL-31-1999
30,119
0
14,824
0
522,904
584,024
463,727
208,708
890,815
407,173
0
0
0
453
435,486
890,815
1,165,401
1,165,401
803,521
1,045,862
0
0
20
119,539
46,740
72,799
0
0
0
72,799
1.59
1.56
