UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended January 29, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15
(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO
FEE REQUIRED]
For the transition period from _______ to _______
Commission file number 0-14678
ROSS STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
94-1390387
(I.R.S. Employer Identification No.)
8333 Central Avenue, Newark, California
(Address of principal executive offices)
94560-3433
(Zip Code)
(510) 505-4400
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
----------------------------
Common stock, par value $.01
Name of each exchange on which registered
- - - - - - - - -
NASDAQ/NMS
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
Indicate by check mark if disclosure of delinquent files pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
The aggregate market value of the voting stock held by non-
affiliates of the Registrant as of April 1, 1994 was
$329,728,439.25.
The number of shares of Common Stock, with $.01 par value,
outstanding on April 1, 1994 was 24,859,733.
Documents incorporated by reference:
Portions of the Proxy Statement for Registrant's Annual
Meeting of Stockholders, to be held Tuesday, June 7, 1994,
are incorporated herein by reference into part III.
begin page 2
PART I
ITEM 1. BUSINESS
Ross Stores, Inc. operates a chain of off-price retail
apparel stores which target value conscious men and women between
the ages of 25 and 54 and their families. The company offers its
merchandise at low everyday prices, generally 20% to 60% below
those of most department and specialty stores. The company
believes it derives a competitive advantage by offering a wide
assortment of quality brand-name apparel within each of its
merchandise categories (e.g., shirts, dresses, shoes) in an
attractive easy-to-shop environment.
Ross Stores' mission is to offer competitive values to its
target customers by focusing on the following key strategic
objectives: achieve an appropriate level of brands and labels at
strong discounts throughout the store; meet customer needs on a
more regional basis; deliver an in-store shopping experience that
reflects the expectations of the off-price customer; and manage
real estate growth to maintain dominance or achieve parity with
the competition in key markets. Ross targets its sales to value-
conscious 25-54 year old men and women in white collar, middle-to-
upper middle income households, which the company believes to be
the largest customer segment in the retailing industry. The
decisions of the company, from merchandising, purchasing and
pricing, to the location of its stores, are aimed at this
customer base.
The original Ross Stores, Inc. was incorporated in
California in 1957. In August 1982, the company was purchased by
some of its current stockholders and restaffed with a new
management team. The six stores acquired at the time were
completely refurbished in the company's current off-price format
and stocked with new merchandise.
At the stockholders' meeting in May 1989, the company's
stockholders approved the reincorporation of Ross Stores, Inc.,
in the state of Delaware. The reincorporation was completed in
June 1989.
Merchandising, Purchasing and Pricing
Ross seeks to provide its target customers with a wide
assortment of first quality, in-season, name brand apparel,
accessories and footwear for the entire family at everyday
savings of 20% to 60% from department and specialty store prices,
as well as similar savings on fragrances and gift items for the
home. In addition, in 1994 Ross will introduce in certain stores
a new department featuring tabletop, bed and bath linens and bath
accessories. The company reviews its merchandise mix each week,
enabling it to respond to merchandise trends and purchasing
opportunities in the market. The company's merchandising
strategy is reflected in its television and newspaper
advertising, which emphasizes a strong value message: Ross'
customers get great prices everyday of the year. Although not a
fashion leader, the company sells recognizable branded
merchandise that is current and fashionable in each category.
Merchandising. The Ross merchandising strategy incorporates
in-season apparel, shoes and accessories for the entire family,
as well as fragrances and giftware for the home. The company's
emphasis on brand names reflects management's conviction that
brand-name apparel sold at affordable prices will continue to be
an important determinant of its success. Ross leaves the brand-
name label on the merchandise it sells.
The company has established a merchandise assortment which
it believes is attractive to its target customer group. Although
Ross Stores offers fewer classifications of merchandise than most
department stores, the company generally offers a large selection
of brand names within each classification with a wide assortment
of vendors, prices, colors, styles and fabrics within each size.
During the year ended January 29, 1994, the overall merchandise
sales mix was approximately 96% first quality merchandise and 4%
irregulars. Ross clears out all in-store seasonal inventory on a
semi-annual basis. During the past year, the respective
departments accounted for total sales approximately as follows:
Ladies 38%, Men's 26%, Accessories, Hosiery and Lingerie 11%,
Shoes 10%, Children's 8%, and Fragrances and Home Accents 7%.
Purchasing. During the past three years, no single vendor
has accounted for more than 1% of the company's purchases. The
company continues to add new vendors and believes it has adequate
sources of first quality merchandise
to meet its requirements. The company purchases the vast
majority of its merchandise directly from manufacturers and has
not experienced any difficulty in obtaining sufficient inventory.
begin page 3
The company believes that its ability to effectively execute
certain off-price buying strategies is a key factor in its
business. Ross buyers use a number of methods that enable the
company to offer customers name brand merchandise at strong
everyday discounts relative to department and specialty stores.
By purchasing later in the merchandise buying cycle than
department and specialty stores, Ross is able to take advantage
of imbalances of manufacturer-projected supply of merchandise.
This purchasing strategy enables Ross to interpret and react
quickly to market conditions and customer demand during the
selling season. As a result, Ross is less dependent than
department and specialty stores on anticipating such
developments.
The company has increased its emphasis in recent years on
opportunistic purchases created by manufacturer overruns and
canceled orders during and at the end of a season. These buys
are referred to as "closeout" or "packaway" purchases. Closeouts
can be shipped to stores in season or stored in the company's
warehouses until the beginning of the next selling season (i.e.,
packaway). Purchases of packaway merchandise are goods that are
not usually affected by seasonal shifts in fashion trends.
Ross, unlike most department and specialty stores, does not
require that manufacturers provide it with promotional and
markdown allowances, return privileges and delayed deliveries.
In addition, Ross requires only one invoice for each delivery,
and deliveries are made to one of the company's two distribution
centers. These characteristics enable the company's buyers to
obtain significant discounts on in-season purchases.
Ross Stores' buying offices are located in New York City and
Los Angeles, the nation's two largest apparel markets. These
strategic locations allow buyers to be in the market on a daily
basis, sourcing opportunities and negotiating purchases with
vendors and manufacturers. These locations also enable the
company's buyers to strengthen vendor relationships, a key
determinant in the success of its off-price buying strategies.
The company's buyers have up to 22 years of experience,
including experience with other retailers such as Bloomingdale's,
Burlington Coat Factory, Dayton Hudson, Lord & Taylor, Macy's,
Marshalls and TJ Maxx. The company has recently increased the
size of its merchandising staff, which is comprised of divisional
merchandise managers, buyers and assistant buyers. Management
believes that these increased resources will enable its merchants
to spend even more time in the market, which should strengthen
the company's ability to procure the most desirable brands at
competitive discounts.
The combination of the above off-price buying strategies
enables the company to purchase merchandise at net prices which
are lower than prices paid by department and specialty stores.
As a summary, important factors in the company's ability to
execute its purchasing strategy are the following:
A recently enlarged merchandising staff strategically
located in the New York and Los Angeles garment districts;
Experienced buyers who select and price the merchandise for
the company's stores and make markdown decisions within pre-
arranged budgets;
Off-price buying techniques that enable the company to offer
strong discounts everyday on name brand merchandise;
A fully-integrated, on-line management information system
which provides buyers with accurate and timely information
on a weekly basis; and
The company's ability to pay its vendors quickly.
Pricing. The company's policy is to sell merchandise which
can generally be priced at 20% to 60% less than most department
and specialty store prices. The Ross pricing policy is to affix
to all brand name merchandise a ticket displaying the company's
selling price as well as the estimated comparable selling price
of that item at department and specialty stores.
begin page 4
The Ross pricing strategy differs from that of a department
or specialty store. Ross purchases its merchandise at lower
prices and marks it up less than a department or specialty store.
This strategy enables Ross to offer customers consistently low
prices. Ticketed prices are not increased and are reviewed
weekly for possible markdowns based on the rate of sales to
promote faster turnover of inventory and accelerate the flow of
fresh merchandise.
Operating Costs
Consistent with the other aspects of its strategy, Ross
strives to keep operating costs as low as possible. Among the
factors which have enabled the company to operate at low costs to
date are:
Reduced in-store labor costs resulting from a store design
which directs customers to merchandise, a self-selection retail
format and utilization of labor saving technologies;
Economies of scale with respect to general and
administrative costs as a result of centralized merchandising,
marketing and purchasing decisions;
Model store layout criteria which facilitate conversion of
existing buildings to the Ross format; and
A fully-integrated, on-line management information system
which enables the company to respond quickly when making
purchasing, merchandising and pricing decisions.
The Ross Store
As of January 29, 1994, the company operated 243 stores.
The typical new Ross store is approximately 27,200 square feet
plus a mezzanine, yielding approximately 21,000 square feet of
selling space. All stores are leased, with the exception of one.
They are conveniently located predominantly in community and
neighborhood strip shopping centers in heavily populated urban
and suburban areas. Where the size of the market permits, the
company clusters stores to maximize economies of scale in
advertising, distribution and management. During the year, the
average Ross store employs approximately 33 full and part-time
people.
The company believes a key element of its success is the
attractive, easy-to-shop environment in its stores which allows
each customer to shop at his or her own pace. The Ross store's
sales area is based on a prototype single floor design with a
racetrack aisle layout. A customer can locate desired
departments by signs displayed just below the ceiling of each
department. Ross encourages its customers to select among sizes
and prices through prominent category and sizing markers,
promoting a self-service atmosphere. Shopping carts are
available at the entrance for customer convenience. Checkout
stations are located only at store entrances for customer ease
and efficient employee assignment.
The Ross store is designed for customer convenience in its
merchandise presentation, dressing rooms, and checkout and
merchandise return areas. Racks, displays and dressing rooms are
kept neat and orderly. It is the company's policy to minimize
transaction time for the customer at the checkout counter by
opening a new register whenever a line has three or more
customers and by using electronic systems for scanning each
ticket at the point of sale and authorizing credit for personal
checks and credit cards in a matter of seconds. Approximately
one-third of payments are made with credit cards. Ross provides
full cash or credit card refunds on all merchandise returned with
a receipt and believes this policy appeals to its customers.
Distribution
Each Ross store is serviced by the company's two
distribution centers, an approximately 494,000 square foot
distribution center located in Newark, California, and an
approximately 424,000 square foot center located in Carlisle,
Pennsylvania. Having two distribution centers, one on each
coast, has resulted in faster deliveries, lower freight costs,
and decreased turn-around time in getting the merchandise from
the vendors to the stores.
Turn-around time between receipt of goods at the
distribution centers and when they are staged and ready for
shipment to the stores is approximately five days. Shipments are
made by contract carriers to each store at least once a week,
thereby limiting the requirement for substantial storage space at
the stores.
begin page 5
Advertising
During the fiscal years 1993, 1992, and 1991 advertising
costs were approximately $33.8 million, $34.1 million and $30.0
million. The company utilizes extensive advertising which
emphasizes quality, brand-name merchandise at low everyday
prices. For the current year, approximately 83% of its
advertising budget was devoted to television, 12% to print, and
5% for production and sales promotion expenses. In 1992, the
company allocated approximately 82% of its advertising budget to
television. The high percentage of television usage over the
past couple of years reflects the company's belief that this is
the best medium for presenting Ross' everyday low price message.
Control Systems
The company's management information system fully integrates
data from significant phases of its operations, and is a key
element in the company's planning, purchasing, distribution and
pricing decisions. The system enables Ross to respond to changes
in the retail market and to increase speed and accuracy in its
merchandise distribution.
Data from the current and last fiscal year can be monitored
on levels ranging from merchandise classification units to
overall totals for the company. Data important to the decision-
making process is on-line, real time data to all authorized
users. Merchandise is tracked by the system from the creation of
its purchase order, through its receipt at the distribution
center, through the distribution planning process, and ultimately
to the point of sale.
Stores
From August 1982 to January 29, 1994, the company expanded
from six stores in California to 243 stores in 18 states:
Arizona, California, Colorado, Florida, Georgia, Hawaii, Idaho,
Maryland, Nevada, New Jersey, New Mexico, Oklahoma, Oregon,
Pennsylvania, Texas, Utah, Virginia and Washington.
The company's real estate strategy is to open additional
stores in existing market areas to increase its market
penetration and reduce overhead and advertising expenses as a
percentage of sales in each market. Important considerations in
evaluating a new market are the availability of potential sites,
demographic characteristics, competition, and population density
of the market. The company plans to open new stores primarily in
existing markets through the end of 1995.
Competition
The national apparel retail market is highly fragmented.
Ross faces intense competition for business from its target
customer segment from department stores, specialty stores,
discount stores, other off-price retailers, and manufacturer-
owned outlet stores, many of which are units of large national or
regional chains that have substantially greater resources than
the company. The retail apparel business may become even more
competitive in the future. The company believes that the
principal competitive factors in the off-price retail apparel
industry are offering everyday low prices on name brand
merchandise appealing to its target customer, making buying
decisions based on regional and/or local factors, and
consistently providing a store environment that is convenient,
easy to shop, and time efficient for the customer. The company
believes that it is well positioned to compete on the basis of
each of these factors.
Employees
At January 29, 1994, the company had 8,949 employees which
includes an estimated 5,025 part-time employees. Of the full-
time employees, approximately 410 are administrative employees,
340 are distribution center employees and 3,174 are store
employees. The company's employees are non-union. Management of
the company considers the relationship between the company and
its employees to be excellent.
begin page 6
Seasonality
The combined sales of the company for the third and fourth
(holiday) quarters are higher than the combined sales for the
first two 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 seasonal factors, if they were to occur
during the last six months, and in particular during the fourth
quarter, could adversely affect the company's fiscal year
results.
ITEM 2. PROPERTIES
The company currently leases its Newark, California
distribution center, corporate and buying offices, store
facilities, and some of its fixtures and equipment. The company
owns its distribution center in Carlisle, Pennsylvania, which has
an outstanding mortgage value of $10.3 million at the end of the
1993 fiscal year. As of January 29, 1994, the company's 243
stores generally range in size from 18,000 to 40,000 gross square
feet, and have an average of 21,442 square feet of selling space.
During the fiscal year ended January 29, 1994, no one store
accounted for more than 2% of the company's sales.
Where possible, the company has obtained sites in existing
buildings requiring minimal alterations. This has allowed Ross
to establish stores in new locations in a relatively short period
of time at reasonable costs in a given market.
At January 29, 1994, the majority of the company's stores
had unexpired original lease terms ranging from one to ten years
with two to three renewal options of five years each. The
average unexpired original lease term of its leased stores is six
years, or 19 years if renewal options are included. See Note D
of notes to consolidated financial statements. Most of the
company's store leases contain provisions for percentage rental
payments after a specified sales level has been achieved. To
date, the company has been able to secure leases in suitable
locations for its stores.
The company's two distribution centers provide the company
with the potential warehouse/distribution capacity to support its
growth for several years.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
begin page 7
EXECUTIVE OFFICERS OF THE REGISTRANT
The following list sets forth the names and ages of all executive
officers of the company indicating each person's principal occupation
or employmlent during the past five years. The term of office is at
the pleasure of the Board of Directors.
Name Age Position
Norman A. Ferber 45 Director, Chairman of the Board
and Chief Executive Officer
Melvin A. Wilmore 48 Director, President and
Chief Operating Officer
Michael A. Balmuth 43 Executive Vice President, Merchandising
Earl T. Benson 46 Senior Vice President, Chief Financial
Officer and Corporate Secretary
Michael J. Bush 33 Senior Vice President,
Marketing and Strategic Planning
James S. Fassio 39 Senior Vice President,
Property Development
Barry S. Gluck 41 Senior Vice President and
General Merchandise Manager
Peter C.M. Hart 43 Senior Vice President, Management
Information Systems and Distribution
James S. Jacobs 49 Senior Vice President, Store Operations
Stephen F. Joyce 52 Senior Vice President, Human Resources
Barbara Levy 39 Senior Vice President and
General Merchandise Manager
John M. Vuko 43 Senior Vice President and Controller
_____________________________
Mr. Ferber has served as Chairman of the Board of Directors
and Chief Executive Officer since March 1993. Prior to March
1993, he served as President and Chief Executive Officer since
January 1988. From February 1987 to January 1988, he served as
President and Chief Operating Officer. Prior to February 1987,
Mr. Ferber was Executive Vice President, Merchandising, Marketing
and Distribution of the company. Mr. Ferber joined the company
in October 1982.
Mr. Wilmore has served as President, Chief Operating Officer
and a member of the Board of Directors since March 1993. Prior
to this, he served as Executive Vice President and Chief
Operating Officer since December 1991. From October 1989 to
December 1991, he was Chief Executive Officer of Live Specialty
Retail, a division of LIVE Entertainment, Inc. From March 1988
to June 1989, he was President/General Partner of Albert's
Acquisition Corporation. From March 1987 to March 1988, Mr.
Wilmore was engaged in the acquisition of Albert's Hosiery and
Bodywear by Albert's Acquisition Corporation. From April 1984 to
March 1987, he was the President and Chief Operating Officer of
Zale Jewelry Stores, a division of Zale Corporation.
Mr. Balmuth became Executive Vice President, Merchandising
in July 1993. Prior to this he served as Senior Vice President
and General Merchandise Manager since November 1989. Before
joining Ross, he was Senior Vice President and General
Merchandise Manager at Bon Marche in Seattle from September 1988
through November 1989. From April 1986 to September 1988, he
served as Executive Vice President and General Merchandise
Manager for Karen Austin Petites.
begin page 8
Mr. Benson has served as Senior Vice President, Chief
Financial Officer, and Corporate Secretary since May 1988. He
joined the company in June 1984 as Controller, Treasurer and
Assistant Secretary and became a Vice President in October 1987.
Mr. Bush has served as Senior Vice President, Marketing and
Strategic Planning since March 1993. He joined the company in
April 1991 as Vice President, Strategic Planning. Prior to
joining Ross, Mr. Bush was affiliated with the consulting firm,
Bain & Company, Inc.
Mr. Fassio has served as Senior Vice President, Property
Development since March 1991. He joined the company in June 1988
as Vice President of Real Estate. Prior to joining Ross, Mr.
Fassio was Vice President, Real Estate and Construction at
Craftmart and Property Director of Safeway Stores, Inc.
Mr. Gluck became Senior Vice President and General
Merchandise Manager in August 1993. From February 1989 to August
1993, he served as Vice President and Divisional Merchandise
Manager. Prior to joining Ross, Mr. Gluck served as General
Merchandise Manager, Vice President and Member of Executive
Committee for Today's Man from May 1987 to February 1989.
Mr. Hart has served as Senior Vice President, Management
Information Systems (MIS) and Distribution since November 1988.
From January 1987 to November 1988, he served as Senior Vice
President of MIS.
Mr. Jacobs has served as Senior Vice President, Store
Operations since November 1988. From November 1986 to October
1988, he served as Regional Vice President, Director of Stores
for the J.W. Robinson's division of May Department Stores.
Mr. Joyce has served as Senior Vice President, Human
Resources since July 1988. Before joining Ross, he was Vice
President, Human Resources at Denny's, Inc. since February 1983.
Ms. Levy became Senior Vice President and General
Merchandise Manager in May 1993. Prior to joining Ross, Ms. Levy
was with R. H. Macy & Co., Inc. most recently as Senior Vice
President and General Merchandise Manager from January 1992 to
April 1993 and before that as their Regional Director - Stores
from May 1989 to January 1992 and from August 1985 to May 1989
she was their Divisional Merchandise Manager - Better Sportswear.
Mr. Vuko has served as Senior Vice President and Controller since
June 1992. He joined the company in October 1989 as Vice President,
Treasurer and Controller. Before joining Ross, he was an executive
with The Cooper Companies from May 1988 to January 1989.
He was Vice President, Treasurer and Controller of Cooper
Lasersonics, Inc., from December 1986 to May 1988. In 1989,
prior to his employment with Ross, the SEC alleged that Mr. Vuko
traded on inside information involving a company that then
employed Mr. Vuko's wife and that he realized profits of $9,990.
Mr. Vuko informed the company of these allegations prior to
joining the company. In order to avoid costly and prolonged
legal action by the SEC, without admitting or denying the
allegations, Mr. Vuko consented to the entry on March 27, 1990 of
an order against him in the U.S. District Court for the Northern
District of California permanently enjoining him from violations
of federal securities laws.
begin page 9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
See information set forth under the caption "Quarterly
Financial Data (Unaudited)" under Note I of notes to consolidated
financial statements in Item 8 of this document which is
incorporated herein by reference. The company's stock is traded
on the NASDAQ national market system under the symbol ROST. The
number of stockholders of record as of April 18, 1994 was 1,252.
On January 27, 1994, the company's Board of Directors declared an
initial quarterly cash dividend of $0.05 per share of common
stock. The first record date was set at March 11, 1994.
ITEM 6. SELECTED FINANCIAL DATA
($000, except per share data) 1993 1992 1991 1990 1989 1988
Operating Results
Sales $1,122,033 1,043,062 926,377 798,350 733,469 626,409
Cost of goods sold and
occupancy 814,745 742,749 656,504 568,896 508,788 438,862
Percent of sales 72.6% 71.2% 70.9% 71.3% 69.4% 70.1%
General, selling and
administrative 235,558 221,795 203,120 184,140 159,560 136,825
Percent of sales 21.0% 21.3% 21.9% 23.1% 21.8% 21.8%
Depreciation and
amortization 20,539 18,740 15,922 13,140 11,961 10,418
Interest 2,318 3,071 5,395 6,955 5,907 3,332
Earnings before taxes 48,873 56,707 45,436 25,219 47,253 36,972
Percent of sales 4.4% 5.4% 4.9% 3.2% 6.4% 5.9%
Provision for taxes
on earnings 19,549 22,683 17,720 8,574 17,413 10,722
Net earnings 29,324 34,024 27,716 16,645 29,840 26,250
Percent of sales 2.6% 3.3% 3.0% 2.1% 4.1% 4.2%
Earnings per fully-diluted
common share $1.14 $1.30 $1.09 $.72 $1.24 $.97
Fiscal 1989 is a 53-week year; all other fiscal years are 52 weeks.
begin page 10
($000, except per share data) 1993 1992 1991 1990 19891988
Financial Position
Merchandise inventory $228,929 $221,048 $185,041 $157,899 $129,413 $117,200
Property and equipment, net 144,152 128,070 126,848 114,913 88,342 71,948
Total assets 437,371 419,870 357,690 309,543 249,766 260,726
Working capital 125,047 121,012 77,448 67,002 60,373 68,790
Current ratio 1.8:1 1.8:1 1.6:1 1.6:1 1.7:1 1.7:1
Total debt, including
current installments 33,308 33,525 40,723 57,600 53,900 45,000
Stockholders' equity 228,222 209,595 162,583 123,064 103,768 114,286
Book value per common share
outstanding at year-end $9.24 $8.23 $6.64 $5.33 $4.53 $4.52
Total debt as a percent of
total capitalization 13% 14% 20% 32% 34% 28%
Return on average stockholders'
equity 13% 18% 19% 15% 27% 23%
Other Statistics
Number of stores opened 22 23 20 29 17 9
Number of stores closed 2 3 2 1
Number of stores at year-end 243 223 203 185 156 140
Comparable store sales growth
(decline) (52-week basis) (1%) 3% 2% (3%) 7% 5%
Sales per square foot of selling
space (52-week basis) $222 $222 $214 $208 $215 $196
Square feet of selling space
at year-end (000) 5,210 4,879 4,518 4,155 3,590 3,315
Number of employees at year-end 8,949 8,156 7,397 7,164 6,054 5,280
Number of average fully-diluted
shares at year-end (000) 25,791 26,249 25,496 23,251 24,142 27,123
Number of common stockholders
of record at year-end 1,275 1,381 1,340 1,715 1,511 1,395
Fiscal 1989 is a 53-week year; all other fiscal years are 52 weeks.
Based on average annual selling square footage.
begin page 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the fiscal years ended January 29, 1994, January 30, 1993 and
February 1, 1992 (referred to as 1993, 1992 and 1991).
Results of Operations
Stores. Total stores open at the end of 1993, 1992 and 1991
were 243, 223 and 203. During 1993, the company opened 22 stores
and closed 2 stores. During 1992, the company opened 23 stores
and closed 3 stores. In 1991, the company opened 20 stores and
closed 2 stores.
Sales. Sales were $1.122 billion, $1.043 billion and $.926
billion in 1993, 1992 and 1991, with each year consisting of 52
weeks. Comparable store sales decreased 1% for 1993, increased
3% for 1992 and increased 2% for 1991. Thus, in 1993 the
increase in sales was due to a greater number of stores in
operation. The increases in sales for 1992 and 1991 were due to
an increase in comparable store sales and a greater number of
stores in operation. The company believes that both the 1992 and
1991 comparable store sales increases resulted from the emphasis
on quality brand name merchandise at low everyday prices. During
1993, the company continued to increase the percentage of quality
brand name merchandise in its stores. The company believes the
decline in comparable store sales from 1992 was due to an
increasingly competitive environment for apparel retailers in
1993, which narrowed the value differential the company normally
offers compared to department and specialty stores. In 1994, the
company plans to offer larger discounts on key name brand items
throughout the store to improve productivity as defined by sales
per square foot. Therefore, the company is not relying on
increasing gross margins in 1994; rather, the company intends to
generate earnings growth primarily through sales increases and
leveraging down expenses as a percentage of sales.
Cost of Goods Sold and Occupancy. Cost of goods sold and
occupancy as a percentage of sales increased to 73% in 1993 from
71% for 1992 and 1991. This change was primarily due to
increased pressures on price points and markdown levels,
resulting from the more competitive retail climate in 1993.
General, Selling and Administrative Expenses. General,
selling and administrative expenses for 1993, 1992 and 1991 were
21%, 21% and 22% of sales. In 1993, management focused store
growth primarily in existing markets and also maintained strong
expense controls. These actions offset the unfavorable
percentage increase normally associated with a same store sales
decline. The percentage decrease in general, selling and
administrative expenses between 1992 and 1991 was due to
increased efficiencies at the store and corporate levels.
The largest component of general, selling and administrative
expenses is payroll. The total number of employees, including
both full and part-time, at year-end 1993, 1992 and 1991 was
approximately 8,900, 8,200 and 7,400.
Depreciation and Amortization. Depreciation and
amortization as a percentage of sales has remained relatively
constant over the last three years, due primarily to the
consistent level of assets in each store.
Interest. The decrease in interest expense in 1993 from
1992 was due to lower interest rates from the prior year
partially offset by increased borrowings due primarily to the
company's repurchases of its common stock. The decrease in
interest expense in 1992 from 1991 was due to lower average
borrowings and a decline in interest rates from the prior year.
Taxes on Earnings. The company's effective rate for 1993,
1992 and 1991 was 40%, 40% and 39%, which represents the
applicable statutory rates reduced by the federal benefit
received for state taxes and targeted jobs tax credits. In 1992,
the company adopted Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes. The adoption of this
standard did not have an effect on the company's earnings or
financial position. See Notes A and E of Notes to Consolidated
Financial Statements.
In August 1993, the federal government enacted a new income
tax law which raised the 34% corporate income tax rate to 35%.
The change in both the mix of state income taxes and available
tax credits allowed the company to maintain its 40% effective tax
rate.
begin page 12
Financial Condition
Liquidity and Capital Resources. During 1993, 1992 and
1991, liquidity and capital requirements were provided by cash
flows from operations, bank borrowings and trade credit. The
company's store sites, central office, and California
distribution center, as well as the buying offices, are leased
and, except for certain leasehold improvements and equipment, do
not represent fixed capital investments. Commitments related to
operating leases are described in Note D of Notes to Consolidated
Financial Statements. The company's east coast distribution
center is owned by the company and was financed by a ten-year
mortgage (see Note C of Notes to Consolidated Financial
Statements). Short-term trade credit represents a significant
source of financing for investments in merchandise inventories.
Trade credit arises from customary trade practices with the
company's vendors. Management regularly reviews the adequacy of
credit available to the company from all sources and has been
able to maintain adequate lines to meet the capital and liquidity
requirements of the company.
During 1993, the primary uses of cash, other than current
operating expenditures, were for merchandise inventory and
property and equipment to open 22 stores, timing of accounts
payable payments, and repurchases in the open market of 1.2
million shares of the company's common stock. The primary uses
of cash in 1992, other than operating expenditures, were for
merchandise inventory and property and equipment to open 23
stores, prepaying $7 million of senior debt, and making
opportunistic inventory purchases, thereby increasing the level
of packaway inventory. In 1991, the primary uses of cash, other
than operating expenditures, were for merchandise inventory and
property and equipment to open 20 stores, constructing the east
coast distribution center, repaying borrowings under the
company's long-term debt agreements, and higher levels of
opportunistic inventory purchases, thereby increasing the level
of packaway inventory. In 1993, 1992 and 1991, the company spent
approximately $35 million, $22 million and $32 million for
capital expenditures, net of leased equipment, that included
fixtures and leasehold improvements to open 22, 23 and 20 stores,
construction costs for the east coast distribution center and
modifications to our New York buying office, purchase of
previously leased equipment and various expenditures for existing
stores and the central office.
The company currently intends to open about 20 to 25 stores
annually through 1995. The company anticipates that this growth
will be financed primarily from cash flows from operating
activities and available credit facilities.
On January 27, 1994, the company's Board of Directors
declared an initial quarterly cash dividend of $0.05 per common
share payable on or about April 1, 1994 to stockholders of record
as of the close of business on March 11, 1994. The company
intends to use cash flows from operations and available cash
resources to provide for the dividends.
The company has available under its principal bank credit
agreement a $110 million revolving credit facility, which expires
in July 1996. At the company's option, the bank credit agreement
can be extended in two one-year increments, or until July 1998.
In March 1992, the company obtained two short-term revolving
credit facilities of $10 million and $15 million each. A third
short-term credit facility of $15 million was added in November
1992. These facilities are available until canceled by either
party. At year-end 1993, 1992 and 1991, there were no
outstanding balances under any revolving credit facility. In
addition, at year-end 1993, 1992 and 1991, the company had
outstanding a term loan of $23 million, which will mature in
November 1994. The company has the ability and intention to
refinance this facility with a long-term financing arrangement.
During 1991, the company issued a ten-year mortgage note in the
amount of $10.8 million on the east coast distribution center.
For additional information relating to these obligations, refer
to Note C of Notes to Consolidated Financial Statements.
Working capital was approximately $125 million at the end of
1993 compared to $121 million at the end of 1992 and $77 million
at the end of 1991. At year-end 1993, 1992 and 1991, the
company's current ratios were 1.8:1, 1.8:1 and l.6:1. The
percentage of long-term debt to total capitalization at year-end
1993, 1992 and 1991 was 13%, 14% and 20%.
The company's primary source of liquidity is the sale of its
merchandise inventories. Management regularly reviews the age
and condition of the merchandise and is able to maintain current
inventory in its stores through the replenishment processes and
liquidation of non-current merchandise through markdowns and
clearances.
In March 1994, a section of the roof at the company's
distribution center in Carlisle, Pennsylvania collapsed due to
unusually heavy snow accumulation. The distribution center in
Newark, California has been utilized to support
begin page 13
the flow of goods to the stores. The company expects the east
coast distribution center to be operating at normal capacity by
June 1994. The company believes that it is fully insured for
costs related to this situation.
The company believes that cash flows from operations, bank
credit lines and trade credit are adequate to meet operating cash
needs as well as to complete the two million share repurchase
plan authorized by the Board of Directors and to provide for
dividend payments and planned capital additions during the
upcoming year.
begin page 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
($000, except per share data) January 29, January 30,
1994 1993
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 32,307 $ 40,457
Accounts receivable 4,016 5,848
Merchandise inventory 228,929 221,048
Prepaid expenses and other 15,224 10,323
Total Current Assets 280,476 277,676
PROPERTY AND EQUIPMENT
Land and buildings 22,502 20,004
Fixtures and equipment 120,493 101,751
Leasehold improvements 89,588 82,506
Construction-in-progress 10,739 4,319
243,322 208,580
Less accumulated depreciation and amortization 99,170 80,510
144,152 128,070
Lease rights 1,804 2,185
Other assets 7,039 7,890
Excess of cost over net assets of acquired 3,900 4,049
subsidiary
$ 437,371 $ 419,870
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 89,561 $ 95,731
Accrued expenses 43,262 30,339
Accrued payroll and benefits 16,202 19,350
Income taxes payable 6,404 11,244
Total Current Liabilities 155,429 156,664
Long-term debt 33,308 33,525
Deferred income taxes and other 20,412 20,086
liabilities
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share
Authorized 100,000,000 shares
Issued and outstanding 24,695,000 and 247 255
25,461,000 shares
Additional paid-in capital 122,073 119,743
Retained earnings 105,902 89,597
228,222 209,595
$ 437,371 $ 419,870
See notes to consolidated financial statements.
begin page 15
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended Year Ended Year Ended
($000, except per share data) January 29, January 30, February 1,
1994 1993 1992
SALES $ 1,122,033 $ 1,043,062 $ 926,377
COSTS AND EXPENSES
Cost of goods sold and occupancy 814,745 742,749 656,504
General, selling and 235,558 221,795 203,120
administrative
Depreciation and amortization 20,539 18,740 15,922
Interest 2,318 3,071 5,395
1,073,160 986,355 880,941
Earnings before taxes 48,873 56,707 45,436
Provision for taxes on earnings 19,549 22,683 17,720
Net earnings $ 29,324 $ 34,024 $ 27,716
EARNINGS PER SHARE
Primary $ 1.14 $ 1.32 $ 1.13
Fully-diluted $ 1.14 $ 1.30 $ 1.09
WEIGHTED AVERAGE SHARES
OUTSTANDING (000)
Primary 25,715 25,683 24,549
Fully-diluted 25,791 26,249 25,496
- --------
See notes to consolidated financial statements.
begin page 16
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional
Common Stock Paid-In Retained
($000) Shares Amount Capital Earnings Total
BALANCE AT FEBRUARY 2, 1991 23,099 $ 231 $ 94,976 $ 27,857 $ 123,064
Common stock issued
under stock plans,
including tax benefit 1,392 14 11,516 11,530
Payment on stock purchased 273 273
Net earnings 27,716 27,716
BALANCE AT FEBRUARY 1, 1992 24,491 245 106,765 55,573 162,583
Common stock issued
under stock plans,
including tax benefit 970 10 12,957 12,967
Payment on stock purchased 21 21
Net earnings 34,024 34,024
BALANCE AT JANUARY 30, 1993 25,461 255 119,743 89,597 209,595
Common stock issued
under stock plans,
including tax benefit 414 4 8,101 8,105
Stock repurchased (1,180) (12) (5,771) (11,791) (17,574)
Net earnings 29,324 29,324
Dividends declared (1,228) (1,228)
BALANCE AT JANUARY 29, 1994 24,695 $ 247 $ 122,073 $ 105,902 $ 228,222
_____
See notes to consolidated financial statements.
begin page 17
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended Year Ended Year Ended
($000) January 29, January 30, February 1,
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $29,324 $34,024 $27,716
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization of
property and equipment 20,539 18,740 15,922
Other amortization 9,077 8,433 8,160
Deferred income taxes 669 2,911 (2,908)
Change in current assets and current
liabilities:
Increase in merchandise inventory (7,881) (36,007) (27,142)
Increase in other current assets - net (6,528) (5,385) (4,003)
Increase (decrease) in accounts payable (7,398) 5,427 14,771
Increase (decrease) in other current
liabilities - net (361) 11,615 14,523
Other 2,466 3,609 3,501
Net cash provided by operating activities 39,907 43,367 50,540
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (34,777) (21,657) (31,729)
Net cash used in investing activities (34,777) (21,657) (31,729)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of senior notes (7,000) (23,000)
Repayment under line of
credit agreement (27,600)
Proceeds (repayment) of long-term debt (303) (296) 33,941
Issuance of common stock
related to stock plan 4,597 9,669 8,948
Repurchase of common stock (17,574)
Net cash provided by (used in) financing activities (13,280) 2,373 (7,711)
Net increase (decrease) in cash and cash equivalents (8,150) 24,083 11,100
Cash and cash equivalents:
Beginning of year 40,457 16,374 5,274
End of year $32,307 $40,457 $16,374
See notes to consolidated financial statements.
begin page 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended January 29, 1994, January 30,
1993 and February 1, 1992 (referred to as 1993, 1992 and 1991).
Note A: Summary of Significant Accounting Policies
Business. The company is an off-price retailer of first
quality, in-season, branded apparel, shoes, gift items for the
home, fragrances and accessories for the entire family. At
January 29, 1994, the company operated 243 stores.
Principles of Consolidation. The consolidated financial
statements include the accounts of all subsidiaries. Intercompany
transactions and accounts have been eliminated. Certain
reclassifications have been made in the 1992 and 1991 financial
statements to conform to the 1993 presentation. The years 1993,
1992 and 1991 consisted of 52 weeks.
Cash Equivalents. Cash equivalents are highly liquid, fixed
income instruments purchased with a maturity of three months or
less.
Merchandise Inventory. Merchandise inventory is stated at
the lower of cost or market determined under the unit cost
method.
Deferred Store Opening Expenses. During 1992 and 1991
expenses incurred in opening new stores were deferred until
stores were opened and then amortized over a period of 18 months.
During 1993, this accounting treatment was changed, resulting in
all pre-opening expenses for 1993 new stores and any prior year
deferred costs being expensed in 1993. The effect of this change
in accounting principle did not have a material impact on any of
the periods presented.
Beginning with 1994, pre-opening expenses will be deferred
until the store's grand opening date. At that time, the deferred
costs will be expensed.
Deferred Rent. Many of the company's leases signed since
1988 contain fixed escalations of the minimum annual lease
payments during the original term of the lease. For these
leases, the company recognizes rental expense on a straight-line
basis and records the difference between the average rental
amount charged to expense and the amount payable under the lease
as deferred rent. At the end of 1993 and 1992, the balance of
deferred rent was $6.4 million and $5.1 million.
Intangible Assets. Lease rights and interests, consisting
of payments made to acquire store leases, are amortized over the
remaining applicable life of the lease.
The excess of cost over the acquired net assets is amortized
on a straight-line basis over a period of 40 years.
Property and Equipment. Property and equipment are stated
at cost. Depreciation is calculated using the straight-line
method over the estimated useful life of the asset, typically
ranging from five to twelve years for equipment and 20 to 40
years for real property. The cost of leasehold improvements is
amortized over the useful life of the asset or the applicable
lease term, whichever is less. Hardware and software costs are
included in fixtures and equipment and are amortized over their
useful life of five years.
Taxes on Earnings. In 1992, the company adopted Statement
of Financial Accounting Standards No. 109 (SFAS 109), Accounting
for Income Taxes. SFAS 109 is an asset and liability approach
that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events
that have been recognized in the company's financial statements
or tax returns. In estimating future tax consequences, SFAS 109
generally considers all expected future events other than
enactments of changes in the tax law or rates.
The adoption of SFAS 109 did not have an impact on the
company's earnings or financial position.
Earnings Per Share. Earnings per share are based on primary
and fully-diluted weighted average common shares and common stock
equivalents outstanding during the year, as calculated under the
treasury stock method. The company's common stock equivalents
consist of outstanding stock options.
begin page 19
Note B: Statements of Cash Flows Supplemental Disclosures
Total cash paid for interest and taxes is as follows:
($000) 1993 1992 1991
Interest $ 2,850 $ 3,229 $ 6,234
Income taxes $21,014 $14,871 $13,717
Note C: Long-Term Debt
Long-term debt consists of the following:
($000) 1993 1992
Mortgage $10,308 $10,525
Term loan 23,000 23,000
$33,308 $33,525
Mortgage. On August 8, 1991, the company obtained a $10.8
million mortgage at 9.5% interest, collateralized by the land and
building of its east coast distribution center. Interest and
principal are based on a 20-year amortization period. The
mortgage is due in 2001 with principal payments of $239,000,
$263,000, $288,000, $318,000 and $349,000 due in 1994, 1995,
1996, 1997 and 1998, respectively. In 1996, the interest rate
will be reset at the lender's best prevailing interest rate or
repaid, at the company's option.
Term Loan. On September 16, 1991, the company signed a term
loan credit agreement with a bank for $23 million due November
1994. The interest rate, which is based on the London Interbank
Offered Rate (LIBOR), was 4.375% at January 29, 1994. The
company has the ability and the intent to refinance this note in
1994 with a long-term financing arrangement.
Bank Credit Facilities. The company has available under its
principal credit agreement a $110 million revolving credit
facility which expires in July 1996 and is renewable at the
company's option for two one-year periods. The credit facility
is also available for the issuance of letters of credit. Interest
is payable monthly under several pricing options, including the
bank's prime rate. At year-end 1993 and 1992, the company had
$11.7 million and $11.0 million in outstanding letters of credit.
Borrowing under the credit facility is subject to the company
maintaining certain levels of tangible net worth, pretax earnings
and leverage ratios.
In addition, the company has $40 million in short-term bank
lines of credit which are available until canceled by either
party. When utilized, interest is payable monthly under several
pricing options.
Included in accounts payable are checks outstanding in
excess of cash balances of approximately $13.9 million and $26.0
million at year-end 1993 and 1992. The company can utilize its
revolving line of credit to cover payment of these checks as they
clear the bank.
Note D: Leases
The company leases its distribution center and corporate
office located in Newark, California under a 15-year,
noncancelable lease agreement expiring 2002. The lease contains
six renewal options of five years each. In addition, the company
leases its store sites, selected computer and related equipment,
certain store fixtures and distribution center equipment under
operating leases with original, noncancelable terms that in
general range from three to fifteen years, expiring through 2008.
Store leases typically contain provisions for two to three
renewal options of five years each. Most store leases also
provide for minimum annual rentals, with provisions for
additional rent based on percentage of sales and for payment of
certain expenses.
begin page 20
The aggregate future minimum annual lease payments under leases
in effect at year-end 1993 are as follows:
($000) Amounts
1994 $ 76,271
1995 75,231
1996 70,314
1997 64,187
1998 61,196
Later years 226,162
Total $ 573,361
Total rent expense for all operating leases is as follows:
($000) 1993 1992 1991
Minimum rentals $70,589 $65,061 $55,607
Percentage rentals 267 268 295
$70,856 $65,329 $55,902
Note E: Taxes on Earnings
The provision for taxes consists of the following:
($000) 1993 1992 1991
CURRENTLY PAYABLE
Federal $14,885 $14,342 $14,396
State 3,995 3,660 3,603
18,880 18,002 17,999
DEFERRED
Federal 506 4,065 (279)
State 163 616
669 4,681 (279)
$19,549 $22,683 $17,720
In 1993, 1992 and 1991, tax benefits of $2.7 million, $2.9
million and $2.3 million related to stock options exercised and
the vesting of restricted stock have been credited to additional
paid-in capital.
The provisions for income taxes for financial reporting
purposes are different from the tax provision computed by
applying the statutory federal income tax rate. The differences
are reconciled as follows:
1993 1992 1991
Federal income taxes at
the statutory rate 35% 34% 34%
Increase (decrease) in
income taxes resulting from:
Utilization of credits (1)
State income taxes, net of
federal benefit 5 5 5
Other, net 1 1
40% 40% 39%
begin page 21
In August of 1993, the federal government enacted a new
income tax law which increased the 34% corporate income tax rate
to 35%. The 1% federal income tax rate increase did not result
in an increase in the company's overall tax rate as it was offset
by a change in the mix of state income taxes and available tax
credits.
The components of the net deferred tax liability at year-end are
as follows:
($000) 1993 1992
DEFERRED TAX ASSETS:
California franchise taxes $ 688 $ 789
Inventory 203 333
Straight-line rent 2,737 2,140
Deferred compensation 2,625 2,055
Reserve for uninsured losses 1,615 1,100
Employee benefits 2,346 1,116
All other 1,230 544
Valuation allowance 0 0
$11,444 $8,077
DEFERRED TAX LIABILITIES:
Depreciation ($11,382) ($10,411)
Prepaid expenses (5,811) (2,626)
Other (29) (149)
(17,222) (13,186)
NET DEFERRED TAX LIABILITIES ($5,778) ($5,109)
Note F: Employee Benefit Plans
The company has available to certain employees a profit
sharing retirement plan. Under the Plan, employee and company
contributions and accumulated plan earnings qualify for favorable
tax treatment under Section 401(k) of the Internal Revenue Code.
In 1987, the company adopted an Incentive Compensation Program,
which provides cash awards to key management employees based on
the company's and the individual's performance. In 1991, the
company began offering an Executive Supplemental Retirement Plan,
which allows eligible employees to purchase individual life
insurance policies and/or annuity contracts. In 1993, the
company made available to management a Nonqualified Deferred
Compensation Plan which allows management to contribute on a pre-
tax basis in addition to the 401(k) Plan. This Plan does not
qualify under Section 401(k) of the Internal Revenue Code.
Note G: Estimated Fair Value of Financial Instruments
SFAS 107, Disclosures About Fair Value of Financial
Instruments, requires disclosure of the estimated fair value of
financial instruments. The carrying value of cash and cash
equivalents, accounts receivable and accounts payable
approximates their estimated fair value. The carrying value of
long-term debt at year-end 1993 is $33.3 million. Its estimated
fair value based on debt with similar terms and remaining
maturities is $33.8 million.
Note H: Stockholders' Equity
On January 27, 1994, the company's Board of Directors
declared a $0.05 per common share cash dividend, payable on or
about April 1, 1994 to stockholders of record as of March 11,
1994.
Preferred Stock. The company has four million shares of
preferred stock authorized, with a par value of $.01 per share.
No preferred stock has been issued or outstanding during the past
three years.
begin page 22
Common Stock. On February 4, 1993, the company announced
that its Board of Directors approved a repurchase of up to one
million shares of common stock. On November 17, 1993, the
company announced that the Board extended the repurchase program
by authorizing the buyback of an additional one million shares.
Through January 29, 1994, a total of 1.2 million shares were
repurchased at an average price of $14.89 per share. The company
intends to complete the repurchase of the remaining authorized
shares in 1994 through both open-market or privately arranged
transactions.
Stock Options. The company's Stock Option Plan allows for
the granting of incentive and nonqualified stock options. As of
January 29, 1994, 6.4 million common shares had been authorized
for issuance under the Plan. Stock options are to be granted at
prices not less than the fair market value of the common shares
on the date the option is granted, and normally vest over a
period not exceeding four years from the date of grant. The
following is a summary of stock option activity under the Plan
for 1993, 1992 and 1991.
(000) Number of Shares Average Price
Outstanding and exercisable at
February 2, 1991 2,406 $10.49
Granted 1,874 $ 9.46
Exercised (833) $ 7.08
Canceled (1,398) $13.13
Outstanding and exercisable at
February 1, 1992 2,049 $ 9.13
Granted 705 $18.85
Exercised (681) $ 8.47
Canceled (57) $12.39
Outstanding and exercisable at
January 30, 1993 2,016 $12.67
Granted 584 $18.49
Exercised (185) $ 7.59
Canceled (117) $16.04
Outstanding and exercisable at
January 29, 1994 2,298 $14.38
At the year-end 1993, 1992 and 1991, 1.7 million, 2.2 million
and 2.8 million shares remained available for grant under the
Plan.
Restricted Stock. As of January 29, 1994, 1.85 million
common shares had been authorized for issuance under the
company's Restricted Stock Plan. During 1993, 1992 and 1991,
the company awarded 194,000, 234,000 and 450,000 shares to
certain employees, of which 49,000, 7,000 and 0 were subsequently
canceled and returned to the share reserve. At year-end 1993,
1992 and 1991, 495,000, 640,000 and 867,000 shares remained
available for grant under the Plan. The compensation associated
with these awards is amortized over vesting periods of generally
two to five years. At year-end 1993, 1992 and 1991, the
unamortized compensation expense was $4.8 million, $5.1 million
and $4.1 million.
Employee Stock Purchase Plan. As of January 29, 1994,
600,000 common shares had been authorized for issuance under the
company's Employee Stock Purchase Plan. During 1993, employees
purchased approximately 85,000 shares of the company's common
stock through payroll deductions. Through January 29, 1994,
approximately 395,000 shares had been issued under this Plan, and
205,000 shares remained available for future issuance under the
Plan.
Outside Directors Stock Option Plan. As of January 29,
1994, 125,000 common shares had been authorized for issuance
under this plan. Stock options are to be granted at exercise
prices not less than the fair market value of the common shares
on the date the option is granted, and normally vest over a
period not exceeding three years from the date of the grant.
Through January 29, 1994, the company had granted options for
approximately 90,000 shares at exercise prices ranging from $8.63
to $20.88 per share. At year-end 1993, 35,000 shares remained
available for grants under the Plan. All nonqualified options
for shares granted under the Plan remained outstanding and
exercisable as of the end of 1993.
begin page 23
Note I: Quarterly Financial Data (Unaudited)
13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 52 Weeks Ended
($000, except per May 1, 1993 July 31, 1993 October 30, 1993 January 29, 1994 January 29,
share data) 1994
Sales $239,552 $275,965 $262,244 $344,272 $1,122,033
Gross margin, after
occupancy 67,368 75,045 71,498 93,378 307,288
Net earnings 3,594 8,153 4,786 12,791 29,324
Net earnings per fully-
diluted share .14 .31 .19 .51 1.14
Dividends declared per
share on common .05 .05
stock
Closing stock price
High 23 1/2 16 1/8 15 5/8 18 23 1/2
Low 15 12 7/8 13 1/8 12 5/8 12 5/8
13 Weeks Ended 13 Weeks 13 Weeks Ended 13 Weeks Ended 52 Weeks Ended
($000, except per May 2, 1992 Ended October 31, 1992 January 30, January 30,
share data) August 1, 1993 1993
1992
Sales $221,020 $253,891 $246,878 $321,274 $1,043,062
Gross margin, after
occupancy 61,760 75,708 70,068 92,774 300,313
Net earnings 3,254 9,684 4,924 16,162 34,024
Net earnings per fully-
diluted share .13 .38 .19 .61 1.30
Closing stock
price
High 23 17 1/2 17 1/2 23 1/2 23 1/2
Low 14 1/8 10 7/8 11 3/8 16 5/8 10 7/8
Ross Stores, Inc. common stock trades on the NASDAQ
National Market System (NMS) under the symbol ROST.
begin page 24
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Ross Stores, Inc.
Newark, California
We have audited the accompanying consolidated balance sheets of
Ross Stores, Inc. and subsidiaries as of January 29, 1994 and
January 30, 1993, and the related consolidated statements of
earnings, stockholders' equity, and cash flows for each of the
three years in the period ended January 29, 1994. These
financial statements are the responsibility of the companies'
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
companies as of January 29, 1994 and January 30, 1993, and the
results of their operations and their cash flows for each of the
three years in the period ended January 29, 1994 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE
San Francisco, California
March 11, 1994
begin page 25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the executive officers of
the Registrant, see "Executive Officers of the Registrant" at the
end of Part I of this report. Information with respect to the
Directors of the Registrant is incorporated herein by reference
to the section entitled "Information Regarding Nominees and
Incumbent Directors" of the Ross Stores, Inc., Proxy Statement
for the Annual Meeting of Stockholders to be held on Tuesday,
June 7, 1994 (the "Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the sections of the
Proxy Statement entitled (i) "Compensation Committee Interlocks
and Insider Participation"; (ii) "Compensation of Directors";
(iii) "Employment Contracts, Termination of Employment and Change-
in-Control Arrangements"; and (iv) the following tables, and
their footnotes, Summary Compensation, Option Grants in Last
Fiscal Year and Aggregrated Option Exercises and Year-End Value.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated herein by reference to the section of the Proxy
Statement entitled "Stock Ownership of Certain Beneficial Owners
and Management".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the sections of the
Proxy Statement entitled (i) "Compensation of Directors" and (ii)
"Certain Transactions".
begin page 26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following financial statements, schedules and exhibits
are filed as part of this report or are incorporated
herein as indicated:
1. List of Financial Statements.
(i) The following consolidated financial statements
included herein as Item 8:
Consolidated Balance Sheets at January 29,
1994 and January 30, 1993.
Consolidated Statements of Earnings for the
years ended January 29, 1994, January 30,
1993 and February 1, 1992.
Consolidated Statements of Stockholders'
Equity for the years ended January 29,
1994, January 30, 1993 and February 1,
1992.
Consolidated Statements of Cash Flows for the
years ended January 29, 1994, January 30,
1993 and February 1, 1992.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
2. List of Financial Statement Schedules.
Independent Auditors' Report on Financial Statement Schedules.
Schedule II - Amounts Receivable from Related Parties and
Underwriters, Promoters, and Employees Other
Than Related Parties, page 30.
Schedule V - Property, Plant and
Equipment, page 31.
Schedule VI - Accumulated Depreciation and Amortization of
Property, Plant and Equipment, page 32.
Schedule VIII - Valuation and Qualifying Accounts and Reserves,
page 33.
Schedule X - Supplementary Income Statement Information,
page 33.
Schedules other than those listed are omitted for the
reason that they are not required or are not
applicable, or the required information is shown in
the financial statements or notes thereto, contained
in, or incorporated by reference into, this Report.
3. List of Exhibits (in accordance with Item 601 of
Regulation S-K)
3.1 Certificate of Incorporation, as amended, incorporated
by reference to Exhibit 3.1 to the Registration
Statement on Form 8-B (the "Form 8-B") filed
September 1, 1989 by Ross Stores, Inc, a Delaware
corporation ("Ross Stores").
3.2 Amended By-laws, dated August 29, 1991, incorporated
by reference to Exhibit 3.2 to the 1991 Form 10-K
filed by Ross Stores for its year ended February
1, 1992 ("1991 Form 10-K").
10.1 Agreement of Lease, dated November 24, 1986, for Ross
Stores' corporate headquarters and distribution
center in Newark, CA, incorporated by reference to
Exhibit 10.5 on Form 8-B.
begin page 27
10.2 Credit Agreement, dated March 2, 1992, among Ross
Stores, Wells Fargo Bank, National Association,
Bank of America, National Trust and Savings
Association, and Security Pacific National Bank;
and Wells Fargo Bank, National Association, as
agent for Banks, incorporated by reference to
Exhibit 10.8 to the 1991 Form 10-K.
10.3 Amended and Restated Credit Agreement, dated November
23, 1992, among Ross Stores, Wells Fargo Bank,
National Association, Bank of America, N.T. &
S.A., Nationsbank of Texas, N.A., and Banque
Nationale de Paris; and Wells Fargo Bank, National
Association, as agent for Banks, incorporated by
reference to Exhibit 10.9 to the 1992 Form 10-K
filed by Ross Stores for its year ended January
30, 1993 ("1992 Form 10-K").
10.4 First Amendment to Amended and Restated Credit
Agreement, entered into as of February 5, 1993, by
and among Ross Stores, Wells Fargo Bank, National
Association, Bank of America, N.T. & S.A.,
Nationsbank of Texas, N.A., and Banque Nationale
de Paris ("Banks"); and Wells Fargo Bank, National
Association, as agent for Banks, incorporated by
reference to Exhibit 10.10 to the 1992 Form 10-K.
10.5 Revolving Credit Agreement, dated July 31, 1993, among
Ross Stores, Wells Fargo Bank, National
Association, Bank of America, N.T. & S.A.,
Nationsbank of Texas, N.A., and Banque Nationale
de Paris ("Banks"), and Wells Fargo Bank, National
Association, as agent for Banks, incorporated by
reference to Exhibit 10.17 on the Form 10-Q filed
by Ross Stores for its quarter ended July 31,
1993.
10.6 Term Credit Agreement, dated September 16, 1991,
between Ross Stores and the Industrial Bank of
Japan, Limited, incorporated by reference to
Exhibit 10 to the Form 10-Q filed by Ross Stores
for its quarter ended August 3, 1991.
10.7 Amendment to Term Credit Agreement, dated February 19,
1993, between Ross Stores and the Industrial Bank
of Japan, Limited, incorporated by reference to
Exhibit 10.12 to the 1992 Form 10-K.
10.8 Second Amendment to Term Credit Agreement,
dated as of October 29, 1993, between Ross Stores
and the Industrial Bank of Japan, Limited,
incorporated by reference to Exhibit 10.13 to the
Form 10-Q filed by Ross Stores for its quarter
ended October 30, 1993.
Management Contracts and Compensatory Plans
10.9 Ross Stores, 1992 Stock Option Plan, incorporated by
reference to Exhibit 19.1 on Form 10-Q filed by
Ross Stores for its quarter ended August 1, 1992.
10.10 Third Amended and Restated Ross Stores Employee Stock
Purchase Plan, incorporated by reference to
Exhibit 19.2 on Form 10-Q filed by Ross Stores for
its quarter ended August 1, 1992.
10.11 Third Amended and Restated Ross Stores 1988 Restricted
Stock Plan, incorporated by reference to Exhibit
19.3 on Form 10-Q filed by Ross Stores, for its
quarter ended August 1, 1992.
10.12 1991 Outside Directors Stock Option Plan, incorporated
by reference to Exhibit 10.13 to the 1991 Form 10-K.
10.13 Ross Stores Executive Medical Plan.
10.14 Third Amended and Restated Ross Stores Executive
Supplemental Retirement Plan.
10.15 Ross Stores Non-Qualified Deferred Compensation Plan.
10.16 Ross Stores Incentive Compensation Plan.
begin page 28
10.17 Employment Agreement between Ross Stores, Inc. and
Norman A. Ferber, dated March 17, 1989,
incorporated by reference to Exhibit 10.4 to the
1988 Annual Report on Form 10-K filed by Ross
Stores, Inc., a California corporation, for its
year ended January 28, 1989.
10.18 Amendment to Employment Agreement between Ross Stores
and Norman A. Ferber, dated March 11, 1991,
incorporated by reference to Exhibit 10.51 to the
1990 Annual Report on Form 10-K filed by Ross
Stores, for its year ended February 2, 1991.
10.19 Second Amendment to Employment Agreement between Ross
Stores and Norman A. Ferber, dated April 23, 1992,
incorporated by reference to Exhibit 10.7 to the
1991 Form 10-K.
10.20 Employment Agreement between Ross Stores and Melvin A.
Wilmore, dated November 25, 1991, incorporated by
reference to Exhibit 10.11 to the 1991 Form 10-K.
10.21 Agreement and General Release between Ross Stores and
Greggory L. Baldwin, dated November 6, 1991,
incorporated by reference to Exhibit 10.12 to the
1991 Form 10-K.
10.22 Consulting Agreement between Ross Stores and Stuart G.
Moldaw, effective as of March 12, 1993,
incorporated by reference to Exhibit 10.16 on the
Form 10-Q filed by Ross Stores for its quarter
ended May 1, 1993.
11 Statement re: Computation of Per Share Earnings.
21 Subsidiaries of the Registrant.
23.1 Independent Auditors' Consent.
23.2 Independent Auditors' Report on Financial
Statement Schedules.
(b) Reports on Form 8-K.
None.
begin page 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ROSS STORES, INC.
(Registrant)
Date: April 27, 1994 By /s/Norman A. Ferber
(Norman A. Ferber, Chairman of the
Board and Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signature Title Date
/s/Norman A. Ferber Chairman, Chief Executive April 27, 1994
Norman A. Ferber Officer and Director
/s/M. Wilmore President, Chief Operating April 27, 1994
Melvin A. Wilmore Officer and Director
/s/Earl Benson Senior Vice President, April 27, 1994
Earl T. Benson Chief Financial Officer
and Secretary
/s/John M. Vuko Senior Vice President, April 27, 1994
John M. Vuko Controller and
Principal Accounting
Officer
/s/Stuart G. Moldaw Chairman Emeritus, April 27, 1994
Stuart G. Moldaw Director
/s/Donald G. Fisher Director April 27, 1994
Donald G. Fisher
/s/Franklin P. Johnson Director April 27, 1994
Franklin P. Johnson, Jr.
/s/G. Orban Director April 27, 1994
George P. Orban
/s/Donald H. Seiler Director April 27, 1994
Donald H. Seiler
/s/Phil Schlein Director April 27, 1994
Philip Schlein
/s/D. L. Weaver Director April 27, 1994
Donna L. Weaver
begin page 30
ROSS STORES, INC.
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(Amounts in thousands)
Column Column Column Column Column
A B C D E
Balance at Balance at
beginning end of period
Name of Debtor of period Additions Deductions CurrentNon Current
Year Ended January 29, 1994
James S. Jacobs $100 $100
Peter C.M. Hart $180 $180
Melvin A. Wilmore $100 $300 $100 $300
Year Ended January 30, 1993
James S. Jacobs $100 $100
Earl T. Benson $ 35 $ 35
Peter C.M. Hart $180 $180
Melvin A. Wilmore $ 0 $100 $100
Year Ended February 1, 1992
James S. Jacobs $100 $100
Earl T. Benson $290 $255 $ 35
James S. Fassio $105 $105
Peter C.M. Hart $ 0 $180 $180
In September and October 1989, the company loaned to Mr.
Earl T. Benson, Senior Vice President, Corporate Secretary,
and Chief Financial Officer, $142,000 for the exercise of
options in the amount of 26,000 shares and $225,000 secured
by a second mortgage on his home. Both loans included
interest at 8% and matured on March 27, 1992, and April 1,
1993, respectively. As of February 1, 1992, Mr. Benson had
repaid the stock option loan, and $190,000 on the second
mortgage on his house, leaving a balance due of $35,000.
This balance was repaid prior to January 30, 1993 and prior
to the due date.
The company has extended three loans to Mr. James S. Fassio,
Senior Vice President, Property Development. In July 1989,
the company extended a loan in the amount of $70,375 for the
exercise of options in the amount of 12,500 shares at an
annual interest rate of 8.75%, due July 13, 1991. In
January and May 1990, the company extended loans in the
amounts of $21,756 at an annual rate of 8%, due March 31,
1992, and $12,758 at an annual rate of 8.5%, due May 13,
1991, both secured by a deed of trust on his home. Mr.
Fassio repaid all outstanding loans as of February 1, 1992.
In June 1989, the company extended a loan of $100,000 at an
annual interest rate of 8% to James S. Jacobs, Senior Vice
President, Operations, secured by a first mortgage on his
home. The loan was repaid prior to January 29, 1994 and on
the due date.
In December 1991, the company loaned $180,000 to Mr. Peter
C.M. Hart, Senior Vice President of Management Information
Systems and Distribution, in three installments, at annual
interest rates from 5.12% to 5.63%, secured by a deed of
trust on the home which the loan helped him purchase. The
loan was repaid prior to January 29, 1994 and prior to the
due date.
In June 1992, the company extended a loan of $100,000 at an
annual interest rate of 5% to Melvin Wilmore, President and
Chief Operating Officer, secured by a certificate of
deposit. The loan was due on June 4, 1995; however, all
outstanding principal and interest was paid in full on
February 5, 1993. On February 5, 1993, the company made a
relocation loan of $300,000 to Mr. Wilmore at an annual
interest rate of 0%. The loan, which is secured by a deed
of trust, is due on February 5, 1996.
begin page 31
ROSS STORES, INC.
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
($000)
Column Column Column Column Column Column
A B C D E F
Balance at Balance
beginning Additions Retirements Other at end
Classification of period at cost and sales changes of period
Year Ended
January 29, 1994:
Land and buildings $20,004 $2,502 ($4) $22,502
Fixtures and equipment 101,751 21,543 (2,801) 120,493
Leasehold improvements 82,506 9,720 (2,638) 89,588
Construction in progress 4,319 6,420 10,739
$208,580 $40,185 ($5,443) $0 $243,322
Year Ended
January 30, 1993:
Land and buildings $19,994 $11 ($1) $20,004
Fixtures and equipment 84,564 19,157 (1,970) 101,751
Leasehold improvements 77,012 8,083 (2,589) 82,506
Construction in progress 9,184 (4,865) ______ ______ 4,319
$190,754 $22,386 ($4,560) $0 $208,580
Year Ended
February 1, 1992:
Land and buildings $6,174 $13,820 $19,994
Fixtures and equipment 71,121 15,907 ($2,464) 84,564
Leasehold improvements 69,581 9,365 (1,934) 77,012
Construction in progress 18,884 (9,700) _______ ______ 9,184
$165,760 $29,392 ($4,398) $0 $190,754
begin page 32
ROSS STORES, INC.
SCHEDULE VI - ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
($000)
Column Column Column Column Column Column
A B C D E F
Additions
Balance at charged to Balance
beginning costs and Other changes at end
Description of period expenses Retirements add (deduct)of period
Year Ended
January 29, 1994:
Buildings and land
improvements $2,222 $703 $2,925
Fixtures and equipment 39,955 11,357 ($1,172) 50,140
Leasehold improvements 38,333 8,488 (716) 46,105
$80,510 $20,548 ($1,888) $0 $99,170
Year Ended
January 30, 1993:
Buildings and land
improvements $1,517 $705 $2,222
Fixtures and equipment 31,255 9,648 ($ 948) 39,955
Leasehold improvements 31,134 8,430 (1,231) 38,333
$63,906 $18,783 ($2,179) $0 $80,510
Year Ended
February 1, 1992:
Buildings and land
improvements $1,057 $460 $1,517
Fixtures and equipment 25,170 7,880 ($1,795) 31,255
Leasehold improvements 24,620 7,626 (1,112) 31,134
$50,847 $15,966 ($2,907) $0 $63,906
Depreciation on fixtures and equipment is calculated using
the straight-line method over the estimated useful life of
the asset (approximately five to twelve years). Leasehold
improvements are amortized over the estimated useful lives
of the assets or the applicable lease term, whichever is
less.
begin page 33
ROSS STORES, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
($000)
Column Column Column Column Column
A B C D E
Additions
Balance at charged to
beginning costs and Balance at
Description of period expenses Deductions* end of period
Accrued expenses for 1987
store closings
Year ended January 29, 1994 $0 $0
Year ended January 30, 1993 $0 $0
Year ended February 1, 1992 $20 ($20) $0
* Payments for store closures.
ROSS STORES, INC.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
($000)
Column A Column B
1993 1992 1991
Advertising Costs $33,849 $34,079 $29,970
begin page 34
INDEX TO EXHIBITS
Exhibit
Number
Exhibit
3.1 Certificate of Incorporation, as amended, incorporated
by reference to Exhibit 3.1 to the Registration
Statement on Form 8-B (the "Form 8-B") filed September
1, 1989 by Ross Stores, Inc., a Delaware corporation
("Ross Stores").
3.2 Amended By-laws, dated August 29, 1991, incorporated by
reference to Exhibit 3.2 to the 1991 Form 10-K filed by
Ross Stores for its year ended February 1, 1992 ("1991
Form 10-K").
10.1 Agreement of Lease, dated November 24, 1986, for Ross
Stores' corporate headquarters and distribution center
in Newark, CA, incorporated by reference to Exhibit
10.5 on Form 8-B.
10.2 Credit Agreement, dated March 2, 1992, among Ross
Stores, Wells Fargo Bank, National Association, Bank of
America, National Trust and Savings Association, and
Security Pacific National Bank; and Wells Fargo Bank,
National Association, as agent for Banks, incorporated
by reference to Exhibit 10.8 to the 1991 Form 10-K.
10.3 Amended and Restated Credit Agreement, dated November
23, 1992, among Ross Stores, Wells Fargo Bank, National
Association, Bank of America, N.T. & S.A., Nationsbank
of Texas, N.A., and Banque Nationale de Paris; and
Wells Fargo Bank, National Association, as agent for
Banks, incorporated by reference to Exhibit 10.9 to the
1992 Form 10-K filed by Ross Stores for its year ended
January 30, 1993 ("1992 Form 10-K").
10.4 First Amendment to Amended and Restated Credit
Agreement, entered into as of February 5, 1993, by and
among Ross Stores, Wells Fargo Bank, National
Association, Bank of America, N.T. & S.A., Nationsbank
of Texas, N.A., and Banque Nationale de Paris
("Banks"); and Wells Fargo Bank, National Association,
as agent for Banks, incorporated by reference to
Exhibit 10.10 to the 1992 Form 10-K.
10.5 Revolving Credit Agreement, dated July 31, 1993, among
Ross Stores, Wells Fargo Bank, National Association,
Bank of America, N.T. & S.A., Nationsbank of Texas,
N.A., and Banque Nationale de Paris ("Banks"), and
Wells Fargo Bank, National Association, as agent for
Banks, incorporated by reference to Exhibit 10.17 on
the Form 10-Q filed by Ross Stores for its quarter
ended July 31, 1993.
10.6 Term Credit Agreement, dated September 16, 1991,
between Ross Stores and the Industrial Bank of Japan,
Limited, incorporated by reference to Exhibit 10 to the
Form 10-Q filed by Ross Stores for its quarter ended
August 3, 1991.
10.7 Amendment to Term Credit Agreement, dated February 19,
1993, between Ross Stores and the Industrial Bank of
Japan, Limited, incorporated by reference to Exhibit
10.12 to the 1992 Form 10-K.
10.8 Second Amendment to Term Credit Agreement, dated as of
October 29, 1993, between Ross Stores and the
Industrial Bank of Japan, Limited, incorporated by
reference to Exhibit 10.13 to the Form 10-Q filed by
Ross Stores for its quarter ended October 30, 1993.
Management Contracts and Compensatory Plans
10.9 Ross Stores 1992 Stock Option Plan, incorporated by
reference to Exhibit 19.1 on Form 10-Q filed by Ross
Stores for its quarter ended August 1, 1992.
10.10 Third Amended and Restated Ross Stores Employee Stock
Purchase Plan, incorporated by reference to Exhibit
19.2 on Form 10-Q filed by Ross Stores for its quarter
ended August 1, 1992.
begin page 35
Exhibit
Number Exhibit
10.11 Third Amended and Restated Ross Stores, 1988 Restricted
Stock Plan, incorporated by reference to Exhibit 19.3
on Form 10-Q filed by Ross Stores, for its quarter
ended August 1, 1992.
10.12 1991 Outside Directors Stock Option Plan, incorporated
by reference to Exhibit 10.13 to the 1991 Form 10-K.
10.13 Ross Stores Executive Medical Plan.
10.14 Third Amended and Restated Ross Stores Executive
Supplemental Retirement Plan.
10.15 Ross Stores Non-Qualified Deferred Compensation Plan.
10.16 Ross Stores Incentive Compensation Plan.
10.17 Employment Agreement between Ross Stores, Inc. and
Norman A. Ferber, dated March 17, 1989, incorporated by
reference to Exhibit 10.4 to the 1988 Annual Report on
Form 10-K filed by Ross Stores, Inc., a California
corporation, for its year ended January 28, 1989.
10.18 Amendment to Employment Agreement between Ross Stores
and Norman A. Ferber, dated March 11, 1991,
incorporated by reference to Exhibit 10.51 to the 1990
Annual Report on Form 10-K filed by Ross Stores, for
its year ended February 2, 1991.
10.19 Second Amendment to Employment Agreement between Ross
Stores and Norman A. Ferber, dated April 23, 1992,
incorporated by reference to Exhibit 10.7 to the 1991
Form 10-K.
10.20 Employment Agreement between Ross Stores and Melvin A.
Wilmore, dated November 25, 1991, incorporated by
reference to Exhibit 10.11 to the 1991 Form 10-K.
10.21 Agreement and General Release between Ross Stores and
Greggory L. Baldwin, dated November 6, 1991,
incorporated by reference to Exhibit 10.12 to the 1991
Form 10-K.
10.22 Consulting Agreement between Ross Stores and Stuart G.
Moldaw, effective as of March 12, 1993, incorporated by
reference to Exhibit 10.16 on the Form 10-Q filed by
Ross Stores for its quarter ended May 1, 1993.
11 Statement re: Computation of Per Share Earnings.
21 Subsidiaries of the Registrant.
23.1 Independent Auditors' Consent.
23.2 Independent Auditors' Report on Financial Statement
Schedules.
ROSS STORES, INC.
EXECUTIVE MEDICAL PLAN
Plan Highlights
The benefits and provisions of this Plan are described in this
Certificate. This is the Plan in effect as of January 1, 1993.
Health Care Benefits
For You and Your Dependents
As an eligible Executive Employee you are eligible for benefits shown
in this Certificate.
Executive Medical Plan
Payment will be made for 100% of the charges for Covered Expenses
listed below. These expenses must be charged to you or your Dependent
while covered. Expenses must be charged in connection with Medical
Care, Dental Care or Vision Care. No Cash Deductible applies to the
Covered Expenses under the Executive Medical Plan.
The Maximum Benefit shall be $25,000 per person per Calendar Year,
subject to a Calendar Year Maximum Benefit of $50,000 per family.
Important
You will notice that some of the terms used in your Certificate begin
with a capital letter. These terms have a special meaning under the
Plan and are listed in Glossary in alphabetical order. Refer to this
section for a detailed explanation.
Executive Medical Plan
The Executive Medical Plan provides payment for a wide range of medical
expenses (called Covered Expenses). These expenses must be charged to
you or your Dependent while covered. These expenses must be needed
because of Medical, Dental or Vision Care.
Covered Expenses
Payment for Additional Covered Expenses will be reduced by any amount
paid for Medical Care under any Worker's Compensation Act or similar
law. Loss of income benefits or specific allowances for loss of a
bodily member will not reduce the amount paid under the Plan.
Payment will be made if the expenses charged to you or your Dependent
are more than the expenses payable under any or all of the following:
The other health benefits of this Plan.
The basic benefits under any other group plans sponsored by the
Employer.
Any government sponsored plan or law, except Medicare or Medicaid.
begin page 2
These expenses must relate to the Additional Covered Expenses under
this benefit. "Additional Covered Expenses" will not include any
expenses which are payable in a Calendar Year under any of the plans
described above.
Covered Expenses are the actual cost to you of the Reasonable Charges,
as defined in Glossary, for services and supplies that are normally not
covered under your medical, dental or vision care plan, or which exceed
Reasonable and Customary Charges under your medical, dental or vision
care plan. However, these expenses are covered under the Executive
Reimbursement Plan. The service or supply must be:
Medically Necessary.
Required for treatment.
An allowable tax deductible item as defined under the Internal Revenue Code.
Recommended and approved by the attending physician unless noted otherwise
in the services listed below.
Any charges in excess of the amount paid under the Comprehensive Medical,
Dental and Vision Care Plan of the Employer.
General Exclusions
Not Covered
Charges for the following are not covered under the Executive Medical
Care Plan:
Injury or sickness caused by war, act of war or international armed
conflict declared or undeclared.
Injury or sickness resulting from or sustained while engaged in the
commission of a crime or felony.
Service or treatment for an injury which is covered by a worker's
compensation act or other similar legislation.
Service or treatment which is compensated for or furnished by the
United States government or any agency thereof.
Services or treatments not prescribed by a Physician.
Services or treatments for pregnancy for dependent children, except
complications of pregnancy.
Services of a person who is a member of your immediate family.
Services of a person who resides in your home.
Services given by volunteers or persons who do not normally charge
for their services.
begin page 3
Services given by a licensed pastoral to a member of his or her
congregation in the course of his or her normal duties as a pastor or
minister.
Custodial care. This is care made up of services and supplies that
meets one of the following conditions:
Care furnished mainly to train or assist in personal hygiene or
other activities of daily living, rather than to provide medical treatment.
Care provided by persons who do not have the technical skills of a
covered health care professional.
Care that meets one of the conditions above is custodial care
regardless of any of the following:
Who recommends, provides or directs the care.
Where the care is provided.
Whether or not the patient can be or is being trained to care for
himself or herself.
Any expenditure which is merely beneficial to the general health,
such as an expenditure for a vacation.
Any expenditure for transportation, unless furnished by an ambulance
service for local travel.
Any expenditure deemed to be educational rather than medical or
rehabilitative.
Any expenditure for toiletries, such as toothpaste, shaving lotion or
cosmetics, such as facial creams, deodorants, hand lotions or other similar
preparations used for ordinary cosmetic purposes.
Any expenditure for meals and lodgings while away from home, but not
confined to a hospital or institution or under the care of an institution.
Expenses incurred during or in connection with the hospital
confinement of a Dependent which began before the Dependent was covered.
Your Dependent's expenses if the Dependent is receiving benefits for
the same expenses under the Plan as an Employee.
Education, training and bed and board while confined in an
institution which is mainly a school or other institution for training, a
place of rest, a place for the aged or a nursing home.
Drugs, treatments, services or supplies which are considered investigational
because they do not meet generally accepted standards of medical
practice in the United States. This includes any related confinement,
treatment, service or supplies.
begin page 4
Expenses for confinement, treatment, services or supplies given for
or related to chelation therapy, except to treat heavy metal poisoninq.
Expenses not directly involved with Medical Care (as defined in
Section 213(d) of the Internal Revenue Code).
A capital expense, like a permanent alteration of your house. Only
that part of the expense that is needed for a person's Medical Care is
covered.
Any service or supply that is not allowable as a tax deduction under
the Internal Revenue Code.
Treatment in a United States government or agency hospital, other
than treatment received by a qualified CHAMPUS beneficiary. This treatment
must be for services that would otherwise be covered under the Plan.
Expenses which you yourself are not legally required to pay. However,
the reasonable cost incurred by the United States for medical care and
treatment for a non-service connected disability given to a veteran by the
United States or one of its agencies is covered to the extent the care and
treatment is otherwise covered under the Plan.
Expenses incurred for the care or treatment of the dependent children
of your Dependent children.
Any premiums that you are required to contribute for your coverage
under your medical, dental or vision care plan.
Claims Information
How To File A Claim
Fill out the First Notice of Claim. These forms are available from the
Employer or from The Travelers. The form has instructions on how to
fill it out.
Please read the form carefully. Answer all questions and send all
required information to your Travelers claim office.
If you ask for a claim form but do not receive it within 15 days you
can file a claim without it by sending in the bills and describing the
situation in a letter.
To claim health benefits you must give The Travelers written proof of
your loss within 15 months after the date of the loss or the date the
expenses are incurred.
If it is not possible to give the proof within 15 months, give the
proof as soon as possible. The Travelers will not reduce or deny your
claim if you give the proof as soon as reasonably possible.
Be sure to save all bills and attach copies of them to the claim form.
Keep a record of the date of service and the type of service given. For
prescription drugs, be sure the bill includes all of the following:
begin page 5
Date of purchase.
Prescription number.
Name of the physician who gave the prescription.
The Travelers has the right to examine anyone filing a claim. If a
medical exam is needed, you will not have to pay for it.
The Travelers can request any needed proof of loss in connection with a
claim for Dental Services and Supplies. This includes the following:
Dentist's or physician's statement of treatment.
Study models.
X-rays taken before and after surgery.
How and When Claims Are Paid
All benefits will be paid to you immediately after The Travelers
receives satisfactory proof of loss.
Any Health Benefits continued for your Dependents after your death will
be paid to one of the following:
Your surviving spouse.
Your Dependent child who is not a minor, if there is no surviving
spouse.
A hospital or a person who makes charges to your Dependents for
services that are covered under this Plan
The legal guardian of your Dependent.
The Travelers will have no further obligation for the amount of the
payment.
Legal Actions
You may not sue on your health claim before 60 days after proof of loss
has been given to The Travelers. You may not sue after 3 years from the
time proof of loss is required unless the law in the area where you
live allows a longer period of time.
The health coverage is not in place of workers' compensation insurance.
It does not affect any requirement for coverage by workers'
compensation insurance.
begin page 6
When Coverage Starts
Who is Eligible for Coverage
Employees
You are eligible if you are an Executive Employee working at least 25
hours per week, or are a former Executive Employee previously covered
under the Employer's basic health plan who has elected health care
continuation under COBRA.
Dependents
Your eligible Dependents are:
Your wife or husband.
Your unmarried children under 19.
Your unmarried children 19 but under 25 who are registered students
in regular full-time attendance at school. Dependents who are students must
be dependent upon the Employee for care and support. They cannot be employed
on a regular full-time basis by one or more employers for a total of 30 or
more hours per week.
Your Dependents must reside in the United States.
"Children" includes any of the following:
Your step-child.
Your legally adopted child (including a child for whom legal adoption
proceedings have been started).
Any child who is related to you, mainly dependent on you for care and
support and living with you in a regular parent-child relationship.
No person can be covered as both an Employee and as a Dependent under
this Plan. No person can be covered as a Dependent of more than one
Employee under this Plan.
Who Pays for the Coverage
The coverage under this Plan is non-contributory. This means you do not
have to make contributions toward its cost.
When Coverage Starts
Your Coverage
You must enroll to get coverage (see How to Enroll).
begin page 7
Coverage will start on the later of
The date you enroll.
The date you become eligible for coverage under the Employer's
Comprehensive Medical, Dental and Vision Care Plan.
If you are away from work because you are disabled on the date coverage
would start, coverage will not start until you return to full-time
work.
Your Dependents Coverage
You must enroll for the coverage in order for your Dependents to be
covered (see How to Enroll).
Coverage starts on the latest of
The date you become covered, if you selected Dependent coverage.
The date you enroll for the Dependents coverage
The first day of the month after you acquire your first Dependent.
If a Dependent is confined in a hospital or other institution when
coverage would start, the Medical Benefits will not start until
The Dependent is out of the hospital or institution, or
The Travelers is given proof that the Dependent is completely
recovered or the pregnancy causing the confinement was delivered, aborted or
miscarried.
The above limitation does not apply to a newborn child.
How To Enroll
You enroll by filing a written request with the Employer. Forms are
available from the Employer.
If you do not have a Dependent when you enroll, you may enroll for the
Dependents benefits when you acquire your first Dependent, if you do so
within the first 31 days of the date the Dependent is eligible.
When Coverage Stops
Your Coverage
Coverage will stop on the earliest of the following:
The last day of the month in which your employment ends.
The last day of the month in which you stop being an eligible
Employee.
begin page 8
When the Plan is terminated by the Employer.
Your Dependents Coverage
Coverage for all of your Dependents stops when your coverage stops.
Coverage for an individual Dependent stops sooner if one of the
following happens:
The Dependent becomes covered as an Employee under this Plan.
The Dependent stops being an eligible Dependent.
Continuation of Coverage
Disability
The Employer may continue coverage when you are away from work due to
disability.
Layoff or Leave of Absence
The Employer may continue coverage if you are away from work due to
leave of absence or temporary layoff.
Benefits Available After Coverage Stops
The Travelers will pay Executive Medical Plan benefits for the 12
months after the date coverage stops as long as the following
conditions are met:
The person is Totally Disabled due to the same cause for the entire
time from when coverage stops until charges are made.
The expenses are not payable under any other group plan.
Benefits are payable only for Covered Expenses charged for the
accidental injury, sickness or pregnancy which caused the Total
Disability.
Glossary
(These definitions apply when the following terms are used in this
Certificate.)
Calendar Year
A period of one year beginning with a January 1.
Covered Family Members
You and your wife or husband and Dependent children who are covered
under the Plan.
begin page 9
Hospital
An institution which is engaged primarily in providing medical care and
treatment of sick and injured persons on an in-patient basis where a
charge is incurred and which fully meets one of the following three
tests:
It is accredited as a hospital by the Joint Commission on
Accreditation of Hospitals.
It is approved by Medicare as a hospital.
It meets all of the following tests:
It maintains on the premises diagnostic and therapeutic facilities
for surgical and medical diagnosis and treatment of sick and injured
persons by or under the supervision of a staff of duly qualified
physicians; and
It continuously provides on the premises 24 hour a day nursing
service by or under the supervision of registered graduate nurses; and
It is operated continuously with organized facilities for operative
surgery on the premises.
Internal Revenue Code
Section 213(d), Medical, Dental, Etc., Expenses (which tells what
medical and dental expenses qualify as "medical care" for federal
income tax purposes) of the internal Revenue Code of 1954 and
amendments thereto, as regulated by the Code of Federal Regulations.
Medical Care
The diagnosis, care, mitigation or prevention of disease or treatment
affecting any structure or functions of the body due to defect, illness
or accidental injury, or care during and following pregnancy including
treatment of any conditions caused by the pregnancy.
Medically Necessary
The Travelers determines, in its discretion, if a service or supply is
medically necessary for the diagnosis or treatment of an accidental
injury, sickness or pregnancy. This determination is based on and
consistent with standards approved by Travelers medical personnel.
These standards are developed, in part with consideration to whether
the service or supply meets the following:
It is appropriate and required for the diagnosis or treatment of the
accidental injury, sickness or pregnancy.
It is safe and effective according to accepted clinical evidence
reported by generally recognized medical professionals or publications.
begin page 10
There is not a less intensive or more appropriate diagnostic or
treatment alternative that could have been used in lieu of the service or
supply given.
A determination that a service or supply is not medically necessary
may apply to the entire service or supply or to any part of the service or
supply.
Medicare
The Health Insurance For The Aged and Disabled program under Title
XVIII of the Social Security Act.
Person Eligible under Medicare
You or your Dependent if eligible to enroll and be covered under the
voluntary portion of Medicare.
Physician
A legally qualified:
Doctor of Medicine (M.D.).
Doctor of Chiropody (D.P.M.; D.S.C.).
Doctor of Chiropractic (D.C.).
Doctor of Dental Surgery (D.D.S.).
Doctor of Medical Dentistry (D.M.D.).
Doctor of Osteopathy (D.O.).
Doctor of Podiatry (D.P.M.).
Reasonable Charge
An amount measured and determined by The Travelers by comparing the
actual charge for the service or supply with the prevailing charges
made for it. The Travelers determines the prevailing charge. It takes
into account all pertinent factors including:
The complexity of the service.
The range of services provided.
The prevailing charge level in the geographic area where the provider
is located and other geographic areas having similar medical cost experience.
begin page 11
Room and Board
Room, board, general duty nursing, intensive nursing care by whatever
name called, and any other services regularly furnished by the hospital
as a condition of occupancy of the class of accommodations occupied,
but not including professional services of physicians nor special
nursing services rendered outside of an intensive care unit by whatever
name called.
Sickness
The term "sickness" will include a surgical procedure for
sterilization and related medical care and treatment and confinement
within 30 consecutive days from the procedure.
The term "sickness" used in connection with new-born children will
include congenital defects and birth abnormalities, including premature
births.
Total Disability
Your inability to perform all of the substantial and material duties
of your regular employment or occupation.
Your Dependent's inability to perform the normal activities of a
person of like age and sex.
End of Certificate of Insurance
THIRD AMENDED AND RESTATED
ROSS STORES, INC.
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
A. Purpose and Description. The third amended and
restated Ross Stores, Inc. Executive Supplemental Retirement Plan
(the "Plan") is designed to help selected employees of Ross
Stores to provide for their retirement and for their
beneficiaries in the event of their death. The Plan shall be
effective as of May 1, 1991. Under the Plan, eligible employees
may purchase individual life insurance policies and/or annuity
contracts from an insurance company selected by Ross Stores (the
"Insurance Company"). The insurance and annuity contract
policies and annuity contracts will be owned exclusively by the
employee. The insurance and annuity contract premiums will be
paid on an "after-tax" basis through payroll deduction. Ross
Stores will pay a bonus to Plan Participants to assist the
participants in meeting their tax liability on amounts withheld
and used to purchase life insurance and annuity contracts under
the Plan.
B. Administration. The Plan shall be administered by the
"Plan Committee," the members of which will be the Vice President
of Human Resources and the Director of Risk Management and
Benefits.
C. Eligibility and Participation.
1. Employees designated by the Plan Committee shall
become participants in the Plan when their application for life
insurance or an annuity contract is accepted by the Insurance
Company and they have authorized insurance or annuity contract
premium payments through payroll deductions and/or direct
payments as described more fully below.
2. Participation in the Plan shall terminate
immediately upon the Participant's separation from service with
Ross Stores for any reason.
D. Contributions.
1. Each Participant may select the amount of
insurance or annuity contract premium payments which he or she
desires and which provides the amount of insurance coverage and
cash value build up or annuity payments as the Participant
desires. Insurance and annuity contract premiums may be paid
through payroll deductions ("Payroll Deductions") from the
Participant's regular salary and bonuses or through direct
payments by the Participant ("Direct Payments"). The Participant
shall notify Ross Stores of all Direct Payments and shall provide
Ross Stores with such evidence of the Direct Payments as it may
reasonably require and Ross Stores shall
begin page 2
have no obligation to pay a Tax Bonus with respect to any
Direct Payments of which it has not been properly notified.
2. A Participant may change premium payments at such
times upon such notice as the Plan Committee may require,
provided, however, that a Participant may cease Payroll
Deductions entirely at any time. Ross Stores has no
responsibility for any changes in the amount of insurance
coverage or future cash value or the amount of annuity payments
which result from a Participant's change in his or her premium
payments.
3. Payroll Deductions are subject to income and
payroll tax withholding. Accordingly, a Participant's take-home
pay will be reduced by withholdings attributable to Payroll
Deductions.
4. Ross Stores shall remit a Participant's Payroll
Deductions to the Insurance Company within a reasonable time
after such Payroll Deductions were made.
E. Tax Bonus.
1. Ross Stores shall pay a bonus to each Participant
to help defray the Participant's federal income tax liability for
the Participant's annual Payroll Deductions (the "Tax Bonus").
The Tax Bonus will equal 70% of the sum of the Participant's
Payroll Deductions and Direct Payments, up to a maximum tax bonus
of $3,500 per calendar year.
2. The Plan Committee may change the rate of the Tax
Bonus from time to time, subject, however, to the provisions of
paragraph F.1., below.
F. Miscellaneous.
1. Ross Stores reserves the right at any time to
modify, amend or terminate the Plan in all or in part; provided,
however, no such amendment or termination shall affect the
portion of the Tax Bonus calculated with respect to Payroll
Deductions paid prior to such termination or amendment.
2. The Participant shall own any insurance policy and
annuity contract acquired pursuant to this Plan and Ross Stores
shall retain no interest therein and shall merely facilitate the
Participant's payment of premiums on the policy or contract
through Payroll Deductions.
3. Ross Stores shall not be responsible for the
adequacy of a Participant's Payroll Deductions to make any
insurance or annuity contract premium payments, but shall have
fully satisfied its obligations under this Plan upon remitting
begin page 3
the Payroll Deductions to the Insurance Company and paying the
applicable Tax Bonus.
4. Ross Stores recommends that Participants consult
their personal financial advisors regarding the tax and financial
consequences of purchasing life insurance and annuity contracts
under this program prior to participating in the Plan.
5. Nothing herein shall be construed as conferring
upon any Participant the right to continue in the employ of Ross
Stores as an employee.
6. The Plan shall be construed in accordance with and
governed by the laws of the State of California.
IN WITNESS WHEREOF, the undersigned Secretary of the Corporation
certifies that the foregoing Third Amended and Restated Ross Stores, Inc.
Executive Supplemental Retirement Plan was duly adopted by the Board of
Directors of the Company on the 29th day of August, 1991, to become
effective as of May 1, 1991.
/S/ EARL BENSON
Earl T. Benson
ROSS STORES, INC.
NON-QUALIFIED DEFERRED COMPENSATION PLAN
Effective Date: January 1, 1994
begin page 2
ROSS STORES, INC.
NON-QUALIFIED DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
Page
ARTICLE 1. INTRODUCTION 1
ARTICLE 2. DEFINITIONS 1
ARTICLE 3. PLAN SPECIFICATIONS 4
ARTICLE 4. WITHDRAWALS DURING EMPLOYMENT 6
ARTICLE 5. PLAN INVESTMENTS 7
ARTICLE 6. BENEFICIARY 7
ARTICLE 7. VESTING 7
ARTICLE 8. BENEFITS 8
ARTICLE 9. ADMINISTRATION 9
ARTICLE 10. MISCELLANEOUS 9
begin page 3
ARTICLE 1.
INTRODUCTION
Whereas, Ross Stores, Inc. (the "Employer" or "Ross") wishes
to establish a supplementary employee retirement plan as set
forth herein (the "Plan") to provide deferred compensation
for a select group of management or highly compensated
employees of the Employer and its subsidiaries effective
January 1, 1994; and
Whereas, the Employer has the legal authority to establish
the Plan pursuant to the laws of the State of Delaware; and
Whereas, the Employer wishes to provide that the Plan shall
be called the Ross Stores, Inc. Non-Qualified Deferred
Compensation Plan; and
Whereas, the Employer wishes to provide under the Plan for
the payment of benefits to participants in the Plan and
their beneficiary or beneficiaries under the terms of the
Plan and the terms of Participants' deferred compensation
agreements; and
Whereas, the Employer wishes to provide under the Plan that
the Employer shall pay the entire cost of benefits under the
Plan from its general assets and set aside contributions by
the Employer to meet its obligations under the Plan; and
Whereas, the Employer intends that the assets of the Plan
and its accompanying trust shall at all times be subject to
the claims of the general creditors of the Employer in the
event of the financial insolvency of the Employer; and
Whereas, the Employer intends that any rights of
participants in the Plan and their beneficiaries be
unsecured and unfunded for purposes of tax law and for
purposes of Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
Now, therefore, the Employer does hereby establish the Plan
as follows, and does also hereby agree that the assets of
the Plan shall be identified, held, invested, and disposed
of as follows:
ARTICLE 2.
DEFINITIONS
"Beneficiary" means the beneficiary or beneficiaries
designated by the Participant in the Enrollment Agreement who are
to receive any distributions payable upon the death of the
Participant.
begin page 4
"Board" means the Employer's Board of Directors.
"Compensation" means a Participant's base salary paid by
Ross, or an affiliate of Ross, but shall not include any other
form of compensation, whether taxable or non-taxable, including,
but not limited to, bonuses, commissions, overtime and other
forms of additional compensation.
"Deferral Amount" means the amount of Compensation that the
Participant elects to defer under the Enrollment Agreement and
that the Participant and the Employer mutually agree shall be
deferred in accordance with the Plan.
"Deferred Compensation Agreement" means the agreement
entered into by a Participant and the Employer which sets forth
the terms of the Participant's participation in the Plan.
"Effective Date" means January 1, 1994.
"Eligible Employee" means an employee of the Employer or a
subsidiary of Employer who is a member of a select group of
management or highly compensated employees and who has been
chosen by the Plan Administrator, in the Plan Administrator's
sole discretion, to be eligible to participate in the Plan. For
purposes of the Plan, the phrase "select group of management or
highly compensated employees" shall include those individuals
employed as directors, buyers, or district managers and those
individuals employed in positions at a higher level, all as
determined by the Plan Administrator.
"Employer" means Ross Stores, Inc., a Delaware corporation,
and any succeeding or continuing corporation.
"Enrollment Agreement" means the agreement entered into by a
Participant which specifies the amount of the Participant's
Deferral Account, the Participant's Beneficiary and the
Participant's election of form of payment on Termination of
Employment and certain withdrawals during employment.
"Hardship Withdrawal" is a withdrawal on account of hardship
due to an unforeseeable financial emergency which Participant
cannot meet through loans, insurance or liquidation of
Participant's assets (to the extent such liquidation would not
itself cause a financial hardship), or cessation of deferrals
under Participant's Deferred Compensation Agreement. The amount
distributed to Participant for such an unforeseeable financial
emergency shall not exceed the lesser of (i) the amount needed to
satisfy the unforeseeable financial emergency, or (ii) the value
of Participant's account under the Plan. An unforeseeable
financial emergency is a severe financial hardship to Participant
resulting from a sudden and unexpected illness or accident of
Participant or of a dependent of Participant (as defined in
section 152(a) of the Internal Revenue Code), loss of
Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result
of events beyond the control of Participant. Examples of what
are not considered to be unforeseeable financial
begin page 5
emergencies include the need to send a child of Participant to
college or the desire to purchase a home. The form of payment of
a Hardship Withdrawal shall be determined by the Plan
Administrator in the Plan Administrator's sole discretion.
"Matching Contribution" means the amount which the Employer
contributes on behalf of Participant under the terms of
Article IV of the Participant's Deferred Compensation Agreement
(as modified by the terms of the Plan).
"Participant" shall mean any Eligible Employee selected by
the Plan Administrator who has elected to participate in the Plan
by entering into an Enrollment Agreement.
"Participant's Account". The individual account maintained
for a Participant by the Plan Administrator in accordance with
the terms of the Plan and the Trust Agreement.
"Plan Administrator" means the committee selected to control
and manage the operation and administration of the Plan.
"Plan Year". A Plan Year is the 12 consecutive month period
beginning on January 1 and ending on the next following December
31.
"Termination of Employment" shall mean severance of the
Participant's employment relationship with the Employer for any
reason, including retirement, death or Total Disability.
"Top Hat Plan" is a non-qualified deferred compensation plan
for a select group of management or highly compensated employees
within the meaning of section 401(a)(1) of ERISA.
"Total Disability" means a Participant's total and permanent
disability which renders the Participant unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last
for a continuous period of not less than twelve (12) months.
Whether or not a Participant has incurred a Total Disability
shall be determined by the Plan Administrator in the Plan
Administrator's sole discretion.
"Trust" means the legal entity created by the Trust
Agreement.
"Trust Agreement" shall mean that trust agreement entered
into between the Employer and the Trustee to hold the assets of
the Plan.
"Trustee" means the original Trustee named in the Trust
Agreement and any duly appointed and acting successor Trustee(s)
which shall be appointed by the Employer and may consist of one
or more persons.
begin page 6
ARTICLE 3.
PLAN SPECIFICATIONS
3.1 Salary Deferrals. Each Eligible Employee who is
notified of his or her eligibility to participate in the Plan
prior to the Effective Date may begin to participate in the Plan
on the Effective Date; provided, however, that such Eligible
Employee completes and signs both a Deferred Compensation
Agreement and an Enrollment Agreement and returns both agreements
to the designated representative of the Employer prior to the
Effective Date or such earlier date established by the Employer
and announced to the Eligible Employee.
Each Eligible Employee who is notified of his or her
eligibility to participate in the Plan on or after the Effective
Date may begin to participate in the Plan at the beginning of the
first pay period commencing after the date the Eligible Employee
completes and signs both a Deferred Compensation Agreement and an
Enrollment Agreement and returns both agreements to the
designated representative of the Employer; provided, however,
that such completion of the agreements and return of the
agreements to the Employer must occur within thirty (30) days
after the date that the Eligible Employee is notified of his or
her eligibility to participate in the Plan.
An Eligible Employee who did not become a Participant in
accordance with the terms of the preceding paragraphs may begin
to participate in the Plan effective as of the beginning of any
calendar year following the calendar year in which he or she was
first notified of his or her eligibility to participate in the
Plan by completing and executing both an Enrollment Agreement and
a Deferred Compensation Agreement and returning both agreements
to the designated representative of the Employer prior to the
beginning of the calendar year (or such earlier date established
by the Employer and announced to the Eligible Employee) in which
deferral of Compensation is intended to commence.
The Participant may terminate his or her Enrollment
Agreement and Deferred Compensation Agreement at any time and be
restored to full Compensation. The Participant may change his or
her Deferral Amount by completing a new Enrollment Agreement, and
such new agreement shall become effective as of the beginning of
the next calendar year. If an Eligible Employee who previously
had elected to defer all or a part of his or her Compensation
under the terms of the Plan and then subsequently terminated that
election wishes in the future to once again elect to defer
Compensation under the terms of the Plan, such Eligible Employee
must complete and sign a new Enrollment Agreement and Deferred
Compensation Agreement and submit both agreements to the
designated representative of the Employer prior to the beginning
of the calendar year (or such earlier date established by the
Employer and announced to the Eligible Employee) in which such
election first becomes effective, and such election shall become
effective at the beginning of that calendar year.
3.2 Bonus Deferrals. In addition to the ability to defer
all or a part of his or her Compensation as outlined in the
previous section, each Eligible Employee who has
begin page 7
been notified of his or her eligibility to participate in the
Plan may elect to defer all or a part of each annual cash bonus
which such Eligible Employee becomes entitled to receive after
the time of notification of eligibility to participate in the
Plan. An Eligible Employee's election to defer all or part of an
annual cash bonus shall be made by completing and signing both an
Enrollment Agreement and a Deferred Compensation Agreement and
returning both agreements to the designated representative of the
Employer prior to the time established by the Employer and
announced to the Eligible Employee, and in any event prior to the
time that the bonus becomes payable by the Employer.
3.3 Any deferrals of Compensation or bonuses made by an
Eligible Employee under the Plan shall be held as an asset of the
Employer, and the Employer shall deposit the amounts deferred
into the Trust.
3.4 The Employer has the power to establish rules and
from time to time to modify or change such rules governing the
manner and method by which deferrals of Compensation or bonuses
may be changed or discontinued temporarily or permanently and any
minimum or maximum amounts of deferral of Compensation and
bonuses.
3.5 A Participant's Enrollment Agreement and Deferred
Compensation Agreement shall remain in effect until modified or
terminated as herein permitted or until the Participant's
Termination of Employment.
3.6 All deferrals of Compensation or bonuses shall be
authorized by the Participant in writing, made by payroll
deduction, deducted from the Participant's Compensation or bonus
(as the case may be) without reduction for any taxes or
withholding (except to the extent required by law) and paid over
to the Plan and Trust by the Employer.
3.7 The Employer shall make a Matching Contribution to
the Plan and Trust for the benefit of a Participant in an amount
determined by the terms of such Participant's Deferred
Compensation Agreement. The terms under which the Employer shall
make a Matching Contribution for the benefit of a Participant as
set forth in such Participant's Deferred Compensation Agreement
are subject to the Employer's retained authority (a) either to
change the formula by which Matching Contributions are determined
in any manner or to stop Matching Contributions entirely
subsequent to notifying the Participant and (b) to terminate the
Plan at any time on a prospective basis. The Employer shall have
this authority notwithstanding any other provision in the Plan or
a Participant's Deferred Compensation Agreement to the contrary.
3.8 The Employer may deposit additional amounts in the
Trust in the sole discretion of the Employer on behalf of a
Participant or group of Participants as determined by the
Employer in its sole discretion and on such terms as shall be
agreed to by the Employer and such affected Participant or group
of Participants.
3.9 All deposits to the Trust made under the Plan on
behalf of a Participant shall be credited to an account
established in the name of such Participant (the
begin page 8
"Account"). The Account of a Participant is a bookkeeping record
of all amounts deposited in the Trust on behalf of such
Participant, and any earnings thereon, for purposes of
determining the Participant's interest in the Trust.
ARTICLE 4.
WITHDRAWALS DURING EMPLOYMENT
4.1 A Participant may make a Hardship Withdrawal, as
defined in Article 2, from the Plan upon the terms set forth in
the Participant's Deferred Compensation Agreement.
4.2 A Participant may elect to receive a distribution of
all or part of the Participant's Account under the Plan in a form
approved by the Plan Administrator if such election is made prior
to or simultaneous with Participant's filing of his or her
initial Enrollment Agreement with the designated representative
of the Employer. The terms of such a distribution shall be
governed by the provisions of the Participant's Deferred
Compensation Agreement in effect at the time of such election.
4.3 A Participant may elect to receive a distribution of
all or part of the Participant's Account under the Plan in a form
approved by the Plan Administrator if such election is made and
submitted to the Plan Administrator at least two years prior to
the date of such distribution, and the Participant remains
employed by Ross or an affiliate of Ross during the entire period
from the date such election is received by the Plan Administrator
until the date the Participant receives such distribution. The
terms of such a distribution shall be governed by the provisions
of the Participant's Deferred Compensation Agreement in effect at
the time of such election. As a condition of receiving such a
distribution, the Participant may not submit a Deferred
Compensation Agreement and/or Enrollment Agreement to elect a
deferral of Compensation or bonuses during the period beginning
when a distribution permitted under this Article 4.3 is first
received and ending at the beginning of the fifth Plan Year
following the Plan Year in which such distribution is received.
Furthermore, the Participant may not elect to defer any
compensation paid by Ross or an affiliate of Ross under the terms
of any other non-qualified deferred compensation plan sponsored
by Ross or an affiliate of Ross for five years after the time
that Participant receives a distribution permitted under this
Article 4.3.
4.4 A Participant may elect to receive a distribution of
all or part of the Participant's Account under the Plan at any
time upon prior written notice to the Plan Administrator;
provided, however, that ten percent (10%) of the amount of the
withdrawal requested shall be permanently forfeited to Ross and
Participant shall have no further right to that amount. The
terms of such a distribution shall be governed by the provision
of the Participant's Deferred Compensation Agreement in effect at
the time of such election.
begin page 9
ARTICLE 5.
PLAN INVESTMENTS
5.1 All contributions will be invested in one or more
investment alternatives determined by the Plan Administrator in
the Plan Administrator's sole discretion. Each Participant shall
have the authority to direct the investment of all amounts
credited to his or her Participant's Account among the investment
alternatives selected by the Plan Administrator, except in the
event of the Employer's financial insolvency as determined under
the standards set forth in the Trust Agreement. The Plan
Administrator may change, discontinue, or add to the investment
alternatives made available under the Plan at any time as
determined by the Plan Administrator in the Plan Administrator's
sole discretion; provided, however, that prior notice is provided
to all Participants.
5.2 All amounts under the Plan, including all investments
purchased with such amounts and all income attributable thereto,
shall remain (until made available to the Participant or
Beneficiary) the property of the Employer as provided under the
Trust Agreement and shall be subject to the claims of the
Employer's general creditors in the event of the Employer's
financial insolvency. No Participant or Beneficiary shall have
any secured or beneficial interest in any property, rights or
investments held by the Employer in connection with the Plan.
ARTICLE 6.
BENEFICIARY
6.1 The Participant's Enrollment Agreement shall
designate the Beneficiary who is to receive a distribution of the
value of a Participant's Account in the event of such
Participant's death. If the Participant has not properly
designated a Beneficiary, or if for any reason such designation
shall not be legally effective, or if said designated Beneficiary
shall predecease the Participant, then the Participant's estate
shall be treated as the Beneficiary. A Participant may change
his or her Beneficiary designation at any time by amending the
Participant's Enrollment Agreement.
ARTICLE 7.
VESTING
The value of all Participants' Accounts shall be fully
vested at all times; provided, however, that all amounts credited
to those Accounts shall remain available to satisfy the claims of
the Employer's creditors in the event of the Employer's financial
insolvency as defined in the Trust Agreement.
begin page 10
ARTICLE 8.
BENEFITS
8.1 The Participant shall elect the payment option
described in Article 8.3 below under which a distribution of
benefits will be made following his or her Termination of
Employment or upon the occurrence of an event for which a
withdrawal during employment upon a two-year advance notice
period or prior to the commencement of participation in the Plan
is permitted by the Plan and such Participant's Deferred
Compensation Agreement. Payment of benefits will begin as soon
as administratively reasonable after the date on which the Plan
Administrator is notified of either the Participant's Termination
of Employment or those certain events specified above for which a
withdrawal during employment is allowed.
8.2 Any benefits paid upon the death of a Participant
must be paid to the Beneficiary designated by such Participant in
the Enrollment Agreement. Such death benefits shall be paid in
the form of payment previously elected by such Participant in the
Enrollment Agreement filed in accordance with the requirements of
the Plan; provided, however, that the Plan Administrator shall
retain the sole discretion to make payment to a Beneficiary in
the form of a single, lump sum distribution.
8.3 As elected by the Participant in his or her
Enrollment Agreement, and subject to Article 8.4 below,
distributions may be made under one or more of the following
payment options:
(a) a single, lump sum distribution; or
(b) installment payments in such amount and
frequency as determined by the Participant
with the approval of the Plan Administrator
prior to the time such payments begin; or
(c) annuity payments in a form determined by
the Participant with the approval of the Plan
Administrator prior to the time such payments
begin.
8.4 Notwithstanding anything else in this Article 8,
Participant's initial election of the form in which benefits
provided under the Plan may be paid shall be made as part of the
first Enrollment Agreement which the Participant files with the
Plan Administrator, and any change to such initial Enrollment
Agreement must be made and submitted to the Plan Administrator in
the Plan Year prior to the Plan Year in which such change in the
form of payment of benefits under the Plan may first become
effective.
begin page 11
ARTICLE 9.
ADMINISTRATION
9.1 Administrator. The Plan Administrator shall be a
committee which has the authority to control and manage the
operation and administration of the Plan. The Plan Administrator
may also be referred to as the Plan Committee. Administrative
concerns of the Plan include, but are not limited to, the
enrollment of Eligible Employees as Participants, the maintenance
of all records, the direction of the Trustee to distribute
benefits to Participants and their Beneficiaries, and the
establishment of rules and procedures for the operation of the
Plan Committee. The initial number of members of the Plan
Committee shall be three (3), until such number is changed by the
approval of a majority of the Plan Committee. A member of the
Plan Committee must be an employee of the Employer and shall
continue to serve until such member resigns, is removed, or
terminates employment with the Employer for any reason. The
approval of at least two-thirds of the members of the Plan
Committee shall be required to remove a member of the Plan
Committee. A majority of the remaining members of the Plan
Committee may fill one or more vacancies on the Plan Committee.
The Plan Committee's authority under this Article 9.1 shall at
all times be subject to the ability of the Board to remove any or
all of the members of the Plan Committee for any reason, change
the number of members of the Plan Committee, fill vacancies on
such committee, and establish rules and procedures for such
committee.
9.2 Any decision or action of the Plan Administrator with
respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and
the rules and regulations promulgated thereunder, a Participant's
Deferred Compensation Agreement, or a Participant's Enrollment
Agreement shall be final and conclusive and binding upon all
persons having any interest in the Plan.
ARTICLE 10.
MISCELLANEOUS
10.1 Amendment of Plan. The Employer reserves the right
to amend any provisions of the Plan at any time upon an action by
at least two-thirds of the Plan Committee to the extent that it
may deem advisable without the consent of the Participant or any
Beneficiary; provided, however, that no such amendment shall
impair the rights of any Participant or Beneficiary with respect
to either any Compensation or bonuses deferred before such
amendment or any earnings on such deferred amounts credited to a
Participant's Account before such amendment.
10.2 Termination of Plan. The Employer reserves the right
to terminate the Plan at any time upon an action by the Board of
Directors of the Employer or the approval of at least two-thirds
of the Plan Committee. Upon termination of the Plan, all
Deferred Compensation Agreements shall terminate immediately and
the Participant's
begin page 12
full Compensation on a non-deferred basis will be thereupon
restored. Distribution of any benefits to a Participant shall
generally commence only upon the occurrence of the Termination of
Employment of a Participant or an event for which a withdrawal
during employment is permitted by the Plan and such Participant's
Deferred Compensation Agreement; provided, however, that the Plan
Administrator shall retain the sole discretion to make payment to
a Participant in the form of a single, lump sum distribution.
10.3 Plan Administrator To Establish Rules. The Plan
Administrator may at any time make rules as it determines
necessary regarding the administration of the Plan which are not
inconsistent with the Plan.
10.4 The Plan Administrator may, from time to time, hire
outside consultants, accountants, actuaries, legal counsel, or
recordkeepers to perform such tasks as the Plan Administrator may
from time to time determine.
10.5 In the event that any Participants are found to be
ineligible, that is, not members of a select group of management
or highly compensated employees eligible to participate in a Top
Hat Plan, according to a determination made by the United States
Department of Labor, the Plan Administrator will take whatever
steps it deems necessary, in its sole discretion, to equitably
protect the interests of the affected Participants.
10.6 No benefits under the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment or garnishment. The provisions
of the Plan shall be binding upon and inure to the benefit of the
Employer and Participants and their respective successors, heirs,
personal representatives, executors, administrators, and
legatees.
Notwithstanding any other provision in the Plan or a
Participant's Deferred Compensation Agreement to the contrary,
any amount credited to a Participant's Account shall be paid from
the Trust only to the extent that the Employer is not financially
insolvent at the time of such payment. Whether or not the
Employer is financially insolvent shall be determined by the
Trustee in the Trustee's sole discretion based upon the standard
for financial insolvency set forth in the Trust Agreement. Any
benefits under the Plan represent an unfunded, unsecured promise
by the Employer to pay these benefits to the Participants when
due. A Participant has no greater right to any assets in the
Trust than the general creditors of the Employer in the event
that the Employer shall become financially insolvent. Trust
assets can be used to pay only benefits under the Plan or the
claims of the Employer's general creditors or the expenses of
administering the Plan and Trust to the extent permitted under
the terms of the Trust Agreement.
10.7 The Plan, the Trust Agreement, a Participant's
Deferred Compensation Agreement, and the Participant's Enrollment
Agreement, and any subsequently adopted amendment to any of these
documents, shall constitute the total agreement or contract
between the Employer and such Participant regarding the Plan. No
oral statement
begin page 13
regarding the Plan may be relied upon by the Participant. If
there are any conflicts between the terms of the Plan and the
Trust Agreement, and a Participant's Enrollment Agreement or
Deferred Compensation Agreement, the terms of the Plan and the
Trust Agreement shall control.
10.8 The terms and conditions of the Plan shall not be
deemed to constitute a contract of employment between the
Employer and the Participant. Such employment is hereby
acknowledged to be an "at will" employment relationship that can
be terminated at any time for any reason, with or without cause,
unless expressly provided in a written employment agreement or
expressly provided by law. Nothing in the Plan shall be deemed
to give a Participant the right to be retained in the service of
the Employer, or to interfere with the right of the Employer to
discipline or discharge the Participant at any time.
10.9 This Plan shall be construed under the laws of the
State of California.
IN WITNESS WHEREOF, the Plan is hereby adopted by a duly
authorized officer of Ross Stores, Inc. on this 23rd day of
December, 1993.
ROSS STORES, INC.
By: /S/ STEPHEN F. JOYCE
Stephen F. Joyce,
Senior Vice President of Human
Resources
begin page 14
TRUST AGREEMENT FOR
THE ROSS STORES, INC.
NON-QUALIFIED DEFERRED COMPENSATION PLAN
begin page 15
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS 1
ARTICLE 2 ESTABLISHMENT AND ACCEPTANCE OF TRUST 1
ARTICLE 3 INVESTMENT AND ADMINISTRATION OF THE TRUST FUND 2
ARTICLE 4 INVESTMENT MANAGER 6
ARTICLE 5 COMPENSATION, EXPENSES AND TAXES 7
ARTICLE 6 ACCOUNTING AND VALUATION 8
ARTICLE 7 TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS
WHEN EMPLOYER INSOLVENT 9
ARTICLE 8 REMOVAL, RESIGNATION, AND APPOINTMENT OF A
SUCCESSOR TRUSTEE 10
ARTICLE 9 AMENDMENT AND TERMINATION 10
ARTICLE 10 PROTECTION OF TRUSTEE 12
ARTICLE 11 MISCELLANEOUS 13
begin page 16
TRUST AGREEMENT
THIS TRUST AGREEMENT is entered into effective as of the
23rd day of December, 1993, by and between Ross Stores, Inc. (the
"Employer"), and John M. Vuko (the "Trustee").
ARTICLE 1
DEFINITIONS
1.1 "Administrator" shall mean the person designated in
the Plan by the Employer to manage and control the operation and
administration of the Plan.
1.2 "Code" shall mean the Internal Revenue Code of 1986,
as amended.
1.3 "Plan" shall mean the Ross Stores, Inc. Non-
Qualified Deferred Compensation Plan.
1.4 "Trust" or "Trust Fund" shall mean all of the assets
held by the Trustee under the Plan and this Trust Agreement.
1.5 All defined terms for which a definition is not set
forth in this Trust Agreement shall have the definition set forth
in the Plan.
ARTICLE 2
ESTABLISHMENT AND ACCEPTANCE OF TRUST
2.1 The Employer has duly adopted the Plan for the
benefit of such of its employees as are eligible thereunder and
such of their beneficiaries as may therein be described. A copy
of the Plan is attached hereto and made a part hereof. The Plan
contemplates that money and other property shall be transferred
in trust to the Trustee to be held and administered by the
Trustee for purposes of the Plan.
2.2 The Trustee shall receive from the Employer its
contributions in cash or other property made under the Plan. All
contributions so received, together with the income and earnings
therefrom and any increments thereto, shall be held, managed, and
administered in trust pursuant to the terms of this Trust
Agreement, to provide benefits under the Plan according to its
terms.
2.3 The Trustee hereby accepts the trust created
hereunder and agrees to hold and administer the Trust Fund and to
perform its duties pursuant to this Trust Agreement. In no
event, however, shall the Trustee have any duty to collect or
enforce payment of any contributions to the Trust Fund or any
duty to compute any amount to be transferred or paid to the
Trustee by the Employer.
begin page 17
2.4 The Plan shall be administered by the Administrator,
and the Trustee shall not be responsible in any respect for the
administration of the Plan, except as provided herein. It is
intended to state expressly in this Trust Agreement the powers,
rights, duties and obligations of the Trustee. No implied
covenants shall be read into this Trust Agreement against the
Trustee.
2.5 This Trust Agreement is made pursuant to the
provisions of the Plan providing for the investment and
administration of contributions under the Plan. It is the
intention of the Employer that this Trust Agreement shall
constitute part of the Plan and shall be a "grantor trust," of
which the Employer is the grantor, and therefore the corpus and
income of the Trust shall be treated as assets and income of the
Employer for federal and state income tax purposes.
2.6 The Employer intends that the assets of the Trust
shall be subject to the claims of the general creditors of the
Employer in the event of the Employer's financial insolvency.
ARTICLE 3
INVESTMENT AND ADMINISTRATION OF THE TRUST FUND
3.1 Subject to section 3.4 and Article 4, the Trustee is
hereby granted full power and authority to invest and reinvest
the principal and income of the Trust Fund, without distinction
between principal and income, in such investments as the Trustee,
in its sole discretion, may deem appropriate, including (without
limiting the generality of the foregoing) improved and unimproved
real property, whether or not income producing, common and
preferred stocks, trust and participation certificates, bonds,
debentures, mortgages, deeds of trust, insurance and annuity
contracts, covered call options, notes secured by real or
personal property, leases, ground leases, real or personal
property interests owned, developed or managed by joint ventures
or limited partnerships, obligations of governmental bodies, both
domestic and foreign, notes, commercial paper, and other
evidences of indebtedness, secured or unsecured, including
variable amount notes, convertible securities of all types and
kinds, mutual fund shares, and interest-bearing savings or
deposit accounts with any federally insured bank (including the
Trustee) or savings and loan association.
3.2 Notwithstanding any other provision of this Trust
Agreement (except section 3.4 and Article 4), the Trustee may
invest and reinvest the assets of this Trust in any of the
following forms of collective investment:
(a) Any trust established and maintained as a
medium for the collective investment of funds, including any such
collective trusts established and maintained or managed by the
Trustee or another fiduciary (or its affiliate), with respect to
which this Trust is an eligible participating trust;
(b) Any mutual fund which is registered as an
investment company under the Investment Company Act of 1940,
including any such mutual fund
begin page 18
established and maintained or managed by a fiduciary (or its
affiliate), with respect to which this Trust is an eligible
investor;
(c) Any insurance policy or contract providing
for allocation of amounts received by the insurance company
thereunder to one or more of its separate accounts maintained for
the collective investment of funds; and
(d) Any investment companies or trusts, including
any investment company or trust which has an investment advisory
or other agreement with the Trustee or another fiduciary (or its
affiliate), with respect to which this Trust is an eligible
investor.
3.3 Subject to section 3.4 and Article 4, the Trustee
shall have the following additional powers and authority in the
administration of the Trust Fund:
(a) To hold and retain any and all property
coming into its possession hereunder.
(b) To vote, and to give proxies to vote, any
securities having voting rights.
(c) To pay any assessment levied upon stock and
to exercise any right or option of subscription or otherwise
which may at any time attach, belong or be given to the holders
of any stocks, bonds, securities or other instruments in the
nature thereof forming part of the Trust Fund, and to join in any
plan of lease, mortgage, consolidation or reorganization of the
property or assets thereof, including the deposit of bonds,
securities and stock with any bondholders, stockholders, or
protective committee, and to take and hold any securities issued
under such plan and to pay any assessments thereunder.
(d) To enforce any mortgage or deed of trust or
pledge held hereunder and to purchase at any sale thereunder any
property subject thereto.
(e) To cause any securities or other property
held as part of the Trust Fund to be registered in its own name
or in the name of one or more of its nominees and to hold any
investments in bearer form, but the books and records of the
Trustee shall at all times show that all such investments are
part of the Trust Fund.
(f) To keep such portion of the Trust Fund in
cash or cash balances as the Trustee may from time to time deem
to be in the best interests of the Trust without liability for
interest thereon.
(g) To deposit any moneys at any time held by it
in any savings bank or in the savings department of any bank,
including a bank which is then serving as the Trustee.
begin page 19
(h) To borrow money and to sell at public or
private sale (for cash or on terms), improve, develop, lease
(without restriction or limitations as to terms), rent, mortgage,
convey in trust, pledge, hypothecate, lease or contract with
reference to oil, gas or other minerals or natural resources and
mineral rights and mineral royalties which may be part of the
Trust Fund, transfer, exchange, subdivide, partition, compromise,
grant options at such times, in such manner and upon such terms
and conditions as the Trustee shall deem advisable and to
otherwise deal with the whole or any part of the Trust Fund upon
such terms and conditions as the Trustee in its discretion may
deem advisable.
(i) To provide itself with public liability
insurance in customary forms at Trustee's expense, or, at the
option of the Employer, at the expense of the Employer.
(j) To employ suitable accountants, actuaries,
advisors, consultants, attorneys, and other agents and to pay for
reasonable expenses and compensation of such agents.
In amplification and not in limitation of the Trustee's
powers under this Trust Agreement, the Trustee shall have the
authority to appoint an attorney-in-fact or other agent to
discharge some or all of the Trustee's rights and
responsibilities under this Trust Agreement. Such authority
shall include, but not be limited to, the following:
(i) To receive contributions from the
Employer.
(ii) To hold, manage and administer
contributions from the Employer, together with the income and
earnings therefrom and any increments thereto, according to the
terms of the Trust Agreement.
(iii) To make payments out of the Trust
Fund to such persons, in such manner, in such amounts and for
such purposes as may be specified in written directions provided
by the Administrator.
(iv) To carry out the investment directions
of a Participant as set forth in section 3.4 or an investment
manager in Article 4.
(v) To cause accurate and detailed accounts
of all investments, receipts, disbursements and other
transactions in the Trust to be maintained and to cause periodic
reports to the Employer to be prepared.
(vi) To pay any taxes which are lawfully
levied or assessed upon or become payable in respect of the
Trust, to withhold appropriate taxes from any payment from the
Trust Fund, and to prepare and file appropriate reports and forms
with the appropriate regulatory authorities and other persons
with respect to such taxes.
(k) To pay out of the Trust Fund all estate,
inheritance, income or other taxes of any kind levied or assessed
against the Trust Fund, to the extent such
begin page 20
taxes are not paid from other sources. The Trustee shall not be
personally liable for such taxes. Moreover, the Trustee may
require, prior to making any payment or distribution from this
Trust under this instrument, such releases or other documents
from any lawful taxing authority as it shall consider advisable.
(l) To do all such acts, take all such
proceedings, and exercise all such rights and privileges,
although not specifically mentioned herein, as the Trustee may
deem necessary to administer the Trust Fund and to carry out the
purposes of this Trust.
3.4 If the Employer has elected to permit a Participant
to direct the investment of amounts allocated to his or her
Participant's Account among the investment alternatives selected
by the Administrator, notwithstanding any other provision of this
Trust Agreement, each Participant shall direct the Trustee as to
the investment of the amounts allocated to his or her
Participant's Account, and the Trustee shall retain and
administer such Participant-directed investments without any duty
to review or make recommendations with respect to such
investments. In no event shall the Trustee borrow any money at
the direction of a Participant (whether or not made indirectly
through the Administrator). The Trustee shall have no right,
duty, or power to dispose of any Participant-directed investment
until so instructed by the Participant. If responsibility for
the management and control of some or all of the Trust Fund has
been entrusted to an investment manager unrelated to the Trustee,
then a Participant shall direct the investment manager as to the
investment of those funds credited to his or her Participant's
Account over which such investment manager has investment
management and control, and the Trustee shall have no duty to
review or make recommendations with respect to such investments.
3.5 The Trustee has no obligation to determine the
existence of any conversion, redemption, exchange, subscription
or other right relating to any securities the Trustee is directed
to purchase for the Trust Fund of which notice was given prior to
the purchase of such securities. Nor does the Trustee have any
obligation to exercise any such right unless it is informed of
the existence of the right and is instructed to exercise such
right, in writing, by the investment manager, or Participant
making or directing the investment in such securities, within a
reasonable time prior to the expiration of such right.
3.6 If the Trustee is directed to purchase, retain, or
sell securities issued by any foreign government or corporation,
the investment manager, or Participant directing the investment
in such securities (whether directly or indirectly) is
responsible for advising the Trustee in writing regarding any
laws or regulations of any foreign countries or any United States
territories or possession that may apply to such securities
including, without limitation, laws and regulations affecting
dividends or interest on such securities.
3.7 The Trustee shall from time to time, on the written
directions of the Administrator, make payments out of the Trust
Fund to such persons, in such manner, in such amounts, and for
such purposes as may be specified by the Administrator; provided,
however, that at that time the Employer is not financially
insolvent as determined according to the standards set forth in
Article 7. The Trustee shall not be responsible in
begin page 21
any way for the purpose or application of such payments, for
inquiring as to whether or not such payments are in accordance
with the terms of the Plan, or for the adequacy of the Trust Fund
to meet and discharge any and all liabilities under the Plan.
3.8 When there is more than one Trustee appointed under
this Trust Agreement they shall jointly control and manage the
Trust Fund, except, however, the Trustees may agree amongst
themselves and may authorize and delegate any one or more of the
Trustees, either individually, or in concert, to exercise the
powers provided for in this Trust Agreement.
ARTICLE 4
INVESTMENT MANAGER
4.1 Whenever one or more investment managers are
appointed by the Administrator, each investment manager shall
have the power to manage, including the power to acquire or
dispose of, that portion of the Trust Fund which is assigned to
it as provided herein. The Administrator shall notify the
Trustee of the identity of the investment managers so appointed.
The Trustee shall be entitled to rely upon the fact that an
investment manager is at all times authorized to invest and
reinvest assets of this Trust until the Trustee is notified to
the contrary by the Administrator.
4.2 Upon the appointment of one or more investment
managers, the Trustee shall segregate any portion of the Trust
Fund assigned to an investment manager into one or more separate
accounts to be known as "Investment Manager Accounts." An
investment manager shall be appointed in writing for each such
account and written notice of said appointment shall be given
contemporaneously to the Trustee, specifying those assets of the
Trust Fund to be managed by the investment manager and
instructing the Trustee as to what to do with respect thereto.
The selection of an investment manager shall be in the sole and
absolute discretion of the Administrator. The Trustee shall
follow the directions of the investment manager in exercising the
powers granted to the Trustee in Article 3.1, 3.2 and subsections
(a)-(h) and subsection (j) of Article 3.3 of this Trust
Agreement.
4.3 All directions given by an investment manager to the
Trustee shall be in writing, provided that the Trustee may in its
sole discretion accept oral directions for the purchase or sale
of securities subject to confirmation in writing. The Trustee
shall be under no duty to question, or make inquiries as to, any
act or direction of any investment manager taken as provided
herein, or any failure to give directions, or to review the
securities held in any Investment Manager Account, or to make any
suggestions to the investment manager with respect to investment
and reinvestment of, or disposing investments in, any Investment
Manager Account. The Trustee shall not be liable for any acts or
omissions of any investment manager, or be under any obligation
to invest or otherwise manage any assets of the Trust Fund which
is subject to the management of an investment manager as herein
provided. Accordingly, the Trustee shall be under no liability
for any loss of any kind which may result by reason of any act or
failure to act, provided such act or failure to act is in
accordance with any directions of any investment
begin page 22
manager or is by reason of inaction in the absence of written
direction from an investment manager.
4.4 No investment manager and no Trustee having power
and authority to invest and reinvest any portion of the Trust
Fund shall have any obligation to invest or otherwise manage any
asset of the Trust Fund which is subject to the management of
another investment manager or Trustee.
ARTICLE 5
COMPENSATION, EXPENSES AND TAXES
5.1 The Trustee shall be paid such reasonable
compensation and reimbursement for expenses out of the Trust
Fund, or at the election of the Employer, by the Employer, as
shall from time to time be agreed to in writing between the
Employer and the Trustee. The Trustee shall be entitled to
withdraw its compensation and expense reimbursement from the
Trust Fund after sixty (60) days after the Trustee sends an
appropriate billing unless such amount is paid by the Employer
prior to that time. However, no Trustee who already receives
full-time pay from the Employer or an affiliate of the Employer
shall receive any compensation or expense reimbursement from the
Trust.
5.2 All taxes of any and all kinds whatsoever that may
be levied or assessed under existing or future laws upon, or in
respect of, the Trust Fund or the income thereof shall be paid by
the Employer. It is the intention of the Employer to have the
corpus and income of the Trust established hereunder treated as
assets and income of the Employer to be used to satisfy the
Employer's legal liability under the Plan in respect of all of
the Participants and their beneficiaries, and the Employer agrees
that all income, deductions, and credits of the Trust belong to
the Employer as owner for income tax purposes and will be
included on the Employer's income tax returns.
The Employer shall from time to time pay taxes (references
in this Agreement to the payment of taxes shall include interest
and applicable penalties) of any and all kinds whatsoever which
at any time are lawfully levied or assessed upon or become
payable in respect of the Trust. To the extent that any taxes
levied or assessed upon the Trust are not paid by the Employer or
contested by the Employer pursuant to the last sentence of this
paragraph, the Trustee shall pay such taxes out of the Trust, and
the Employer shall, upon demand by the Trustee, deposit into the
Trust an amount equal to the amount paid from the Trust to
satisfy such tax liability. If requested by the Employer, the
Trustee shall at the Employer's expense, contest the validity of
such taxes in any manner deemed appropriate by the Employer or
its counsel, but only if it has received an indemnity bond or
other security satisfactory to it to pay any expenses of such
contest. Alternatively, the Employer may itself contest the
validity of any such taxes, but any such contest shall not affect
the Employer's obligation to reimburse the Trust for taxes paid
from the Trust.
In making payments from the Trust, the Trustee shall be
liable for federal and state income tax withholding, and shall
withhold the appropriate amount of tax, if any, as
begin page 23
provided by applicable law and regulation, from any payment made
unless the Employer does not provide the Trustee with the
necessary information as set forth in regulations or the Employer
instructs the Trustee not to withhold, in which case the Employer
shall assume all relevant liability.
Any taxes unpaid at the termination of the Trust shall
constitute a charge against the Trust Fund.
5.3 All costs and expenses relating to the
administration or investment of the Plan's assets, to the extent
not covered by section 5.1 or section 5.2, shall be paid out of
the Trust Fund, or at the election of the Employer, by the
Employer.
ARTICLE 6
ACCOUNTING AND VALUATION
6.1 The Trustee shall keep accurate and detailed
accounts of all investments, receipts, disbursements and other
transactions hereunder. All accounts, books and records relating
to such transactions shall be open to inspection and audit at
reasonable times by any person designated by the Administrator.
The books and records of the Trust shall be kept upon the basis
of the Plan's Plan Year.
6.2 Within sixty (60) days following the end of each
calendar quarter of the Trust and within sixty (60) days after
the removal or resignation of the Trustee as provided in
Article 8 hereof, the Trustee shall file with the Administrator a
written accounting setting forth all investments, receipts,
disbursements and other transactions executed by the Trustee
during such calendar quarter or during the period from the
commencement of the last calendar quarter to the date of such
removal or resignation, and setting forth the fair market value
of the Trust assets as of the close of said calendar quarter or
the effective date of such removal or resignation, as the case
may be, and the Trust Fund shall be valued as of such date.
6.3 Valuation of the Trust Fund shall be made at more
frequent intervals than provided in Section 6.2 if the
Administrator shall so direct. Subject to Section 5.1, the
Trustee shall be entitled to receive additional and adequate
compensation for any additional valuation so directed.
6.4 Notwithstanding any other provision of this
Article 6, if the Trustee shall determine that the Trust Fund
consists in whole or in part of property not traded freely on a
recognized market, or that information necessary to ascertain the
fair market value thereof is not readily available to the
Trustee, the Trustee shall request the Administrator to instruct
the Trustee as to the value of such property for all purposes
under the Plan and this Trust Agreement, and the Administrator
shall comply with such request. The value placed upon such
property by the Administrator in its instructions to the Trustee
shall be conclusive and binding upon the Employer, the
Administrator, Participants and their beneficiaries and all other
persons with an interest herein. If the Administrator shall fail
or refuse to instruct the Trustee as to the value of such
property
begin page 24
within a reasonable time after receipt of the Trustee's request
so to do, the Trustee shall engage a competent appraiser to fix
the fair market value of such property for all purposes
hereunder. The determination of any such property shall be
conclusive upon all parties interested therein and the Trustee
shall have no liability in connection therewith. The reasonable
fees and expenses incurred for any such appraisal shall be paid
by the Trustee out of the Trust Fund or, at the option of the
Employer, by the Employer. Any reasonable fees or expenses
unpaid at the termination of the Trust shall constitute a charge
against the Trust Fund.
ARTICLE 7
TRUSTEE'S RESPONSIBILITY REGARDING
PAYMENTS WHEN EMPLOYER INSOLVENT
7.1 The Employer shall be considered "Insolvent" and an
"Insolvency" shall be deemed to exist for purposes of this Trust
under any of the following circumstances:
(a) The Employer is unable to pay its debts as
they mature.
(b) A receiver or trustee is appointed to take
possession of all or substantially all of the assets of the
Employer.
(c) There is a general assignment by the Employer
for the benefit of creditors.
(d) An action or proceeding is commenced by or
against the Employer under any insolvency or bankruptcy act, or
any other statute or regulation having as its purpose the
protection of creditors, and the action or proceeding is not
discharged within 120 days after the date of commencement.
7.2 Notwithstanding any provision in this Trust to the
contrary, if at any time while the Trust is still in existence
the Employer becomes Insolvent, the Trustee shall upon written
notice thereof suspend the payment of all amounts from the Trust
and shall thereafter (i) not permit any further elective salary
deferrals by the Participants until so instructed by the
Employer, (ii) discontinue all contributions by the Employer to
the Trust on behalf of the Participants; and (iii) not carry out
any investment instructions from any Participant and shall
instead follow the investment instructions of the Administrator
or of a court order. The terms of a court order shall take
precedence over any directions by any other person which are
inconsistent with such court order. The Trustee shall hold the
Trust in suspense for the benefit of the Employer's creditors
until it receives a court order directing the disposition of the
Trust. The Trustee, however, may deduct or continue to deduct
its fees and expenses, including fees of any consultants,
actuaries, accountants, legal counsel or recordkeepers retained
by the Employer or Trustee to provide services to the Trust.
7.3 By its approval and execution of this Trust, the
Employer represents and agrees that it shall have the fiduciary
duty and responsibility on behalf of the
begin page 25
Employer's creditors to give to the Trustee prompt written notice
by the Employer's Chief Executive Officer or Chief Operating
Officer of the Employer's Insolvency and the Trustee shall be
entitled to rely thereon. Without such notice, the Trustee shall
have no responsibility for determining whether or not the
Employer has become Insolvent, unless the Trustee has actual
knowledge that the Employer has become Insolvent.
If after being Insolvent, the Employer later becomes solvent
without the entry of a court order concerning the disposition of
the Trust Fund, or if any bankruptcy or insolvency proceedings
are dismissed, the Employer shall, by written notice, so inform
the Trustee and the Trustee shall thereupon resume all its duties
and responsibilities under this Trust Agreement without regard to
this Article 7 until and unless the Employer again becomes
Insolvent as such term as defined hereunder.
ARTICLE 8
REMOVAL, RESIGNATION, AND APPOINTMENT
OF A SUCCESSOR TRUSTEE
8.1 The Trustee may be removed by the Administrator at
any time upon sixty (60) days notice in writing to the Trustee,
unless a shorter period is acceptable to the Trustee. The
Trustee may resign at any time upon sixty (60) days notice in
writing to the Administrator, unless a shorter period is
acceptable to the Administrator; provided, however, that upon
receipt of instructions or directions from the Employer or the
Administrator with which the Trustee is unable or unwilling to
comply, the Trustee may resign upon giving written notice to the
Administrator within a reasonable time after receipt of such
instructions or directions, and, notwithstanding any other
provision hereof, in that event the Trustee shall have no
liability to the Employer, the Administrator, or any other person
interested herein for failure to comply with such instructions or
directions.
8.2 Upon such removal or resignation of the Trustee, the
Administrator shall appoint a successor trustee who shall have
the same powers and duties as those conferred upon the Trustee
hereunder. Upon acceptance of such appointment by the successor
trustee, the Trustee shall assign, transfer and pay over to such
successor trustee the funds and properties which then constitute
the Trust Fund and shall be released and discharged from all
further liability with respect to the Trust. The Trustee is
authorized, however, to reserve such sum of money, as to it may
seem advisable, for payment of its fees and expenses hereunder
and any balance of such reserve remaining after the payment of
such fees and expenses shall be paid over to the successor
trustee.
ARTICLE 9
AMENDMENT AND TERMINATION
9.1 This Trust is declared to be irrevocable except in
the event of issuance by the Internal Revenue Service of
unfavorable tax authority binding on the Trust regarding the
treatment of the Trust as a grantor trust. Except as otherwise
provided in
begin page 26
Article 7 and this Article 9, the Employer has no reversion in
the Trust Fund. However, although the Employer has established
the Trust with the bona fide intention and expectation that it
will be able to make contributions to it indefinitely, the
Employer is not and shall not be under any obligation or
liability whatsoever to continue its contributions or to maintain
the Plan for any given length of time. The Employer may in its
sole and absolute discretion discontinue its contributions or
terminate the Trust in whole or in part in accordance with the
provisions of the Plan at any time without any liability
whatsoever for such discontinuance or complete or partial
termination. From and after the date of termination of the Plan
and Trust, and until further distribution of the Trust, the
Trustee shall continue to have all the powers provided under this
Trust Agreement as are necessary and expedient for the orderly
liquidation and distribution of the Trust in accordance with the
provisions of the Plan and/or the instructions of the
Administrator (to the extent not inconsistent with the Plan or
this Trust Agreement).
9.2 In addition, to provide for contingencies which may
require or make advisable the clarification, modification, or
amendment of this Trust Agreement, the Employer reserves the
right to amend this Trust Agreement at any time and from time to
time, in whole or in part, in accordance with the provisions of
the Plan. However, no such amendment shall
(a) cause any part of the Trust Fund to revert to
or be recoverable by the Employer or be used for or diverted to
purposes other than the exclusive benefit of Participants
(including former Participants) and their beneficiaries except in
the event of the Employer's financial insolvency as determined
under the standards set forth in Article 7, and any purported
amendment to this Trust Agreement in violation of this
requirement shall not be enforced by the Trustee; or
(b) increase the duties, powers or liabilities of
the Trustee hereunder without the Trustee's written consent; or
(c) cause the Trust to be other than a "grantor
trust," or have contributions to the Trust by the Employer, or
income and gains of the Trust, constitute a taxable event to the
Trust or to the Participants; or
(d) cause any benefits paid to Participants
(including former Participants) or their beneficiaries from the
Trust to become nondeductible to the Employer in the year of
payment; or
(e) change the nature of the Employer's
obligation to pay benefits under the Plan from an unfunded and
unsecured obligation.
begin page 27
ARTICLE 10
PROTECTION OF TRUSTEE
10.1 In any event, in any matter in which an investment
manager is permitted to exercise any power or authority
hereunder, the Trustee shall be fully protected in relying on the
directions of such investment manager or in refusing to take
action in the absence of receipt of such direction,
notwithstanding any loss to or diminution of the Trust Fund which
may thereby result.
10.2 In any event, in any matter in which a Participant
is permitted or required to direct or approve the exercise by the
Trustee of any power or authority hereunder, the Trustee shall be
fully protected in relying on such direction or approval or in
refusing to take action in the absence of receipt of such
direction or approval, notwithstanding any loss to or diminution
of the Trust Fund which may thereby result.
10.3 The Trustee shall be fully protected in acting upon
any instruction or document believed by it to be genuine and to
be presented or signed by the person or persons duly authorized
so to do, and the Trustee shall be under no duty to make any
investigation or inquiry as to the correctness of such
instruction or document.
10.4 The Trustee may consult with legal counsel of its
choice (who may or may not be counsel for the Employer) upon any
question or matter arising hereunder and shall be fully protected
in acting in good faith upon advice of such counsel,
notwithstanding any power otherwise vested in the Employer or the
Administrator to construe this Trust Agreement or adjudicate
questions arising hereunder.
10.5 It is the intent of the parties to this Trust
Agreement that each party shall be solely responsible for its own
acts or omissions.
10.6 The Employer hereby agrees to indemnify and hold
harmless the Trustee from and against all liabilities, claims,
demands, and costs, including reasonable attorneys' fees and
expenses of legal proceedings, arising as a result of an alleged
breach in the performance of the responsibilities of the Trustee
under this Trust Agreement, unless (a) if the Trustee is an
individual, the Trustee commits a breach of its duties by reason
of its willful misconduct, bad faith or criminal act, or (b) if
the Trustee is not an individual, the Trustee commits a breach of
its duties by reason of its willful misconduct or negligence.
The Employer shall have the obligation to conduct the defense of
such persons in any proceeding to which this Section 10.6
applies. If the Trustee determines that the defense of the
Employer is inadequate, the Trustee shall be entitled to retain
separate legal counsel for his or her defense and the Employer
shall be obligated to pay for all reasonable legal fees and other
court costs incurred in the course of such defense unless a court
of competent jurisdiction finds such person has acted in bad
faith or engaged in willful misconduct or criminal acts.
Notwithstanding the foregoing, the Trustee shall have no right to
indemnification if the Trustee is covered as a named insured at
the Employer's expense under a fiduciary liability insurance
policy for the period in which the claim of breach by the Trustee
is made. The Employer may satisfy
begin page 28
its obligation under this section 10.6, in whole or in part,
through the purchase of insurance, but no insurer shall have any
rights against the Employer arising out of this Section 10.6.
The Trustee shall be entitled to indemnity under this Section
10.6 only from the Employer and shall not be entitled to payment
directly or indirectly from the Trust Fund.
ARTICLE 11
MISCELLANEOUS
11.1 During the term of this Trust Agreement, the
interest of each Participant or his or her beneficiary shall
consist of the right of such Participant to receive such payments
or distributions as the Trustee may, from time to time, be
directed to make by the Administrator as provided herein. Any
rights of a Participant or beneficiary in the Trust Fund shall be
unfunded and unsecured, and such persons shall have the status of
a general creditor with respect to the assets of the Trust Fund
in the event that the Employer is financially insolvent
(determined under the standards set forth in Article 7) at the
time that the Participant or beneficiary becomes entitled to a
distribution under the terms of the Plan.
11.2 Except as hereinafter provided, neither the
Administrator nor the Trustee shall recognize any alienation,
transfer, mortgage, encumbrance, pledge, hypothecation, order or
assignment, by any Participant or beneficiary of all or part of
such Participant's or beneficiary's interest hereunder; and such
interest shall not be subject in any manner to transfer by
operation of law, and shall be exempt from the claims of
creditors or other claimants from all orders, decrees, levies,
garnishments, and/or executions and other legal or equitable
process or proceedings against such Participant or beneficiary to
the fullest extent permitted by law.
11.3 This Trust Agreement and the Trust hereby created
shall be construed, administered, and governed in all respects in
accordance with the laws of the State of California; provided,
however, that if any provision is susceptible of more than one
interpretation, such interpretation shall be given thereto as is
consistent with the Plan being an unfunded plan which is
maintained by the Employer primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and
the Trust being a grantor trust within the meaning of the Code,
or corresponding provisions of subsequent federal revenue laws.
If any provision of this instrument shall be held by a court of
competent jurisdiction to be invalid or unenforceable, the
remaining provisions hereof shall continue to be fully effective.
11.4 Headings in this Trust Agreement are inserted for
convenience of reference only. They constitute no part of the
Trust Agreement.
11.5 This Trust Agreement may be executed in several
counterparts, each of which shall be deemed an original, and said
counterparts, when taken together, shall
begin page 29
constitute but one and the same instrument which may be
sufficiently evidenced by any one counterpart.
11.6 This Trust Agreement shall inure to the benefit of
and be binding upon the parties hereto and their successor and
assigns.
11.7 Reference to a specific law in this Trust Agreement
shall include such law, any valid regulation promulgated
thereunder, any comparable provision of any future legislation
amending, supplementing or superseding such law.
11.8 This Trust shall be held, managed, administered,
maintained at all times as a domestic trust in the United States,
and shall be subject to the laws of the State of California.
11.9 All notices, directions and other communications by
any person pursuant to this Trust Agreement ("Directions") shall
be given or made in writing and shall be deemed effective upon
receipt by the addressee; provided, however, that the
transmission of Directions by photostatic teletransmission with
duplicate or facsimile signatures shall be an authorized method
of communication until the recipient gives notice that the use of
such device is no longer authorized; and provided further, that
the transmission of Directions by telephone shall also be an
authorized method of communication until the recipient gives
notice to the contrary. Any Direction transmitted by telephone
shall be promptly confirmed by a written instrument. The
recipient shall be entitled to act upon and settle any investment
transaction in reliance upon a Direction transmitted by telephone
as duly recorded and transcribed in the normal course. If the
recipient fails to receive a written confirmation of a Direction
transmitted by telephone within five (5) business days following
the date of receipt of the Direction, or if a written
confirmation received conflicts with the oral Direction received
by telephone, the recipient shall promptly notify the person
giving the Direction orally of such fact and request (a) delivery
of such written confirmation forthwith, if it has not been
received or (b) an additional Direction if there is a conflict
between the oral Direction and the written confirmation.
11.10 The masculine gender shall include the feminine and
the singular number shall include the plural unless the context
clearly indicates otherwise.
begin page 30
IN WITNESS WHEREOF, the Employer and the Trustee have
executed and accepted this Trust Agreement effective as of the
date first above written.
ROSS STORES, INC.
By /S/ STEPHEN F. JOYCE
Stephen F. Joyce,
Senior Vice President of
Human Resources
TRUSTEE:
/S/ JOHN M. VUKO
John M. Vuko
ROSS STORES, INC.
INCENTIVE COMPENSATION PLAN
The Incentive Compensation Plan (the "Plan") of Ross Stores,
Inc., a Delaware corporation (the "company"), is authorized
annually by the Compensation Committee of the company's
Board of Directors.
The Plan is based on a total compensation concept and is
designed to allow members of management to share in the
company's profits based on the attainment of pre-
established, corporate profit performance and individual
performance goals.
The Plan is designed so that if adjusted pretax earnings,
prior to payment of Plan incentive awards, are equal to or
exceed the profit performance goal, each participant in the
Plan will be paid an incentive award equal to a
preestablished percent of salary. Exceeding the profit
performance goal results in a larger incentive award for
each participant and failure to achieve the profit
performance goal will eliminate, or substantially reduce,
the incentive award. Additionally, Plan participants other
than the Chief Executive Officer, President, Executive Vice
Presidents and Senior Vice Presidents ("Executive Officers")
may have their incentive awards amount increased or
decreased based on individual, appraised job performance.
PARTICIPANTS
Participants shall be the Officers of the company and those
employees designated as District Managers, Directors,
Buyers, Counselors and other employees designated by the
Compensation Committee.
PLAN DESIGN
Prior to the commencement of each fiscal year, the
Compensation Committee shall establish in writing a profit
performance goal for such fiscal year and a threshold for
incentive award payment set at a percentage of the profit
performance goal, below which no incentive award is payable,
except to those eligible participants, other than Executive
Officers, whose performance is rated as "exceptional" during
the fiscal year. In the event the threshold for incentive
award payment is not achieved, but the company is
profitable, those participants who are not Executive
Officers and who have received an appraisal rating of
"exceptional" will be paid the amount of incentive award
that would otherwise have been payable had 100% of the
profit performance goal been achieved (the individual
performance factor is not applicable in this event).
begin page 2
The incentive award payable upon meeting or exceeding the
threshold level of achievement of the profit performance
goal consists of preestablished percentages of base salary
based on the organizational level of the participant and the
actual profit performance of the company. Prior to the
commencement of each fiscal year, the Compensation Committee
shall establish in writing for each participant
organizational level, a formula setting forth the percentage
of base salary payable as an incentive award determined by
the actual profit performance relative to the profit
performance goal for the fiscal year (the "Incentive Award
Formula"). Additionally, participants who are not Executive
Officers may have their incentive award amount increased or
decreased from the amount otherwise payable, based on their
individual job performance for the year and the nature of
their position. Notwithstanding the individual performance
factor, the incentive award payable is a function of the
percentage of the profit performance goal actually achieved,
which determines the percentage of the incentive award which
would otherwise have been payable at 100% of target.
PROFIT GOALS
Prior to the beginning of each fiscal year, the Management
Committee will submit to the Compensation Committee of the
Board of Directors recommendations for the profit
performance goal and the Incentive Award Formula for the
fiscal year. The profit performance goal and Incentive
Award Formula will then be reviewed, approved and
established in writing by the Compensation Committee as
described above. At the end of the company's fiscal year,
the Compensation Committee will determine whether or not the
company's profit performance goal has been met and will
certify such determination in writing prior to payment of
the incentive awards earned.
The profit performance goal is established to reflect
operating performance. For purposes of the Plan, "profit"
shall mean adjusted pretax earnings, prior to the payment of
the incentive awards, excluding, however, extraordinary
items.
Each participant in the Plan shall be advised of the profit
performance goal for the coming fiscal year and the
Incentive Award Formula that will determine for a
participant at such participant's organizational level the
incentive award that will be payable upon achieving or
exceeding the threshold percentage of the profit performance
goal.
ELIGIBILITY FOR PAYMENT OF INCENTIVE AWARD
Except as otherwise provided below, in order to be eligible
for an incentive award, a participant must be an active,
full-time employee of the company on the last day of the
fiscal year for which the incentive award is earned.
begin page 3
New Employees and Promotions. New employees who become
eligible participants after the beginning of the fiscal year
will receive a prorata incentive award based on length of
employment. An employee who is promoted into a position
eligible for an incentive award (or subject to an Incentive
Award Formula for a higher organizational level) during the
fiscal year will receive an incentive award prorated on the
basis of the starting date in his or her new position. An
employee who is promoted into a position as an Executive
Officer during the fiscal year will be eligible for an
incentive award on a prorata basis and will not be eligible
for an additional individual performance award.
Termination. Voluntary resignation prior to the end of a
fiscal year will serve as a forfeiture of all incentive
awards that the participant would have otherwise received.
In the event of death prior to the last day of the
applicable fiscal year, the company will pay to the estate
of the participant a prorata portion of the incentive award
that the participant would have otherwise received for such
fiscal year.
An eligible participant involuntarily terminated for reasons
other than cause prior to the last day of the applicable
fiscal year, will be entitled to a prorata share of the
incentive award that the participant would otherwise have
received for such fiscal year. If employment is terminated
for cause, including, but not limited to, dishonesty,
violation of company policy or other actions harmful to the
company, the Compensation Committee may at its discretion
declare any incentive award forfeited.
Eligible employees, who terminate for any reason, other than
for cause, after the end of the applicable fiscal year, will
be entitled to full payment of any earned incentive award on
the date fixed for payment.
The prorated portion of an incentive award paid in the event
of death or involuntary termination will be determined on
the basis of the period of employment during the applicable
fiscal year prior to the date of death or termination, as
the case may be. In no event will such prorated portion be
paid unless achievement of the profit performance goal has
been certified in writing by the Compensation Committee.
Disability. If a participant is disabled by an accident or
illness and is disabled long enough to be placed on the
company's long term disability plan, his or her incentive
award for the fiscal year shall be prorated, so that no
incentive award shall be earned during the period the
participant remains on long term disability.
Nothing in the Plan shall confer upon the participant any
right to continue in the employ of the company or interfere
in any way with the right of the company to terminate the
participant's employment at any time. The Incentive
Compensation Plan will not be deemed to constitute a
contract of employment with any participant, nor be deemed
to be consideration for the employment of any Participant.
begin page 4
Payment. Incentive awards shall be paid by check, as soon
as possible, after the fiscal year financial results are
available and achievement of the profit performance goal has
been certified in writing by the Compensation Committee.
To receive payment an eligible participant, whose employment
relationship with the company has terminated, must submit a
written request for such payment to the Senior Vice
President, Human Resources by February 15th of the following
year (e.g., to receive an award for the 1994 fiscal year, a
written request is due February 15, 1995). The notification
must include the participant's current home address and
telephone number.
Non-Transferability. An incentive award shall be payable
only to the participant and may not be transferred in any
manner otherwise than by will or laws of descent and
distribution. An award cannot be alienated by assignment or
by any other means, and shall not be subject to any action
taken by the participant's creditors.
Withholding. All appropriate taxes will be deducted and
withheld from the award payments, as required by foreign,
federal, state and/or local laws.
Any rights accruing to a participant or his or her
beneficiary under the Plan shall be solely those of an
unsecured general creditor of the company. Nothing
contained in the Plan and no action taken pursuant to the
provisions thereof will create or be construed to create a
trust of any kind, or a pledge, or a fiduciary relationship
between the company or the Compensation Committee and the
participant, or his or her beneficiary, or any other person.
Nothing herein will be construed to require the company or
the Compensation Committee to maintain any fund or to
segregate any amount for a participant's benefit.
PLAN AUTHORITY AND ADMINISTRATION
The Plan, as set forth in this document, represents the
general guidelines the company presently intends to utilize
to determine what incentive awards, if any, will be paid.
If, however, at the sole discretion of the Compensation
Committee, the company's best interest is served by applying
different guidelines to certain individuals, or to
individuals under special or unusual circumstances, it
reserves the right to do so by notice to such individuals at
any time, or from time to time. To the extent that such
applications are contrary to any provisions of the Plan, the
Plan will be deemed amended to such extent. Notwithstanding
the foregoing, the Compensation Committee shall have no
discretion or authority to increase the amount of an
incentive award paid to an Executive Officer in excess of
the amount determined under the Incentive Award Formula
applicable to such participant.
The Compensation Committee shall have full power and
authority to interpret and administer the Plan and shall be
the sole arbiter of all matters of interpretation and
application of the Plan and the Compensation Committee's
determination shall be final.
begin page 5
PLAN TERM
This Plan shall continue until terminated by the company's
Board of Directors. The Board of Directors may at any time
amend or terminate this Plan.
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Year Ended
(In thousands, except per share amounts) January 29, January 30, February 1,
1994 1993 1992
Primary
Net earnings $29,324 $34,024 $27,716
Weighted average shares outstanding:
Common shares 25,229 24,921 23,740
Common equivalent shares:
Stock options 486 762 809
Weighted average common and common
equivalent shares outstanding, as adjusted 25,715 25,683 24,549
Earnings per common and
common equivalent share $1.14 $1.32 $1.13
Fully Diluted
Net earnings $29,324 $34,024 $27,716
Weighted average shares outstanding:
Common shares 25,287 25,346 24,271
Common equivalent shares:
Stock options 504 903 1,225
Weighted average common and common
equivalent shares outstanding, as adjusted 25,791 26,249 25,496
Earnings per common and
common equivalent share $1.14 $1.30 $1.09
EXHIBIT 21
SUBSIDIARIES
Jurisdiction of Name Under Which
Name Incorporation Business is
Conducted
Retail Assurance Bermuda Retail Assurance
Group, LTD. Group, LTD.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement Nos. 33-51916, 33-51896, 33-51898, 33-41415, 33-
41413 and 33-29600 of Ross Stores, Inc. on Form S-8 of our
reports dated March 11, 1994, appearing in this Annual
Report on Form 10-K of Ross Stores, Inc. for the year ended
January 29, 1994.
Deloitte & Touche
San Francisco, California
April 25, 1994
EXHIBIT 23.2
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
Board of Directors and Stockholders
Ross Stores, Inc.
Newark, California
We have audited the consolidated financial statements of Ross
Stores, Inc. and subsidiaries as of January 29, 1994 and January
30, 1993, and for each of the three years in the period ended
January 29, 1994, and have issued our report thereon dated March
11, 1994; such financial statements and report are included in
this Annual Report on Form 10-K. Our audits also included the
financial statement schedules of Ross Stores, Inc. and
subsidiaries listed in Item 14(a)2. These financial statement
schedules are the responsibility of the companies' management.
Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedules, when
considered in relation to the basic financial statements taken as
a whole, present fairly in all material respects the information
set forth therein.
Deloitte & Touche
San Francisco, California
March 11, 1994
