rossstores_10k.htm
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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549 |
FORM 10-K
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(Mark one) |
X |
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ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended January
30, 2010 |
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or |
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TRANSITION REPORT PURSUANT TO
SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from
_____ to _____
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Commission file
number 0-14678
Ross Stores, Inc.
(Exact name of registrant as specified in
its charter)
Delaware |
94-1390387 |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer Identification
No.) |
|
4440 Rosewood Drive, Pleasanton,
California |
94588-3050 |
(Address of principal executive
offices) |
(Zip Code) |
|
Registrant's telephone number,
including area code |
(925)
965-4400 |
Securities
registered pursuant to Section 12(b) of the Act:
Title of each
class |
|
Name of each
exchange on which registered |
Common stock, par value
$.01 |
|
Nasdaq Global Select
Market |
Securities registered pursuant to
Section 12(g) of the Act: |
Title of each
class |
None |
Indicate by
check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes X
No
Indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes
No X
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 whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes No
Indicate by
check mark if disclosure of delinquent filers 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.
Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. Large accelerated
filer X Accelerated filer Non-accelerated
filer Smaller
reporting company
Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Act).
Yes
No X
The aggregate
market value of the voting common stock held by non-affiliates of the Registrant
as of August 1, 2009 was $5,381,730,344, based on the closing price on that date
as reported by the NASDAQ Global Select Market®. Shares of voting
stock held by each director and executive officer have been excluded in that
such persons may be deemed to be affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other
purposes.
The number of
shares of Common Stock, with $.01 par value, outstanding on March 12, 2010 was
122,529,865.
Documents incorporated by reference: |
|
Portions of the Proxy Statement for
Registrant's 2010 Annual Meeting of Stockholders, which will be filed on
or before June 1, 2010, are incorporated herein by reference into Part
III. |
|
|
|
|
2
PART I
Item 1. Business.
Ross Stores,
Inc. and its subsidiaries (“we” or the “Company”) operate two chains of
off-price retail apparel and home accessories stores. At
January 30, 2010, we operated a total of 1,005 stores, of which 953 were Ross
Dress for Less®
(“Ross”) locations in 27 states and Guam and 52 were dd’s DISCOUNTS® stores in four states.
Both chains target value-conscious women and men between the ages of 18 and 54.
Ross target customers are primarily from middle income households, while the
dd’s DISCOUNTS target customer is typically from more moderate income
households. The decisions we make, from merchandising, purchasing and pricing,
to the locations of our stores, are based on these customer
profiles.
Ross offers
first-quality, in-season, name brand and designer apparel, accessories,
footwear, and home fashions for the entire family at everyday savings of 20 to
60 percent off department and specialty store regular prices. dd’s DISCOUNTS
features a more moderately-priced assortment of first-quality, in-season, name
brand apparel, accessories, footwear, and home fashions for the entire family at
everyday savings of 20 to 70 percent off moderate department and discount store
regular prices. We believe that both Ross and dd’s DISCOUNTS derive a
competitive advantage by offering a wide assortment of product within each of
our merchandise categories in organized and easy-to-shop store environments.
Our mission is
to offer competitive values to our target customers by focusing on the following
key strategic objectives:
We refer to our
fiscal years ended January 30, 2010, January 31, 2009, and February 2, 2008 as
fiscal 2009, fiscal 2008, and fiscal 2007, respectively.
Merchandising, Purchasing and
Pricing
We seek to
provide our customers with a wide assortment of first-quality, in-season,
brand-name and designer apparel, accessories, footwear, and home merchandise for
the entire family at everyday savings of 20 to 60 percent below department and
specialty store regular prices at Ross, and 20 to 70 percent below moderate
department and discount store regular prices at dd’s DISCOUNTS. We sell
recognizable brand-name merchandise that is current and fashionable in each
category. New merchandise typically is received from three to six times per week
at both Ross and dd’s DISCOUNTS stores. Our buyers review their merchandise
assortments on a weekly basis, enabling them to respond to selling trends and
purchasing opportunities in the market. Our merchandising strategy is reflected
in our advertising, which emphasizes a strong value message. Our stores offer a
treasure-hunt shopping experience where customers can find great savings every
day on a broad assortment of brand-name bargains for the family and the
home.
3
Merchandising. Our merchandising strategy incorporates
a combination of off-price buying techniques to purchase advance-of-season,
in-season, and past-season merchandise for both Ross and dd’s DISCOUNTS. We
believe nationally recognized name brands sold at compelling discounts will
continue to be an important determinant of our success. We generally leave the
brand-name label on the merchandise we sell.
We have
established merchandise assortments that we believe are attractive to our target
customers. Although we offer fewer classifications of merchandise than most
department stores, we generally offer a large selection of brand names within
each classification with a wide assortment of vendors, labels, prices, colors,
styles, and fabrics within each size or item. The mix of comparable store sales
by department in fiscal 2009 was approximately as follows: Ladies 30%, Home
Accents and Bed and Bath 24%, Men's 13%, Accessories, Lingerie, Fine Jewelry,
and Fragrances 13%, Shoes 11%, and Children’s 9%. Our merchandise offerings also
include product categories such as small furniture and furniture accents,
educational toys and games, luggage, gourmet food and cookware, watches,
sporting goods and, in select Ross stores, fine jewelry.
Purchasing. We have a combined network of
approximately 7,700 merchandise vendors and manufacturers for both Ross and dd’s
DISCOUNTS and believe we have adequate sources of first-quality merchandise to
meet our requirements. We purchase the vast majority of our merchandise directly
from manufacturers, and we have not experienced any difficulty in obtaining
sufficient merchandise inventory.
We believe that
our ability to effectively execute certain off-price buying strategies is a key
factor in our success. Our buyers use a number of methods that enable us to
offer our customers brand-name and designer merchandise at strong everyday
discounts relative to department and specialty stores for Ross and moderate
department and discount stores for dd’s DISCOUNTS. By purchasing later in the
merchandise buying cycle than department, specialty, and discount stores we are
able to take advantage of imbalances between retailers’ demand for products and
manufacturers’ supply of those products.
Unlike most
department and specialty stores, we typically do not require that manufacturers
provide promotional allowances, co-op advertising allowances, return privileges,
split shipments, drop shipments to stores, or delayed deliveries of merchandise.
For most orders, only one delivery is made to one of our four distribution
centers. These flexible requirements further enable our buyers to obtain
significant discounts on in-season purchases.
The majority of
the apparel and apparel-related merchandise that we offer in all of our stores
is acquired through opportunistic purchases created by manufacturer overruns and
canceled orders both during and at the end of a season. These buys are referred
to as "close-out" and "packaway" purchases. Close-outs can be shipped to stores
in-season, allowing us to get in-season goods into our stores at lower prices.
Packaway merchandise is purchased with the intent that it will be stored in our
warehouses until a later date, which may even be the beginning of the same
selling season in the following year. Packaway purchases are an effective method
of increasing the percentage of prestige and national brands at competitive
savings within our merchandise assortments. Packaway merchandise is mainly
fashion basics and, therefore, not usually affected by shifts in fashion
trends.
In fiscal 2009,
we continued our emphasis on this important sourcing strategy in response to
compelling opportunities available in the marketplace. Packaway accounted for
approximately 38% of total inventories as of January 30, 2010 and January 31,
2009. We believe the strong discounts we are able to offer on packaway
merchandise are one of the key drivers of our business results.
4
We continued to
roll out additional information system enhancements and process changes to
improve our merchandising capabilities. These new tools are designed to
strengthen our ability to plan, buy, and allocate at a more local versus
regional level. We completed the chain-wide rollout to all merchandise
categories for Ross in fiscal 2009, which was earlier than planned. The
long-term objective of these investments is to fine tune our merchandise
offerings to address more localized customer preferences and thereby gradually
increase sales productivity and gross profit margins in both newer and existing
regions and markets.
Our buying
offices are located in New York City and Los Angeles, the nation's two largest
apparel markets. These strategic locations allow our buyers to be in the market
on a daily basis, sourcing opportunities and negotiating purchases with vendors and
manufacturers. These locations also enable our buyers to strengthen vendor
relationships -- a key element to the success of our off-price buying
strategies.
Over the past
year, we continued to make strategic investments in our merchandise organization
to further enhance our ability to deliver name brand bargains to our customers.
At the end of fiscal 2009, we had a total of approximately 410 merchants for
Ross and dd’s DISCOUNTS combined, up from 360 in the prior year. The Ross and
dd’s buying organizations are separate and distinct. These buying resources
include merchandise management, buyers, and assistant buyers. Ross and dd’s
DISCOUNTS buyers have an average of about 12 years of experience, including
merchandising positions with other retailers such as Ann Taylor, Bloomingdale's,
Burlington Coat Factory, Foot Locker, HomeGoods, Kohl’s, Loehmann’s, Lord &
Taylor, Macy's, Marshalls, Nordstrom, Saks, and T.J. Maxx. We expect to continue
to make additional targeted investments in new merchants to further develop our
relationships with an expanding number of manufacturers and vendors. Our ongoing
objective is to strengthen our ability to procure the most desirable brands and
fashions at competitive discounts.
The off-price
buying strategies utilized by our experienced team of merchants enable us to
purchase Ross merchandise at net prices that are lower than prices paid by
department and specialty stores and to purchase dd’s DISCOUNTS merchandise at
net prices that are lower than prices paid by moderate department and discount
stores.
Pricing. Our policy is to sell brand-name
merchandise at Ross that is priced 20 to 60 percent below most department and
specialty store regular prices. At dd’s DISCOUNTS, we sell more moderate
brand-name product and fashions that are priced 20 to 70 percent below most
moderate department and discount store regular prices. Our pricing policy is
reflected on the price tag displaying our selling price as well as the
comparable selling price for that item in department and specialty stores for
Ross merchandise, or in more moderate department and discount stores for dd’s
DISCOUNTS merchandise.
Our pricing
strategy at Ross differs from that of a department or specialty store. We
purchase our merchandise at lower prices and mark it up less than a department
or specialty store. This strategy enables us to offer customers consistently low
prices. On a weekly basis our buyers review specified departments in our stores
for possible markdowns based on the rate of sale as well as at the end of
fashion seasons to promote faster turnover of merchandise inventory and to
accelerate the flow of fresh product. A similar pricing strategy is in place at
dd’s DISCOUNTS where prices are compared to those in moderate department and
discount stores.
Stores
At January 30,
2010, we operated a total of 1,005 stores
comprised of 953 Ross stores and 52 dd’s DISCOUNTS stores. Our stores are
conveniently located in predominantly community and neighborhood shopping
centers in heavily populated urban and suburban areas. Where the size of the
market permits, we cluster stores to benefit from economies of scale in
advertising, distribution, and field management.
5
We believe a key
element of our success is our organized, attractive, easy-to-shop, in-store
environments at both Ross and dd’s DISCOUNTS, which allow customers to shop at
their own pace. While our stores promote a self-service, treasure hunt shopping
experience, the layouts are designed to promote customer convenience in their
merchandise presentation, dressing rooms, checkout, and merchandise return
areas. Each 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. We enable our customers to
select among sizes and prices through prominent category and sizing markers,
promoting a self-service atmosphere. At most stores, shopping carts are
available at the entrance for customer convenience. All cash registers are
centrally located at store exits for customer ease and efficient
staffing.
We use
point-of-sale (“POS”) hardware and software systems in all stores, which
minimizes transaction time for the customer at the checkout counter by
electronically scanning each ticket at the point of sale and authorizing
personal checks and credit cards in a matter of seconds. In addition, the POS
systems allow us to accept debit cards and electronic gift cards from customers.
For Ross and dd’s DISCOUNTS combined, approximately 58% of payments in fiscal
2009 and fiscal 2008 were made with credit cards and debit cards. We provide
cash, credit card, and debit card refunds on all merchandise (not used, worn, or
altered) returned with a receipt within 30 days. Merchandise returns having a
receipt older than 30 days are exchanged or credited with store credit.
Operating Costs
Consistent with
the other aspects of our business strategy, we strive to keep operating costs as
low as possible. Among the factors which have enabled us to keep operating costs
low are:
- Labor costs that generally
are lower than full-price department and specialty stores due to a store
design that creates a self-service retail format and due to the 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.
-
Flexible store
layout criteria which facilitates conversion of existing buildings to our
formats.
Information Systems
We continue to
invest in new information systems and technology to provide a platform for
growth over the next several years. Recent initiatives include the following:
-
We completed
the rollout of demand forecasting software and related process changes
designed to strengthen our merchandise planning effectiveness for Ross. We
expect this initiative to drive gradual increases over time in store sales
productivity and profitability by improving our ability to plan, buy, and
allocate product at a more local level.
-
We implemented
additional supply chain enhancements to support expansion and improvement of
our supply chain network. We also implemented a new labor time and attendance
system at all of our distribution centers.
-
We completed
the rollout of new tools to better support the continued growth of our import
business. These new tools provide our merchants with greater visibility into
item cost components and inbound movement of import
products.
6
- We made enhancements to our
POS systems to reduce customer transaction and wait times.
- We implemented enhanced labor
scheduling capabilities to give our stores the ability to better align the
workforce with in-store activities.
- We upgraded our loss
prevention software to allow for greater in-depth analysis and reporting. We
also invested in additional store video surveillance systems to provide
centralized remote monitoring.
- We implemented new on-line
tools to assist our stores in their recruiting and hiring efforts. These new
tools are designed to help our store managers expedite the hiring process and
increase the quality of hiring decisions.
Distribution
We have four
distribution processing facilities–-two in California and one each in
Pennsylvania and South Carolina. We ship all of our merchandise to our stores
through these distribution centers, which are large, highly automated, and built
to suit our specific off-price business model.
In addition, we
own one and lease three other warehouse facilities for packaway storage. We use
other third-party facilities as needed for storage of packaway
inventory.
We also utilize
third-party cross docks to distribute merchandise to stores on a regional basis.
Shipments are made by contract carriers to the stores from three to six times
per week depending on location.
We believe that
our existing distribution centers with their current expansion capabilities will
provide adequate processing capacity to support store growth over the next few
years. Additional information on the size and locations of our distribution
centers and warehouse facilities is found under “Properties” in Item 2.
Advertising
We rely
primarily on television advertising to communicate the Ross value
proposition--brand-name merchandise at low everyday prices. This strategy
reflects our belief that television is the most efficient and cost-effective
medium for communicating everyday savings on a wide selection of brand-name
bargains for both the family and home. Advertising for dd’s DISCOUNTS is
primarily focused on new store grand openings and local grass roots initiatives.
Trademarks
The trademarks
for Ross Dress For Less® and dd’s
DISCOUNTS® have
been registered with the United States Patent and Trademark Office.
Employees
As of January
30, 2010, we had approximately 45,600 total employees, including an estimated
32,300 part-time employees. Additionally, we hire temporary
employees--especially during the peak seasons. Our employees are non-union.
Management considers the relationship between the Company and our employees to
be good.
7
Competition
We believe the
principal competitive factors in the off-price retail apparel and home
accessories industry are offering significant discounts on brand-name
merchandise, offering a well-balanced assortment that appeals to our target
customer, and consistently providing store environments that are convenient and
easy to shop. To execute this concept, we continue to make strategic investments
in our buying organization. As discussed under Information Systems, we also
recently completed the rollout in fiscal 2009 of additional enhancements to our
merchandise planning system to strengthen our ability to plan, buy, and allocate
product based on more local versus regional trends. We believe that we are well
positioned to compete on the basis of each of these factors.
Nevertheless, the
retail apparel market is highly fragmented and competitive. We face a
challenging macro- economic and retail environment that creates intense
competition for business from department stores, specialty stores, discount
stores, warehouse 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. We also compete to some degree with
retailers that sell apparel and home accessories through catalogs or over the
internet. The retail apparel and home-related businesses may become even more
competitive in the future.
dd’s DISCOUNTS
At January 30,
2010, we operated 52 dd’s DISCOUNTS in four states: 39 in California, 7 in
Texas, 5 in Florida, and 1 in Arizona. At January 31, 2009, we had 39 dd’s
DISCOUNTS stores in California, 6 in Florida, 5 in Texas, and 2 in Arizona, for
a total of 52 stores. This smaller off-price concept targets the needs of
households with more moderate incomes than Ross customers. We believe this is one of the fastest
growing demographic markets in the country. dd’s DISCOUNTS features a
moderately-priced assortment of first-quality, in-season, name brand apparel,
accessories, footwear, and home fashions at everyday savings of 20 to 70 percent
off moderate department and discount store regular prices.
The dd’s
DISCOUNTS business generally has similar merchandise departments and categories
to those of Ross, but features a different mix of brands at lower average price
points. The typical dd’s DISCOUNTS store is located in an established shopping
center in a densely populated urban or suburban neighborhood. The merchant,
store, and distribution organizations for dd’s DISCOUNTS and Ross are separate
and distinct; however, dd’s DISCOUNTS shares certain other corporate and support
services with Ross.
Available Information
The internet
address for our corporate website is www.rossstores.com. Our Annual Reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Proxy
Statements, and amendments to those reports are made available free of charge on
or through the Investors section of our corporate website promptly after being
electronically filed with the Securities and Exchange Commission. The
information found on our corporate website is not part of this, or any other
report or regulatory filing we file with or furnish to the Securities and
Exchange Commission.
8
Item 1A. Risk Factors.
Our Annual
Report on Form 10-K for fiscal 2009, and information we provide in our Annual
Report to Stockholders, press releases, telephonic reports, and other investor
communications, including those on our corporate website, may contain
forward-looking statements with respect to anticipated future events and our
projected financial performance, operations and competitive position that are
subject to risk factors that could cause our actual results to differ materially
from those forward-looking statements and our prior expectations and
projections. Refer to Management’s Discussion and Analysis for a more complete
identification and discussion of “Forward-Looking Statements.”
Our financial
condition, results of operations, cash flows, and the performance of our common
stock may be adversely affected by a number of risk factors. Risks and
uncertainties that apply to both Ross and dd’s DISCOUNTS include, without
limitation, the following:
We are subject to the economic and
industry risks that affect large retailers operating in the United States.
Our business is exposed to the risks of a large, multi-store retailer,
which must continually and efficiently obtain and distribute a supply of fresh
merchandise throughout a large and growing network of stores. These risk factors
include:
- An increase in the level of
competitive pressures in the apparel or home-related merchandise
industry.
- Changes in the level of
consumer spending on or preferences for apparel or home-related merchandise,
including the potential impact from the macro-economic environment,
uncertainty in financial and credit markets, and changes in geopolitical
conditions.
- Unseasonable weather trends
that could affect consumer demand for seasonal apparel and apparel-related
products.
- A change in the availability,
quantity, or quality of attractive brand-name merchandise at desirable
discounts that could impact our ability to purchase product and continue to
offer customers a wide assortment of merchandise at competitive
prices.
- Potential disruptions in the
supply chain that could impact our ability to deliver product to our stores in
a timely and cost-effective manner.
- A change in the availability,
quality, or cost of new store real estate locations.
- A downturn in the economy or
a natural disaster in California or in another region where we have a
concentration of stores or a distribution center. Our corporate headquarters,
Los Angeles buying office, two distribution centers, and 26% of our stores are
located in California.
We are subject to operating risks as we
attempt to execute on our merchandising and growth strategies.
The continued
success of our business depends, in part, upon our ability to increase sales at
our existing store locations, to open new stores, and to operate stores on a
profitable basis. Our existing strategies and store expansion programs may not
result in a continuation of our anticipated revenue or profit growth. In
executing our off-price retail strategies and working to improve efficiencies,
expand our store network, and reduce our costs, we face a number of operational
risks, including:
- Our ability to attract and
retain personnel with the retail talent necessary to execute our
strategies.
9
- Our ability to effectively
operate our various supply chain, core merchandising, and other information
systems.
- Our ability to improve our
merchandising capabilities through the recent implementation of new processes
and systems enhancements.
- Our ability to improve new
store sales and profitability, especially in newer regions and
markets.
- Our ability to achieve and
maintain targeted levels of productivity and efficiency in our distribution
centers.
- Our ability to lease or
acquire acceptable new store sites with favorable demographics and long term
financial returns.
- Our ability to identify and
to successfully enter new geographic markets.
- Our ability to achieve
planned gross margins by effectively managing inventories, markdowns, and
shrink.
- Our ability to effectively
manage all operating costs of the business, the largest of which are payroll
and benefit costs for store and distribution center employees.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
At January 30,
2010, we operated a total of 1,005 stores, of which 953 were Ross Dress for Less
locations in 27 states and Guam and 52 were dd’s DISCOUNTS® stores in four states. All stores are
leased, with the exception of two locations which we own.
During fiscal
2009, we opened 52 new Ross stores and closed three existing stores. The average
approximate Ross store size is 29,800 square feet.
During fiscal
2009, we opened four new dd’s DISCOUNTS stores and closed four existing stores.
The average approximate dd’s DISCOUNTS store size is 24,900 square feet. Our
dd’s DISCOUNTS stores are currently located in California, Texas, Florida, and
Arizona.
During fiscal
2009, no one store accounted for more than 1% of our sales.
We carry
earthquake insurance for business interruption, inventory, and personal property
to mitigate our risk on our corporate headquarters, distribution centers, buying
offices, and all of our stores.
Our real estate
strategy in 2010 is to open stores in states where we currently operate to
increase our market penetration and to reduce overhead and advertising expenses
as a percentage of sales in each market. We expect to enter new states for both
Ross and dd’s DISCOUNTS in 2011. Important considerations in evaluating a new
store location are the availability and quality of potential sites, demographic
characteristics, competition, and population density of the local trade area. In
addition, we continue to consider opportunistic real estate acquisitions.
10
The following
table summarizes the locations of our stores by state as of January 30, 2010 and
January 31, 2009.
State/Territory |
|
January 30, 2010 |
|
January 31,
2009 |
Alabama |
|
17 |
|
17 |
Arizona |
|
52 |
|
52 |
California |
|
259 |
|
247 |
Colorado |
|
28 |
|
27 |
Delaware |
|
1 |
|
1 |
Florida |
|
125 |
|
114 |
Georgia |
|
44 |
|
44 |
Guam |
|
1 |
|
1 |
Hawaii |
|
12 |
|
11 |
Idaho |
|
9 |
|
9 |
Louisiana |
|
11 |
|
10 |
Maryland |
|
18 |
|
17 |
Mississippi |
|
5 |
|
5 |
Montana |
|
6 |
|
6 |
Nevada |
|
20 |
|
19 |
New Jersey |
|
10 |
|
9 |
New Mexico |
|
6 |
|
5 |
North Carolina |
|
32 |
|
32 |
Oklahoma |
|
18 |
|
16 |
Oregon |
|
25 |
|
25 |
Pennsylvania |
|
32 |
|
29 |
South Carolina |
|
20 |
|
20 |
Tennessee |
|
25 |
|
24 |
Texas |
|
153 |
|
143 |
Utah |
|
12 |
|
12 |
Virginia |
|
32 |
|
30 |
Washington |
|
30 |
|
29 |
Wyoming |
|
2 |
|
2 |
Total |
|
1,005 |
|
956 |
Where possible,
we obtain sites in buildings requiring minimal alterations, allowing us to
establish stores in new locations in a relatively short period of time at
reasonable costs in a given market. At January 30, 2010, the majority of our
stores had unexpired original lease terms ranging from three to ten years with
three to four renewal options of five years each. The average unexpired original
lease term of our leased stores is five years, or 22 years if renewal options
are included. See Note E of Notes to Consolidated Financial Statements.
See additional
discussion under “Stores” in Item 1.
11
The following
table summarizes the location and approximate sizes of our distribution centers,
warehouses, and office locations as of January 30, 2010. Square footage
information for the distribution centers and warehouses represents total ground
floor area of the facility. Square footage information for office space
represents total space occupied. See additional discussion in Management’s
Discussion and Analysis.
|
|
|
|
|
Location |
|
Approximate Square
Footage |
|
Own /
Lease |
Distribution
centers |
|
|
|
|
Carlisle, Pennsylvania |
|
425,000 |
|
OWN |
Fort Mill, South Carolina |
|
1,300,000 |
|
OWN |
Moreno Valley, California |
|
1,300,000 |
|
OWN |
Perris, California |
|
1,300,000 |
|
LEASE |
|
Warehouses |
|
|
|
|
Carlisle, Pennsylvania |
|
239,000 |
|
LEASE |
Carlisle, Pennsylvania |
|
246,000 |
|
LEASE |
Fort Mill, South Carolina |
|
423,000 |
|
OWN |
Fort Mill, South Carolina |
|
255,000 |
|
LEASE |
|
Office
space |
|
|
|
|
Los Angeles, California |
|
26,000 |
|
LEASE |
New York City, New York |
|
197,000 |
|
LEASE |
Pleasanton, California |
|
181,000 |
|
LEASE |
|
|
|
|
|
In October 2008,
we purchased 167 acres of land in the Southeast.
See additional
discussion under “Distribution” in Item 1.
Item 3. Legal
Proceedings.
Like many
California retailers, we have been named in class action lawsuits regarding wage
and hour claims. Class action litigation involving allegations that hourly
associates have missed meal and/or rest break periods, as well as allegations of
unpaid overtime wages to store managers and assistant store managers at Company
stores under state law remains pending as of January 30, 2010.
We are also
party to various other legal proceedings arising in the normal course of
business. Actions filed against us include commercial, product, customer,
intellectual property, and labor and employment-related claims, including
lawsuits in which plaintiffs allege that we violated state or federal laws.
Actions against us are in various procedural stages. Many of these proceedings
raise factual and legal issues and are subject to uncertainties.
We believe that
the resolution of these legal proceedings will not have a material adverse
effect on our financial condition, results of operations, or cash
flows.
12
Item 4. (Removed and
Reserved).
Executive Officers of the Registrant
The following
sets forth the names and ages of our executive officers, indicating each
person's principal occupation or employment during at least the past five years.
The term of office is at the discretion of our Board of Directors.
Name |
|
Age |
|
Position |
Michael Balmuth |
|
59 |
|
Vice Chairman and Chief Executive
Officer |
James S. Fassio |
|
55 |
|
President and Chief Development Officer |
Michael O’Sullivan |
|
46 |
|
President and Chief Operating
Officer |
Barbara Rentler |
|
52 |
|
President and Chief Merchandising Officer |
Lisa Panattoni |
|
47 |
|
Group Executive Vice President,
Merchandising |
John G. Call |
|
51 |
|
Senior Vice President and Chief Financial
Officer |
Mr. Balmuth
joined the Board of Directors as Vice Chairman and became Chief Executive
Officer in September 1996. From February 2005 to December 2009, he also served
as President. He was Executive Vice President, Merchandising from July 1993 to
September 1996 and Senior Vice President and General Merchandise Manager from
November 1989 to July 1993. Before joining Ross, he was Senior Vice President
and General Merchandising Manager at Bon Marché in Seattle from September 1988
to November 1989. From April 1986 to September 1988, he served as Executive Vice
President and General Merchandising Manager for Karen Austin Petites.
Mr. Fassio
became President and Chief Development Officer in December 2009. Prior to this,
he was Executive Vice President, Property Development, Construction and Store
Design from February 2005 to December 2009. From March 1991 to February 2005, he
served as Senior Vice President, Property Development, Construction and Store
Design. He joined the Company in June 1988 as Vice President of Real Estate.
Prior to joining Ross, Mr. Fassio held various retail and real estate positions
with Safeway Stores, Inc.
Mr. O’Sullivan
became President and Chief Operating Officer in December 2009. From February
2005 to December 2009, he served as Executive Vice President and Chief
Administrative Officer, after joining Ross in September 2003 as Senior Vice
President, Strategic Planning and Marketing. From 1991 to 2003, Mr. O’Sullivan
was a partner with Bain & Company providing consulting advice to retail,
consumer goods, financial services and private equity clients.
Ms. Rentler has
served as President and Chief Merchandising Officer of Ross Dress for Less®
since December 2009, with responsibility for all merchandising categories at
Ross. From December 2006 to December 2009, she was Executive Vice President,
Merchandising, with responsibility for all Ross Apparel and Apparel-related
products. She also served as Executive Vice President and Chief Merchandising
Officer of dd’s DISCOUNTS® from February 2005 to December 2006, Senior Vice
President and Chief Merchandising Officer of dd's DISCOUNTS from January 2004 to
February 2005 and Senior Vice President and General Merchandise Manager at Ross
Dress for Less from February 2001 to January 2004. Prior to that, she held
various merchandising positions since joining the Company in February
1986.
Ms. Panattoni
was named Group Executive Vice President, Merchandising for Ross Home, Men’s and
Children’s in December 2009. She joined the Company in January 2005 as Senior
Vice President and General Merchandise Manager of Ross Home and was promoted to
Executive Vice President in October 2005. Prior to joining Ross, Ms. Panattoni
was with The TJX Companies, where she served as Senior Vice President of Merchandising and Marketing
for HomeGoods from 1998 to 2004 and as Divisional Merchandise Manager of the
Marmaxx Home Store from 1994 to 1998.
13
Mr. Call has
served as Senior Vice President and Chief Financial Officer since joining the
Company in June 1997. From June 1997 to February 2009 he also served as
Corporate Secretary. Mr. Call was Senior Vice President, Chief Financial
Officer, Secretary and Treasurer of Friedman’s from June 1993 until joining Ross
in 1997. Prior to joining Friedman’s, Mr. Call held various positions with Ernst
& Young LLP.
PART II
Item
5.
|
Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
|
General information. See the information set forth under the caption "Quarterly Financial Data
(Unaudited)" under Note K of Notes to Consolidated Financial Statements in Item
8 of this Annual Report, which is incorporated herein by reference. Our stock is
traded on The NASDAQ Global Select Market® under the symbol ROST. There were 768
stockholders of record as of March 12, 2010 and the closing stock price on that
date was $52.92 per share.
Cash dividends. In January 2010, our Board of Directors declared a quarterly cash
dividend payment of $.16 per common share, payable on March 31, 2010. Our Board
of Directors declared quarterly cash dividends of $.11 per common share in
January, May, August, and November 2009, and cash dividends of $.095 per common
share in January, May, August, and November 2008.
Issuer purchases of equity securities. Information regarding shares of common
stock we repurchased during the fourth quarter of fiscal 2009 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of |
|
Maximum number |
|
|
|
|
Total |
|
|
|
|
|
shares (or units) |
|
(or approximate
dollar |
|
|
|
|
number of |
|
Average |
|
purchased as part |
|
value) of shares (or
units) |
|
|
|
|
shares |
|
price paid |
|
of publicly |
|
that may yet be
purchased |
|
|
|
|
(or units) |
|
per share |
|
announced plans or |
|
under the plans or |
|
|
Period |
|
purchased1 |
|
(or unit) |
|
programs |
|
programs ($000) |
|
|
November |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11/01/2009-11/28/2009) |
|
310,363 |
|
|
$ |
45.31 |
|
309,776 |
|
|
$ |
56,000 |
|
|
December |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11/29/2009-01/02/2010) |
|
724,912 |
|
|
$ |
43.68 |
|
722,670 |
|
|
$ |
25,000 |
|
|
January |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(01/03/2010-01/30/2010) |
|
553,919 |
|
|
$ |
45.27 |
|
542,397 |
|
|
$ |
- |
|
|
|
|
|
Total |
|
1,589,194 |
|
|
$ |
44.55 |
|
1,574,843 |
|
|
$ |
-² |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 We acquired 14,351
shares of treasury stock during the quarter ended January 30, 2010. Treasury
stock includes shares purchased from employees for tax withholding purposes
related to vesting of restricted stock grants. All remaining shares were
repurchased under our publicly announced stock repurchase program.
2 In January 2010 our
Board of Directors approved a two-year $750 million stock repurchase program for
fiscal 2010 and 2011.
See Note H of Notes to Consolidated
Financial Statements for equity compensation plan information. The information
under Item 12 of this Annual Report on Form 10-K under the caption “Equity
compensation plan information” is incorporated herein by reference.
14
Stockholder Return Performance Graph
The following
information in this Item 5 shall not be deemed filed for purposes of Section 18
of the Securities Act of 1934, nor shall it be deemed incorporated by reference
in any filing under the Securities Act of 1933.
Set forth below
is a line graph comparing the cumulative total stockholder returns for our
common stock with the Standard & Poors (“S&P”) 500 Index and the S&P
Retailing Group over the last five years. The five year period comparison graph
assumes that the value of the investment in our common stock at each fiscal year
end and the comparative indexes was $100 on January 31, 2005 and measures the
performance of this investment as of the last trading day in the month of
January for each of the following five years. These measurement dates are based
on the historical month-end data available and may vary slightly from our actual
fiscal year-end date for each period. Data with respect to returns for the
S&P indexes is not readily available for periods shorter than one month. The
total return assumes the reinvestment of dividends at the frequency with which
dividends are paid. The graph is a historical representation of past performance
only and is not necessarily indicative of future returns to stockholders.
COMPARISON OF 5 YEAR CUMULATIVE
TOTAL RETURN* Among Ross Stores, Inc., The
S&P 500 Index and S&P Retailing Group
|
|
|
*$100 invested on 1/28/05 in stock
or 1/31/05 in index, including reinvestment of dividends. Fiscal year
ended January 31. Indexes calculated on month-end
basis.
|
|
|
|
|
|
Base Period |
Indexed Returns for Years
Ended |
|
Company /
Index |
|
2005 |
|
2006 |
|
2007 |
|
2008 |
|
2009 |
|
2010 |
Ross Stores, Inc. |
|
100 |
|
106 |
|
119 |
|
110 |
|
110 |
|
173 |
S&P 500 Index |
|
100 |
|
110 |
|
126 |
|
123 |
|
76 |
|
101 |
S&P Retailing Group |
|
100 |
|
109 |
|
124 |
|
106 |
|
67 |
|
107 |
15
Item 6. Selected Financial Data.
The following
selected financial data is derived from our consolidated financial statements.
The data set forth below should be read in conjunction with “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” the
section “Forward-Looking Statements” in this Annual Report on Form 10–K and our
consolidated financial statements and notes thereto.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000, except per
share data) |
|
2009 |
|
2008 |
|
2007 |
|
20061 |
|
2005 |
|
|
Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
7,184,213 |
|
$ |
6,486,139 |
|
|
$ |
5,975,212 |
|
|
$ |
5,570,210 |
|
|
$ |
4,944,179 |
|
|
|
Cost of goods sold |
|
|
5,327,278 |
|
|
4,956,576 |
|
|
|
4,618,220 |
|
|
|
4,317,527 |
|
|
|
3,852,591 |
|
|
|
Percent of
sales |
|
|
74.2% |
|
|
76.4% |
|
|
|
77.3% |
|
|
|
77.5% |
|
|
|
77.9% |
|
|
|
Selling, general and administrative |
|
|
1,130,813 |
|
|
1,034,357 |
|
|
|
935,901 |
|
|
|
863,033 |
|
|
|
766,144 |
|
|
|
Percent of
sales |
|
|
15.7% |
|
|
16.0% |
|
|
|
15.7% |
|
|
|
15.5% |
|
|
|
15.5% |
|
|
|
Interest expense (income), net |
|
|
7,593 |
|
|
(157 |
) |
|
|
(4,029 |
) |
|
|
(8,627 |
) |
|
|
(2,898 |
) |
|
|
Earnings before taxes |
|
|
718,529 |
|
|
495,363 |
|
|
|
425,120 |
|
|
|
398,277 |
|
|
|
328,342 |
|
|
|
Percent of
sales |
|
|
10.0% |
|
|
7.6% |
|
|
|
7.1% |
|
|
|
7.2% |
|
|
|
6.6% |
|
|
|
Provision for taxes on
earnings |
|
|
275,772 |
|
|
189,922 |
|
|
|
164,069 |
|
|
|
156,643 |
|
|
|
128,710 |
|
|
|
Net earnings |
|
|
442,757 |
|
|
305,441 |
|
|
|
261,051 |
|
|
|
241,634 |
|
|
|
199,632 |
|
|
|
Percent of
sales |
|
|
6.2% |
|
|
4.7% |
|
|
|
4.4% |
|
|
|
4.3% |
|
|
|
4.0% |
|
|
|
Basic earnings per share |
|
$ |
3.60 |
|
$ |
2.36 |
|
|
$ |
1.93 |
|
|
$ |
1.73 |
|
|
$ |
1.38 |
|
|
|
Diluted earnings per
share |
|
$ |
3.54 |
|
$ |
2.33 |
|
|
$ |
1.90 |
|
|
$ |
1.70 |
|
|
$ |
1.36 |
|
|
|
|
|
|
Cash
dividends declared per common share |
|
$ |
.490 |
|
$ |
.395 |
|
|
$ |
.320 |
|
|
$ |
.255 |
|
|
$ |
.220 |
|
|
|
|
1 Fiscal 2006 was
a 53-week year; all other fiscal years presented were 52
weeks.
|
|
|
16
Selected Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000, except per
share data) |
2009 |
|
2008 |
|
2007 |
|
2006¹ |
|
2005 |
|
|
Financial Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchandise inventory |
$ |
872,498 |
|
$ |
881,058 |
|
$ |
1,025,295 |
|
$ |
1,051,729 |
|
$ |
938,091 |
|
|
Property and equipment, net |
|
942,999 |
|
|
951,656 |
|
|
868,315 |
|
|
748,233 |
|
|
639,852 |
|
|
Total assets |
|
2,768,633 |
|
|
2,355,511 |
|
|
2,371,322 |
|
|
2,358,591 |
|
|
1,938,738 |
|
|
Return on average assets |
|
17% |
|
|
13% |
|
|
11% |
|
|
11% |
|
|
11% |
|
|
Working capital |
|
554,933 |
|
|
358,456 |
|
|
387,396 |
|
|
431,699 |
|
|
349,864 |
|
|
Current ratio |
|
1.5:1 |
|
|
1.4:1 |
|
|
1.4:1 |
|
|
1.4:1 |
|
|
1.4:1 |
|
|
Long-term debt |
|
150,000 |
|
|
150,000 |
|
|
150,000 |
|
|
150,000 |
|
|
- |
|
|
Long-term debt as a percent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of total capitalization |
|
11% |
|
|
13% |
|
|
13% |
|
|
14% |
|
|
- |
|
|
Stockholders' equity |
|
1,157,293 |
|
|
996,369 |
|
|
970,649 |
|
|
909,830 |
|
|
836,172 |
|
|
Return on average stockholders' equity |
|
41% |
|
|
31% |
|
|
28% |
|
|
28% |
|
|
25% |
|
|
Book value per common
share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding at
year-end |
$ |
9.41 |
|
$ |
7.82 |
|
$ |
7.24 |
|
$ |
6.53 |
|
$ |
5.80 |
|
|
|
|
|
Operating
Statistics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of stores opened |
|
56 |
|
|
77 |
|
|
98 |
|
|
66 |
|
|
86 |
|
|
Number of stores closed |
|
7 |
|
|
11 |
|
|
5 |
|
|
3 |
|
|
1 |
|
|
Number of stores at
year-end |
|
1,005 |
|
|
956 |
|
|
890 |
|
|
797 |
|
|
734 |
|
|
Comparable store sales increase² |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52-week basis) |
|
6% |
|
|
2% |
|
|
1% |
|
|
4% |
|
|
6% |
|
|
Sales per square foot of
selling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
space3 (52-week basis) |
$ |
311 |
|
$ |
298 |
|
$ |
301 |
|
$ |
305 |
|
$ |
304 |
|
|
Square feet of selling space |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at year-end (000) |
|
23,700 |
|
|
22,500 |
|
|
21,100 |
|
|
18,600 |
|
|
17,300 |
|
|
Number of employees at
year-end |
|
45,600 |
|
|
40,000 |
|
|
39,100 |
|
|
35,800 |
|
|
33,200 |
|
|
Number of common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of record at year-end |
|
767 |
|
|
754 |
|
|
760 |
|
|
749 |
|
|
756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Fiscal 2006 was
a 53-week year; all other fiscal years presented were 52
weeks.
2 Comparable stores are stores open
for more than 14 complete months.
3 Based on average
annual selling square footage.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
Overview
We are the
second largest off-price apparel and home goods retailer in the United States.
At the end of fiscal 2009, we operated 953 Ross Dress for Less (“Ross”)
locations in 27 states and Guam, and 52 dd’s DISCOUNTS stores in four states.
Ross offers first-quality, in-season, name brand and designer apparel,
accessories, footwear and home fashions at everyday savings of 20 to 60 percent
off department and specialty store regular prices. dd’s DISCOUNTS features a
more moderately-priced assortment of first-quality, in-season, name brand
apparel, accessories, footwear and home fashions at everyday savings of 20 to 70
percent off moderate department and discount store regular prices.
Our primary
objective is to pursue and refine our existing off-price strategies to maintain
or improve profitability and improve financial returns over the long term. In
establishing appropriate growth targets for our business, we closely monitor
market share trends for the off-price industry. Total aggregate sales for five
of the largest off-price retailers in the United States increased 7% during 2009
on top of a 3% increase in 2008. This compares to total national apparel sales
which declined 5% during 2009 compared to a 3% decline in 2008, according to
data published by the NPD Group, Inc., which provides global sales and marketing
information on the retail industry.
We believe that
the stronger relative sales gains of the off-price retailers during 2009 were
driven mainly by the increased focus on value by consumers, whose spending
continued to be pressured by the challenging macro-economic environment. Our
sales and earnings gains in 2009 benefited from efficient execution of our
resilient and flexible off-price business model. Our merchandise and operational
strategies are designed to take advantage of the expanding market share of our
off-price industry as well as the ongoing customer demand for name brand
fashions for the family and home at compelling everyday discounts.
Looking ahead to
2010, we are planning to maintain tight controls of both inventory levels and
operating expenses as part of our strategy to help us maximize our
profitability.
We refer to our
fiscal years ended January 30, 2010, January 31, 2009, and February 2, 2008 as
fiscal 2009, fiscal 2008, and fiscal 2007, respectively. Fiscal 2009, 2008, and
2007 were 52 weeks.
18
Results of Operations
The following
table summarizes the financial results for fiscal years ended 2009, 2008, and
2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
2007 |
|
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
Sales (millions) |
|
$ |
7,184 |
|
$ |
6,486 |
|
$ |
5,975 |
|
|
|
Sales
growth |
|
|
10.8% |
|
|
8.6% |
|
|
7.3% |
|
|
|
Comparable store sales growth |
|
|
6% |
|
|
2% |
|
|
1% |
|
|
|
|
|
|
Costs and expenses (as a percent of
sales) |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
74.2% |
|
|
76.4% |
|
|
77.3% |
|
|
|
Selling,
general and administrative |
|
|
15.7% |
|
|
16.0% |
|
|
15.7% |
|
|
|
Interest expense (income), net |
|
|
0.1% |
|
|
0.0% |
|
|
(0.1% |
) |
|
|
|
|
|
Earnings before taxes (as a percent
of sales) |
|
|
10.0% |
|
|
7.6% |
|
|
7.1% |
|
|
|
|
|
|
Net earnings (as a percent of
sales) |
|
|
6.2% |
|
|
4.7% |
|
|
4.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores. Total stores open at the end of 2009,
2008, and 2007 were 1,005, 956, and 890, respectively. The number of stores at
the end of fiscal 2009, 2008, and 2007 increased by 5%, 7%, and 12% from the
respective prior years. Our expansion strategy is to open additional stores
based on market penetration, local demographic characteristics, competition,
expected store profitability, and the ability to leverage overhead expenses. We
continually evaluate opportunistic real estate acquisitions and opportunities
for potential new store locations. We also evaluate our current store locations
and determine store closures based on similar criteria.
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
2007 |
|
|
Stores at the beginning of the
period |
|
956 |
|
|
890 |
|
|
797 |
|
|
|
Stores opened in the period |
|
56 |
|
|
77 |
|
|
98 |
|
|
|
Stores closed in the
period |
|
(7 |
) |
|
(11 |
) |
|
(5 |
) |
|
|
Stores at the end of the period |
|
1,005 |
|
|
956 |
|
|
890 |
|
|
|
|
|
|
Selling square footage at the end
of the period (000) |
|
23,700 |
|
|
22,500 |
|
|
21,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales. Sales for fiscal 2009 increased $698.1
million, or 10.8%, compared to the prior year due to the opening of 49 net new
stores during 2009, and a 6% increase in sales from “comparable” stores (defined
as stores that have been open for more than 14 complete months). Sales for
fiscal 2008 increased $510.9 million, or 8.6%, compared to the prior year due to
the opening of 66 net new stores during 2008, and a 2% increase in sales from
comparable stores.
19
Our sales mix is
shown below for fiscal 2009, 2008, and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
2007 |
|
|
Ladies |
|
30% |
|
32% |
|
32% |
|
|
Home accents and bed and bath |
|
24% |
|
23% |
|
23% |
|
|
Men’s |
|
13% |
|
14% |
|
15% |
|
|
Accessories, lingerie, fine jewelry, and fragrances |
|
13% |
|
12% |
|
11% |
|
|
Shoes |
|
11% |
|
10% |
|
10% |
|
|
Children’s |
|
9% |
|
9% |
|
9% |
|
|
Total |
|
100% |
|
100% |
|
100% |
|
|
|
|
|
|
|
|
|
|
We expect to address the competitive
climate for off-price apparel and home goods by pursuing and refining our
existing strategies and by continuing to strengthen our organization, to
diversify our merchandise mix, and to more fully develop our organization and
systems to improve regional and local merchandise offerings. Although our
strategies and store expansion program contributed to sales gains in fiscal
2009, 2008, and 2007, we cannot be sure that they will result in a continuation
of sales growth or an increase in net earnings.
Cost of goods sold. Cost of goods sold in fiscal 2009 increased $370.7 million compared to
the prior year mainly due to increased sales from the opening of 49 net new
stores during the year, and a 6% increase in sales from comparable
stores.
Cost of goods sold as a percentage of
sales for fiscal 2009 decreased approximately 230 basis points from the prior
year. This improvement was mainly the result of a 170 basis point increase in
merchandise gross margin, which includes a 40 basis point benefit from lower
shortage. In addition, freight costs declined by about 50 basis points,
occupancy leveraged 35 basis points, and distribution costs declined by about 10
basis points. These improvements were partially offset by a 35 basis point
increase in buying expenses due in part to higher incentive costs versus the
prior year.
Cost of goods sold in fiscal 2008
increased $338.4 million compared to the prior year mainly due to increased
sales from the opening of 66 net new stores during the year, and a 2% increase
in sales from comparable stores.
Cost of goods sold as a percentage of
sales for fiscal 2008 decreased approximately 90 basis points from the prior
year. This improvement was mainly the result of a 100 basis point increase in
merchandise gross margin. In addition, distribution costs for the year improved
by about 20 basis points. As a percent of sales, these favorable trends were
partially offset by a 10 basis point increase in occupancy expense and a 20
basis point increase in incentive costs.
We cannot be sure that the gross profit
margins realized in fiscal 2009, 2008, and 2007 will continue in future years.
Selling, general and administrative expenses. For fiscal 2009, selling, general and
administrative expenses (“SG&A”) increased $96.5 million compared to the
prior year, mainly due to increased store operating costs reflecting the opening
of 49 net new stores during the year.
SG&A as a percentage of sales for
fiscal 2009 decreased by approximately 20 basis points compared to the prior
year. This decrease was mainly driven by 40 basis points of leverage on store
operating expenses partially offset by a 20 basis point increase in general and
administrative expenses due in part to higher incentive costs versus the prior
year.
For fiscal 2008, SG&A increased $98.5
million compared to the prior year, mainly due to increased store operating
costs reflecting the opening of 66 net new stores during the year.
20
SG&A as a
percentage of sales for fiscal 2008 grew by approximately 30 basis points over
the prior year. This increase was mainly driven by a 20 basis point increase in
store operating expenses and a 10 basis point increase in general and
administrative costs as a percent of sales.
The largest
component of SG&A is payroll. The total number of employees, including both
full and part-time, as of fiscal year end 2009, 2008, and 2007 was approximately
45,600, 40,000, and 39,100, respectively.
Interest expense (income), net.
In fiscal 2009,
interest expense increased by $1.1 million primarily due to lower capitalization
of construction interest. In fiscal 2009, interest income decreased by $6.7
million primarily due to lower investment yields as compared to the prior year.
As a percentage of sales, net interest expense in fiscal 2009 decreased pre-tax
earnings by approximately 10 basis points compared to the same period in the
prior year. The table below shows interest expense and income for fiscal 2009,
2008, and 2007:
|
($
millions) |
|
2009 |
|
2008 |
|
2007 |
|
|
Interest expense |
|
$ |
9.4 |
|
|
$ |
8.3 |
|
|
$ |
9.8 |
|
|
|
Interest income |
|
|
(1.8 |
) |
|
|
(8.5 |
) |
|
|
(13.8 |
) |
|
|
Total interest expense (income),
net |
|
$ |
7.6 |
|
|
$ |
(0.2 |
) |
|
$ |
(4.0 |
) |
|
|
|
Taxes on earnings. Our effective tax rate for fiscal 2009,
2008, and 2007 was approximately 38%, 38%, and 39%, respectively, which
represents the applicable combined federal and state statutory rates reduced by
the federal benefit of state taxes deductible on federal returns. The effective
rate is affected by changes in law, location of new stores, level of earnings,
and the resolution of tax positions with various taxing authorities. We
anticipate that our effective tax rate for fiscal 2010 will be in the range of
38% to 39%.
Net earnings. Net earnings as a percentage of sales for
fiscal 2009 were higher compared to fiscal 2008 primarily due to both lower cost
of goods sold and lower SG&A expenses as a percentage of sales. Net earnings
as a percentage of sales for fiscal 2008 were higher compared to fiscal 2007
primarily due to lower cost of goods sold as a percentage of sales, partially
offset by higher SG&A expenses as a percentage of sales.
Earnings per share. Diluted earnings per share in fiscal 2009
was $3.54, compared to $2.33 in fiscal 2008. This 52% increase in diluted
earnings per share is attributable to an approximate 45% increase in net
earnings and a 5% reduction in weighted average diluted shares outstanding,
largely due to the repurchase of common stock under our stock repurchase
program. Diluted earnings per share in fiscal 2008 was $2.33, compared to $1.90
in fiscal 2007. This 23% increase in diluted earnings per share is attributable
to an approximate 17% increase in net earnings and a 4% reduction in weighted
average diluted shares outstanding, largely due to the repurchase of common
stock under our stock repurchase program.
21
Financial Condition
Liquidity and Capital Resources
Our primary
sources of funds for our business activities are cash flows from operations and
short-term trade credit. Our primary ongoing cash requirements are for
merchandise inventory purchases, payroll, capital expenditures in connection
with opening new stores, and investments in distribution centers and information
systems. We also use cash to repurchase stock under our stock repurchase program
and to pay dividends.
|
($ millions) |
|
2009 |
|
2008 |
|
2007 |
|
|
Cash flows provided by operating
activities |
|
$ |
888.4 |
|
|
$ |
583.4 |
|
|
$ |
353.5 |
|
|
|
Cash flows used in investing activities |
|
|
(136.8 |
) |
|
|
(218.7 |
) |
|
|
(244.7 |
) |
|
|
Cash flows used in financing
activities |
|
|
(304.6 |
) |
|
|
(300.9 |
) |
|
|
(218.6 |
) |
|
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
447.0 |
|
|
$ |
63.8 |
|
|
$ |
(109.8 |
) |
|
|
Operating Activities
Net cash
provided by operating activities was $888.4 million, $583.4 million, and $353.5
million in fiscal 2009, 2008, and 2007, respectively. The primary sources of
cash provided by operating activities in fiscal 2009, 2008, and 2007 were net
earnings plus non-cash expenses for depreciation and amortization. Accounts
payable leverage (defined as accounts payable divided by merchandise inventory)
was 75% as of January 30, 2010 and 61% as of January 31, 2009. The increase in
leverage was due to faster turns on lower inventory levels.
Our primary
source of liquidity is the sale of our merchandise inventory. We regularly
review the age and condition of our merchandise and are able to maintain current
merchandise inventory in our stores through replenishment processes and
liquidation of slower-moving merchandise through clearance markdowns.
Investing Activities
In fiscal 2009,
2008, and 2007, our capital expenditures were $158.5 million, $224.4 million,
and $236.1 million, respectively. Our capital expenditures included fixtures and
leasehold improvements to open new stores, implement information technology
systems, build or expand distribution centers, and various other expenditures
related to our stores, buying and corporate offices. In fiscal 2008 we also
purchased land in South Carolina with the intention of building a new
distribution center in the future. We opened 56, 77, and 98 new stores in fiscal
2009, 2008, and 2007, respectively, which included relocating one store in 2009
and one store in 2007.
We had purchases
of investments of $2.9 million, $37.0 million, and $146.1 million in fiscal
2009, 2008, and 2007, respectively. We had sales of investments of $24.5
million, $42.5 million, and $137.1 million in fiscal 2009, 2008, and 2007,
respectively.
22
We are
forecasting approximately $215 million in capital requirements in 2010 to fund
expenditures for fixtures and leasehold improvements to open both new Ross and
dd’s DISCOUNTS stores, for the relocation, or upgrade of existing stores, for
investments in store and merchandising systems, buildings, equipment and
systems, and for various buying and corporate office expenditures. We expect to
fund these expenditures with available cash, cash flows from operations, and
trade credit.
Our capital
expenditures over the last three years are set forth in the table below:
|
($ millions) |
|
2009 |
|
2008 |
|
2007 |
|
|
New stores |
|
$ |
55.4 |
|
$ |
52.0 |
|
$ |
110.1 |
|
|
Store renovations and improvements |
|
|
44.3 |
|
|
47.3 |
|
|
32.3 |
|
|
Information systems |
|
|
10.4 |
|
|
13.2 |
|
|
21.4 |
|
|
Distribution centers, corporate office, and other |
|
|
48.4 |
|
|
111.9 |
|
|
72.3 |
|
|
Total capital
expenditures |
|
$ |
158.5 |
|
$ |
224.4 |
|
$ |
236.1 |
|
|
|
|
Financing Activities
During fiscal
2009, 2008, and 2007, our liquidity and capital requirements were provided by
available cash, cash flows from operations, and trade credit. Our buying
offices, our corporate headquarters, one distribution center, one trailer
parking lot, three warehouse facilities, and all but two of our store locations
are leased and, except for certain leasehold improvements and equipment, do not
represent capital investments. We own one distribution center in each of the
following cities: Carlisle, Pennsylvania; Moreno Valley, California; and Fort
Mill, South Carolina; and one warehouse facility in Fort Mill, South
Carolina.
In January 2008,
our Board of Directors approved a two-year $600 million stock repurchase program
for fiscal 2008 and 2009. We repurchased 7.4 million and 9.3 million shares of
common stock for aggregate purchase prices of approximately $300 million in both
2009 and 2008. In January 2010, our Board of Directors approved a two-year $750
million stock repurchase program for fiscal 2010 and 2011.
In January 2010,
our Board of Directors declared a quarterly cash dividend payment of $.16 per
common share, payable on March 31, 2010. Our Board of Directors declared
quarterly cash dividends of $.11 per common share in January, May, August, and
November 2009, and cash dividends of $.095 per common share in January, May,
August, and November 2008.
Short-term trade
credit represents a significant source of financing for merchandise inventory.
Trade credit arises from customary payment terms and trade practices with our
vendors. We regularly review the adequacy of credit available to us from all
sources and expect to be able to maintain adequate trade, bank, and other credit
lines to meet our capital and liquidity requirements, including lease payment
obligations in 2010.
We estimate that
cash flows from operations, bank credit lines, and trade credit are adequate to
meet operating cash needs, fund our planned capital investments, repurchase
common stock, and make quarterly dividend payments for at least the next twelve
months.
23
Contractual Obligations
The table below
presents our significant contractual obligations as of January 30, 2010:
|
|
|
Less than 1 |
|
|
|
|
|
After 5 |
|
|
|
|
($000) |
|
year |
|
1 - 3 years |
|
3 - 5 years |
|
years |
|
Total1 |
|
|
Senior Notes |
|
$ |
- |
|
$
|
- |
|
$ |
- |
|
$ |
150,000 |
|
$ |
150,000 |
|
|
Interest payment obligations |
|
|
9,667 |
|
|
19,335 |
|
|
19,335 |
|
|
50,195 |
|
|
98,532 |
|
|
Capital leases |
|
|
291 |
|
|
45 |
|
|
- |
|
|
- |
|
|
336 |
|
|
Operating leases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent
obligations |
|
|
333,077 |
|
|
660,350 |
|
|
502,136 |
|
|
500,278 |
|
|
1,995,841 |
|
|
Synthetic leases |
|
|
5,681 |
|
|
8,886 |
|
|
1,705 |
|
|
- |
|
|
16,272 |
|
|
Other
synthetic lease obligations |
|
|
1,564 |
|
|
1,030 |
|
|
56,000 |
|
|
- |
|
|
58,594 |
|
|
Purchase obligations |
|
|
1,078,071 |
|
|
7,886 |
|
|
831 |
|
|
- |
|
|
1,086,788 |
|
|
Total contractual
obligations |
|
$ |
1,428,351 |
|
$ |
697,532 |
|
$ |
580,007 |
|
$ |
700,473 |
|
$ |
3,406,363 |
|
|
|
|
1 We have a $33.6
million liability for unrecognized tax benefits that is included in other
long-term liabilities on our consolidated balance sheet. This liability is
excluded from the schedule above as the timing of payments cannot be reasonably
estimated.
Senior Notes. We have two series of unsecured senior
notes outstanding with various institutional investors for $150 million. The
Series A notes totaling $85 million are due in December 2018 and bear interest
at a rate of 6.38%. The Series B notes totaling $65 million, are due in December
2021, and bear interest at a rate of 6.53%. Interest on these notes is included
in Interest payment obligations in the table above. These notes are subject to
prepayment penalties for early payment of principal.
Borrowings under
these notes are subject to certain operating and financial covenants, including
maintaining certain interest coverage and other financial ratios. As of January
30, 2010, we were in compliance with these covenants.
Capital leases. The obligations under capital leases
relate to distribution center equipment and have terms of two to three
years.
Off-Balance Sheet
Arrangements
Operating leases. We lease our two buying offices, our
corporate headquarters, one distribution center, one trailer parking lot, three
warehouse facilities, and all but two of our store locations. Except for certain
leasehold improvements and equipment, these leased locations do not represent
long-term capital investments.
We have lease
arrangements for certain equipment in our stores for our point-of-sale (“POS”)
hardware and software systems. These leases are accounted for as operating
leases for financial reporting purposes. The initial terms of these leases are
either two or three years, and we typically have options to renew the leases for
two to three one-year periods. Alternatively, we may purchase or return the
equipment at the end of the initial or each renewal term. We have guaranteed the
value of the equipment of $2.6 million, at the end of the respective initial
lease terms, which is included in Other synthetic lease obligations in the table
above.
24
We lease
approximately 181,000 square feet of office space for our corporate headquarters
in Pleasanton, California, under several facility leases. The terms for these
leases expire between 2011 and 2015 and contain renewal provisions.
We lease
approximately 197,000 and 26,000 square feet of office space for our New York
City and Los Angeles buying offices, respectively. The lease terms for these
facilities expire in 2021 and 2014, respectively and contain renewal
provisions.
We lease a 1.3
million square foot distribution center in Perris, California. The land and
building for this distribution center are financed under a $70 million ten-year
synthetic lease that expires in July 2013. Rent expense on this center is
payable monthly at a fixed annual rate of 5.8% on the lease balance of $70
million. At the end of the lease term, we have the option to either refinance
the $70 million synthetic lease facility, purchase the distribution center at
the amount of the then-outstanding lease obligation, or arrange a sale of the
distribution center to a third party. If the distribution center is sold to a
third party for less than $70 million, we have agreed under a residual value
guarantee to pay the lessor any shortfall amount up to $56 million. The
agreement includes a prepayment penalty for early payoff of the lease. Our
contractual obligation of $56 million is included in Other synthetic lease
obligations in the above table.
We have
recognized a liability and corresponding asset for the inception date estimated
fair value of the residual value guarantee in the amount of $8.3 million for the
Perris, California distribution center and $0.9 million for the POS leases.
These residual value guarantees are being amortized on a straight-line basis
over the original terms of the leases. The current portion of the related asset
and liability is recorded in prepaid expenses and accrued expenses,
respectively, and the long-term portion of the related assets and liabilities is
recorded in other long-term assets and other long-term liabilities,
respectively, in the accompanying consolidated balance sheets.
We lease two
warehouses in Carlisle, Pennsylvania with one lease expiring in 2013 and the
other expiring in 2014. In January 2009, we exercised a three-year option for a
255,000 square foot warehouse in Fort Mill, South Carolina, extending the term
to February 2013. In June 2008, we purchased a 423,000 square foot warehouse
also in Fort Mill, South Carolina. All four of these properties are used to
store our packaway inventory. We also lease a 10-acre parcel of land that has
been developed for trailer parking adjacent to our Perris distribution center.
The synthetic
lease facilities described above, as well as our revolving credit facility and
senior notes, have covenant restrictions requiring us to maintain certain
interest coverage and other financial ratios. In addition, the interest rates
under the revolving credit facility may vary depending on actual interest
coverage ratios achieved. As of January 30, 2010, we were in compliance with
these covenants.
Purchase obligations. As of January 30, 2010 we had purchase
obligations of $1,087 million. These purchase obligations primarily consist of
merchandise inventory purchase orders, commitments related to store fixtures and
supplies, and information technology service and maintenance contracts.
Merchandise inventory purchase orders of $1,044 million represent purchase
obligations of less than one year as of January 30, 2010.
25
Commercial Credit Facilities
The table below
presents our significant available commercial credit facilities at January 30,
2010:
|
|
|
Amount of Commitment Expiration Per
Period |
|
Total |
|
|
|
|
Less than |
|
1 - 3 |
|
3 – 5 |
|
After 5 |
|
amount |
|
|
($000) |
|
1 year |
|
years |
|
years |
|
years |
|
committed |
|
|
Revolving credit facility |
|
|
$ |
- |
|
$ |
600,000 |
|
$ |
- |
|
$ |
- |
|
|
$ |
600,000 |
|
|
Total commercial
commitments |
|
|
$ |
- |
|
$ |
600,000 |
|
$ |
- |
|
$ |
- |
|
|
$ |
600,000 |
|
|
|
|
For additional
information relating to this credit facility, refer to Note D of Notes to
the Consolidated Financial Statements. |
|
Revolving credit facility.
We have available a
$600 million revolving credit facility with our banks, which contains a $300
million sublimit for issuance of standby letters of credit, of which $234.8
million was available at January 30, 2010. This credit facility which expires in
July 2011 has a LIBOR-based interest rate plus an applicable margin (currently
45 basis points) and is payable upon maturity but not less than quarterly. Our
borrowing ability under this credit facility is subject to our maintaining
certain financial ratios. As of January 30, 2010 we had no borrowings
outstanding under this facility and were in compliance with the covenants.
Standby letters of credit.
We use standby
letters of credit to collateralize certain obligations related to our
self-insured workers’ compensation and general liability claims. We had $65.2
million and $60.4 million in standby letters of credit outstanding at January
30, 2010 and January 31, 2009, respectively.
Trade letters of
credit. We had $32.9
million and $16.7 million in trade letters of credit outstanding at January 30,
2010 and January 31, 2009, respectively.
Other
2008 Equity Incentive Plan.
In May 2008, our
stockholders approved the adoption of the Ross Stores, Inc. 2008 Equity
Incentive Plan (the “2008 Plan”) with an initial share reserve of 8.3 million
shares of our common stock, of which 6.0 million shares can be issued as full
value awards. The 2008 Plan provides for various types of incentive awards,
which may potentially include the grant of stock options, stock appreciation
rights, restricted stock purchase rights, restricted stock bonuses, restricted
stock units, performance shares, performance units, and deferred compensation
awards.
Critical Accounting Policies
The preparation
of our consolidated financial statements requires our management to make
estimates and assumptions that affect the reported amounts. These estimates and
assumptions are evaluated on an ongoing basis and are based on historical
experience and on various other factors that management believes to be
reasonable. We believe the following critical accounting policies describe the
more significant judgments and estimates used in the preparation of our
consolidated financial statements.
26
Merchandise inventory. Our merchandise inventory is stated at
the lower of cost or market, with cost determined on a weighted average cost
basis. We purchase manufacturer overruns and canceled orders both during and at
the end of a season which are referred to as "packaway" inventory. Packaway
inventory is purchased with the intent that it will be stored in our warehouses
until a later date, which may even be the beginning of the same selling season
in the following year. Packaway inventory accounted for approximately 38% of
total inventories as of January 30, 2010 and January 31, 2009. Merchandise
inventory includes acquisition, processing, and storage costs related to
packaway inventory.
Included in the
carrying value of our merchandise inventory is a provision for shortage. The
shortage reserve is based on historical shortage rates as evaluated through our
periodic physical merchandise inventory counts and cycle counts. If actual
market conditions, markdowns, or shortage are less favorable than those
projected by us, or if sales of the merchandise inventory are more difficult
than anticipated, additional merchandise inventory write-downs may be required.
Long-lived assets. We record a long-lived asset impairment
charge when events or changes in circumstances indicate that the carrying amount
of a long-lived asset may not be recoverable based on estimated future cash
flows. An impairment loss would be recognized if analysis of the undiscounted
cash flow of an asset group was less than the carrying value of the asset
group. If our actual results differ materially
from projected results, an impairment charge may be required in the future. In
the course of performing our annual analysis, we determined that no long-lived
asset impairment charge was required for fiscal 2009, 2008, or
2007.
Depreciation and amortization
expense. Property and
equipment are stated at cost, less accumulated depreciation and amortization.
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 lesser of the useful life of the asset or the
applicable lease term.
Lease accounting. When a lease contains “rent holidays” or
requires fixed escalations of the minimum lease payments, we record rental
expense on a straight-line basis over the term of the lease and the difference
between the average rental amount charged to expense and the amount payable
under the lease is recorded as deferred rent. We amortize deferred rent on a
straight-line basis over the lease term commencing on the possession date.
Tenant improvement allowances are included in other long-term liabilities and
are amortized over the lease term. Tenant improvement allowances are included as
a component of operating cash flows in the consolidated Statements of Cash
Flows.
Self-insurance. We self insure certain of our workers’
compensation and general liability risks as well as certain coverages under our
health plans. Our self-insurance liability is determined actuarially, based on
claims filed and an estimate of claims incurred but not reported. Should a
greater amount of claims occur compared to what is estimated or the costs of
medical care increase beyond what was anticipated, our recorded reserves may not
be sufficient and additional charges could be required.
Stock-based compensation.
We recognize
compensation expense based upon the grant date fair value of all stock-based
awards, typically over the vesting period. We use historical data to estimate
pre-vesting forfeitures and to recognize stock-based compensation expense. All
stock-based compensation awards are expensed over the service or performance
periods of the awards.
Income taxes. We account for our uncertain tax
positions in accordance with Accounting Standards Codification (“ASC”) 740. We
are required to make assumptions and judgments regarding our income tax
exposures. Our policy is to recognize interest and/or penalties related to all
tax positions in income tax expense. To the extent that accrued interest and
penalties do not ultimately become payable, amounts accrued will be reduced and
reflected as a reduction of the overall income tax provision in the period that
such determination is made.
27
The critical
accounting policies noted above are not intended to be a comprehensive list of
all of our accounting policies. In many cases, the accounting treatment of a
particular transaction is specifically dictated by Generally Accepted Accounting
Principles (“GAAP”), with no need for management’s judgment in their
application. There are also areas in which management’s judgment in selecting
one alternative accounting principle over another would not produce a materially
different result. See our audited consolidated financial statements and notes
thereto under Item 8 in this Annual Report on Form 10-K, which contain
accounting policies and other disclosures required by GAAP.
Effects of inflation or deflation.
We do not consider
the effects of inflation or deflation to be material to our financial position
and results of operations.
New Accounting
Pronouncements
In June 2009,
the Financial Accounting Standards Board (“FASB”) issued ASC 810 (originally
issued as SFAS No. 167, “Amendments to FASB Interpretation No. 46(R))”. Among
other things, ASC 810 responds to concerns about the application of certain key
provisions of FIN 46(R), including those regarding the transparency of the
involvement with variable interest entities. ASC 810 is effective for fiscal
years beginning after November 15, 2009. We do not believe the adoption of ASC
810 will have a material impact on our consolidated financial statements.
Forward-Looking Statements
Our Annual
Report on Form 10-K for fiscal 2009, and information we provide in our Annual
Report to Stockholders, press releases, telephonic reports, and other investor
communications including on our corporate website, may contain a number of
forward-looking statements regarding, without limitation, planned store growth,
new markets, expected sales, projected earnings levels, capital expenditures,
and other matters. These forward-looking statements reflect our then current
beliefs, projections, and estimates with respect to future events and our
projected financial performance, operations, and competitive position. The words
“plan,” “expect,” “target,” “anticipate,” “estimate,” “believe,” “forecast,”
“projected,” “guidance,” “looking ahead,” and similar expressions identify
forward-looking statements.
Future economic
and industry trends that could potentially impact revenue, profitability, and
growth remain difficult to predict. As a result, our forward-looking statements
are subject to risks and uncertainties which could cause our actual results to
differ materially from those forward-looking statements and our previous
expectations and projections. Refer to Item 1A in this Annual Report on Form
10-K for a more complete discussion of risk factors for Ross and dd’s DISCOUNTS.
The factors underlying our forecasts are dynamic and subject to change. As a
result, any forecasts or forward-looking statements speak only as of the date
they are given and do not necessarily reflect our outlook at any other point in
time. We do not undertake to update or revise these forward-looking
statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
We are exposed
to market risks, which primarily include changes in interest rates. We do not
engage in financial transactions for trading or speculative
purposes.
We occasionally
use forward contracts to hedge against fluctuations in foreign currency prices.
We had no outstanding forward contracts as of January 30, 2010.
28
Interest that is
payable on our revolving credit facility is based on variable interest rates and
is, therefore, affected by changes in market interest rates. As of January 30,
2010, we had no borrowings outstanding under our revolving credit facility. In
addition, lease payments under certain of our synthetic lease agreements are
determined based on variable interest rates and are, therefore, affected by
changes in market interest rates.
In addition, we
issued notes to institutional investors in two series: Series A for $85 million
accrues interest at 6.38% and Series B for $65 million accrues interest at
6.53%. The amount outstanding under these notes as of January 30, 2010 is $150
million.
Interest is
receivable on our short- and long-term investments. Changes in interest rates
may impact interest income recognized in the future, or the fair value of our
investment portfolio.
A hypothetical
100 basis point increase or decrease in prevailing market interest rates would
not have materially impacted our consolidated financial position, results of
operations, cash flows, or the fair values of our short- and long-term
investments as of and for the year ended January 30, 2010. We do not consider
the potential losses in future earnings and cash flows from reasonably possible,
near term changes in interest rates to be material.
29
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA.
Consolidated Statements of Earnings
|
|
Year ended |
|
Year ended |
|
Year ended |
($000, except per
share data) |
|
January 30, 2010 |
|
January 31,
2009 |
|
February 2,
2008 |
Sales |
|
|
$ |
7,184,213 |
|
|
$ |
6,486,139 |
|
|
|
$ |
5,975,212 |
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of goods sold |
|
|
|
5,327,278 |
|
|
|
4,956,576 |
|
|
|
|
4,618,220 |
|
Selling,
general and administrative |
|
|
|
1,130,813 |
|
|
|
1,034,357 |
|
|
|
|
935,901 |
|
Interest expense (income), net |
|
|
|
7,593 |
|
|
|
(157 |
) |
|
|
|
(4,029 |
) |
Total costs
and expenses |
|
|
|
6,465,684 |
|
|
|
5,990,776 |
|
|
|
|
5,550,092 |
|
|
Earnings before taxes |
|
|
|
718,529 |
|
|
|
495,363 |
|
|
|
|
425,120 |
|
Provision for taxes on earnings |
|
|
|
275,772 |
|
|
|
189,922 |
|
|
|
|
164,069 |
|
Net
earnings |
|
|
$ |
442,757 |
|
|
$ |
305,441 |
|
|
|
$ |
261,051 |
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
$ |
3.60 |
|
|
$ |
2.36 |
|
|
|
$ |
1.93 |
|
Diluted |
|
|
$ |
3.54 |
|
|
$ |
2.33 |
|
|
|
$ |
1.90 |
|
|
|
Weighted average shares outstanding
(000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
122,887 |
|
|
|
129,235 |
|
|
|
|
135,093 |
|
Diluted |
|
|
|
125,014 |
|
|
|
131,315 |
|
|
|
|
137,142 |
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per
share |
|
|
$ |
0.490 |
|
|
$ |
0.395 |
|
|
|
$ |
0.320 |
|
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
30
Consolidated Balance
Sheets
($000, except
share data) |
|
January 30, 2010 |
|
January 31,
2009 |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
768,343 |
|
|
$ |
321,355 |
|
Short-term investments |
|
|
1,754 |
|
|
|
798 |
|
Accounts receivable |
|
|
44,234 |
|
|
|
41,170 |
|
Merchandise inventory |
|
|
872,498 |
|
|
|
881,058 |
|
Prepaid expenses and other |
|
|
58,618 |
|
|
|
55,241 |
|
Deferred income taxes |
|
|
- |
|
|
|
14,093 |
|
Total
current assets |
|
|
1,745,447 |
|
|
|
1,313,715 |
|
|
Property and
Equipment |
|
|
|
|
|
|
|
|
Land and buildings |
|
|
239,688 |
|
|
|
201,385 |
|
Fixtures and equipment |
|
|
1,189,538 |
|
|
|
1,073,990 |
|
Leasehold improvements |
|
|
536,979 |
|
|
|
509,971 |
|
Construction-in-progress |
|
|
21,812 |
|
|
|
72,839 |
|
|
|
|
1,988,017 |
|
|
|
1,858,185 |
|
Less accumulated depreciation and
amortization |
|
|
1,045,018 |
|
|
|
906,529 |
|
Property and
equipment, net |
|
|
942,999 |
|
|
|
951,656 |
|
Long-term investments |
|
|
16,848 |
|
|
|
38,014 |
|
Other long-term assets |
|
|
63,339 |
|
|
|
52,126 |
|
Total assets |
|
$ |
2,768,633 |
|
|
$ |
2,355,511 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
658,299 |
|
|
$ |
536,745 |
|
Accrued expenses and other |
|
|
259,582 |
|
|
|
238,516 |
|
Accrued payroll and benefits |
|
|
218,234 |
|
|
|
170,878 |
|
Income taxes payable |
|
|
51,505 |
|
|
|
9,120 |
|
Deferred income taxes |
|
|
2,894 |
|
|
|
- |
|
Total
current liabilities |
|
|
1,190,514 |
|
|
|
955,259 |
|
Long-term debt |
|
|
150,000 |
|
|
|
150,000 |
|
Other long-term liabilities |
|
|
174,543 |
|
|
|
156,726 |
|
Deferred income taxes |
|
|
96,283 |
|
|
|
97,157 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity |
|
|
|
|
|
|
|
|
Common stock, par value $.01 per
share |
|
|
1,229 |
|
|
|
1,273 |
|
Authorized
600,000,000 shares |
|
|
|
|
|
|
|
|
Issued and
outstanding 122,929,000 and |
|
|
|
|
|
|
|
|
127,346,000
shares, respectively. |
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
681,908 |
|
|
|
626,117 |
|
Treasury stock |
|
|
(36,864 |
) |
|
|
(30,819 |
) |
Accumulated other comprehensive income
(loss) |
|
|
170 |
|
|
|
(1,174 |
) |
Retained earnings |
|
|
510,850 |
|
|
|
400,972 |
|
Total stockholders’ equity |
|
|
1,157,293 |
|
|
|
996,369 |
|
Total liabilities and stockholders’ equity |
|
$ |
2,768,633 |
|
|
$ |
2,355,511 |
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
31
Consolidated Statements of Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
other |
|
|
|
|
|
|
|
|
|
|
Common
stock |
|
paid-in |
|
Treasury |
|
comprehensive |
|
Retained |
|
|
|
|
(000) |
|
Shares |
|
Amount |
|
capital |
|
stock |
|
income
(loss) |
|
earnings |
|
Total |
Balance at February 3,
2007 |
|
139,356 |
|
|
$ |
1,402 |
|
|
$ |
545,702 |
|
|
$ |
(22,031 |
) |
|
|
$ |
(163 |
) |
|
$ |
384,920 |
|
|
$ |
909,830 |
|
Cumulative effect of adoption of new |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,417 |
) |
|
|
(7,417 |
) |
accounting standard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
261,051 |
|
|
|
261,051 |
|
Unrealized
investment gain |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,503 |
|
|
|
- |
|
|
|
1,503 |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
262,554 |
|
Common stock issued under
stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plans, net
of shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
used for
tax withholding |
|
1,612 |
|
|
|
8 |
|
|
|
20,745 |
|
|
|
(3,879 |
) |
|
|
- |
|
|
|
- |
|
|
|
16,874 |
|
Tax benefit from equity issuance |
|
- |
|
|
|
- |
|
|
|
6,535 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,535 |
|
Stock based compensation |
|
- |
|
|
|
- |
|
|
|
25,165 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
25,165 |
|
Common stock repurchased |
|
(6,872 |
) |
|
|
(69 |
) |
|
|
(20,360 |
) |
|
|
- |
|
|
|
- |
|
|
|
(179,571 |
) |
|
|
(200,000 |
) |
Dividends
declared |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(42,892 |
) |
|
|
(42,892 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at February 2,
2008 |
|
134,096 |
|
|
$ |
1,341 |
|
|
$ |
577,787 |
|
|
$ |
(25,910 |
) |
|
|
$ |
1,340 |
|
|
$ |
416,091 |
|
|
$ |
970,649 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
305,441 |
|
|
|
305,441 |
|
Unrealized investment loss |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,514 |
) |
|
|
- |
|
|
|
(2,514 |
) |
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
302,927 |
|
Common stock issued under stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plans, net of shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
used for tax withholding |
|
2,598 |
|
|
|
25 |
|
|
|
47,848 |
|
|
|
(4,909 |
) |
|
|
- |
|
|
|
- |
|
|
|
42,964 |
|
Tax benefit from equity issuance |
|
- |
|
|
|
- |
|
|
|
8,532 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,532 |
|
Stock based compensation |
|
- |
|
|
|
- |
|
|
|
22,575 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
22,575 |
|
Common stock repurchased |
|
(9,348 |
) |
|
|
(93 |
) |
|
|
(30,625 |
) |
|
|
- |
|
|
|
- |
|
|
|
(269,282 |
) |
|
|
(300,000 |
) |
Dividends
declared |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(51,278 |
) |
|
|
(51,278 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31,
2009 |
|
127,346 |
|
|
$ |
1,273 |
|
|
$ |
626,117 |
|
|
$ |
(30,819 |
) |
|
|
$ |
(1,174 |
) |
|
$ |
400,972 |
|
|
$ |
996,369 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
442,757 |
|
|
|
442,757 |
|
Unrealized investment gain |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,344 |
|
|
|
- |
|
|
|
1,344 |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
444,101 |
|
Common stock issued under stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plans, net of shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
used for tax withholding |
|
2,958 |
|
|
|
30 |
|
|
|
49,363 |
|
|
|
(6,045 |
) |
|
|
- |
|
|
|
- |
|
|
|
43,348 |
|
Tax benefit from equity issuance |
|
- |
|
|
|
- |
|
|
|
8,582 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,582 |
|
Stock based compensation |
|
- |
|
|
|
- |
|
|
|
25,746 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
25,746 |
|
Common stock repurchased |
|
(7,375 |
) |
|
|
(74 |
) |
|
|
(27,900 |
) |
|
|
- |
|
|
|
- |
|
|
|
(272,026 |
) |
|
|
(300,000 |
) |
Dividends
declared |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(60,853 |
) |
|
|
(60,853 |
) |
Balance at January 30,
2010 |
|
122,929 |
|
|
$ |
1,229 |
|
|
$ |
681,908 |
|
|
$ |
(36,864 |
) |
|
|
$ |
170 |
|
|
$ |
510,850 |
|
|
$ |
1,157,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
32
Consolidated Statements of Cash
Flows
|
|
Year ended |
|
Year ended |
|
Year ended |
($000) |
|
January 30, 2010 |
|
January 31,
2009 |
|
February 2,
2008 |
Cash Flows From Operating
Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
$ |
442,757 |
|
|
|
$ |
305,441 |
|
|
|
$ |
261,051 |
|
Adjustments to reconcile net
earnings to net cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
provided by operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
159,043 |
|
|
|
|
141,802 |
|
|
|
|
122,801 |
|
Stock-based
compensation |
|
|
|
25,746 |
|
|
|
|
22,575 |
|
|
|
|
25,165 |
|
Deferred income taxes |
|
|
|
16,113 |
|
|
|
|
23,804 |
|
|
|
|
(10,699 |
) |
Tax
benefit from equity issuance |
|
|
|
8,582 |
|
|
|
|
8,532 |
|
|
|
|
6,535 |
|
Excess tax benefit from stock-based
compensation |
|
|
|
(7,291 |
) |
|
|
|
(5,973 |
) |
|
|
|
(5,140 |
) |
Change in
assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchandise
inventory |
|
|
|
8,560 |
|
|
|
|
144,237 |
|
|
|
|
26,434 |
|
Other
current assets |
|
|
|
(6,441 |
) |
|
|
|
(6,089 |
) |
|
|
|
(15,039 |
) |
Accounts
payable |
|
|
|
115,893 |
|
|
|
|
(101,682 |
) |
|
|
|
(63,199 |
) |
Other
current liabilities |
|
|
|
118,980 |
|
|
|
|
43,249 |
|
|
|
|
(18,716 |
) |
Other
long-term, net |
|
|
|
6,442 |
|
|
|
|
7,543 |
|
|
|
|
24,366 |
|
Net cash
provided by operating activities |
|
|
|
888,384 |
|
|
|
|
583,439 |
|
|
|
|
353,559 |
|
|
Cash Flows From Investing
Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment |
|
|
|
(158,487 |
) |
|
|
|
(224,418 |
) |
|
|
|
(236,121 |
) |
Proceeds from sales of property and
equipment |
|
|
|
10 |
|
|
|
|
117 |
|
|
|
|
356 |
|
Purchases of investments |
|
|
|
(2,904 |
) |
|
|
|
(36,984 |
) |
|
|
|
(146,082 |
) |
Proceeds from investments |
|
|
|
24,548 |
|
|
|
|
42,522 |
|
|
|
|
137,104 |
|
Net cash
used in investing activities |
|
|
|
(136,833 |
) |
|
|
|
(218,763 |
) |
|
|
|
(244,743 |
) |
|
Cash Flows From Financing
Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess tax benefit from stock-based compensation |
|
|
|
7,291 |
|
|
|
|
5,973 |
|
|
|
|
5,140 |
|
Issuance of common stock related to
stock plans |
|
|
|
49,393 |
|
|
|
|
47,873 |
|
|
|
|
20,753 |
|
Treasury stock purchased |
|
|
|
(6,045 |
) |
|
|
|
(4,909 |
) |
|
|
|
(3,879 |
) |
Repurchase of common
stock |
|
|
|
(300,000 |
) |
|
|
|
(300,000 |
) |
|
|
|
(200,000 |
) |
Dividends paid |
|
|
|
(55,202 |
) |
|
|
|
(49,838 |
) |
|
|
|
(40,638 |
) |
Net cash
used in financing activities |
|
|
|
(304,563 |
) |
|
|
|
(300,901 |
) |
|
|
|
(218,624 |
) |
|
Net increase (decrease) in cash and
cash equivalents |
|
|
|
446,988 |
|
|
|
|
63,775 |
|
|
|
|
(109,808 |
) |
|
Cash and cash
equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of
year |
|
|
|
321,355 |
|
|
|
|
257,580 |
|
|
|
|
367,388 |
|
End of
year |
|
|
$ |
768,343 |
|
|
|
$ |
321,355 |
|
|
|
$ |
257,580 |
|
|
Supplemental Cash Flow
Disclosures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
|
$ |
9,668 |
|
|
|
$ |
9,676 |
|
|
|
$ |
9,668 |
|
Income taxes paid |
|
|
$ |
201,232 |
|
|
|
$ |
167,478 |
|
|
|
$ |
164,223 |
|
|
Non-Cash Investing
Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in fair value of investment
securities |
|
|
$ |
1,435 |
|
|
|
$ |
(2,514 |
) |
|
|
$ |
1,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
33
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
Note A: Summary of Significant Accounting
Policies
Business. Ross Stores, Inc. and its subsidiaries
(the “Company”) is an off-price retailer of first-quality, name brand apparel,
shoes, and accessories for the entire family, as well as gift items, linens and
other home-related merchandise. At the end of fiscal 2009, the Company operated
953 Ross Dress for Less® (“Ross”) locations in
27 states and Guam and 52 dd’s DISCOUNTS® stores in four states,
all of which are supported by four distribution centers. The Company’s
headquarters, one buying office, two distribution centers and 26% of its stores
are located in California.
Segment reporting. The Company has one reportable segment.
The Company’s operations include only activities related to off-price retailing
in stores throughout the United States.
Basis of presentation and fiscal year.
The consolidated
financial statements include the accounts of the Company and its subsidiaries,
all of which are wholly-owned. Intercompany transactions and accounts have been
eliminated. The Company follows the National Retail Federation fiscal calendar
and utilizes a 52-53 week fiscal year whereby the fiscal year ends on the
Saturday nearest to January 31. The fiscal years ended January 30, 2010, January
31, 2009 and February 2, 2008 are referred to as fiscal 2009, fiscal 2008, and
fiscal 2007, respectively, and were 52 weeks.
Use of accounting estimates.
The preparation of
consolidated financial statements in conformity with Generally Accepted
Accounting Principles in the United States of America (“GAAP”) requires the
Company to make estimates and assumptions that affect the reported amounts of
assets, liabilities, and disclosures of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates. The Company’s significant accounting estimates include
valuation of merchandise inventory and long-lived assets and accruals for
self-insurance.
Purchase obligations. As of January 30, 2010, the Company had
purchase obligations of approximately $1,087 million. These purchase obligations
primarily consist of merchandise inventory purchase orders, commitments related
to store fixtures and supplies, and information technology service and
maintenance contracts. Merchandise inventory purchase orders of $1,044 million
represent purchase obligations of less than one year as of January 30,
2010.
Cash and cash equivalents.
Cash equivalents
consist of highly liquid, fixed income instruments purchased with an original
maturity of three months or less.
Investments. The Company’s investments are comprised
of various debt securities. At January 30, 2010 and January 31, 2009, these
investments were classified as available-for-sale and are stated at fair value.
Investments are classified as either short- or long-term based on their original
maturities and the Company’s intent. Investments with an original maturity of
less than one year are classified as short-term. See Note B for additional
information.
Merchandise inventory.
Merchandise inventory
is stated at the lower of cost (determined using a weighted average basis) or
net realizable value. The Company purchases manufacturer overruns and canceled
orders both during and at the end of a season which are referred to as
"packaway" inventory. Packaway inventory is purchased with the intent that it
will be stored in the Company's warehouses until a later date, which may even be
the beginning of the same selling season in the following year. Packaway
inventory accounted for approximately 38% of total inventories as of January 30,
2010 and January 31, 2009. The cost of the Company’s merchandise inventory is
reduced by valuation reserves for shortage based on historical shortage
experience from the Company’s physical merchandise inventory counts and cycle
counts. Merchandise inventory includes acquisition, processing, and storage
costs related to packaway inventory.
34
Cost of goods sold. In addition to product
costs, the Company includes in cost of goods sold its buying, distribution and
freight expenses as well as occupancy costs, and depreciation and amortization
related to the Company’s retail stores, buying and distribution facilities.
Buying expenses include costs to procure merchandise inventories. Distribution
expenses include the cost of operating the Company’s distribution
centers.
Property and equipment.
Property and
equipment, which include amounts recorded under capital leases, are stated at
cost, less accumulated depreciation and amortization. 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. Depreciation and amortization expense on property and equipment
was $153.1 million, $134.0 million and $120.7 million for fiscal 2009, 2008, and
2007, respectively. The cost of leasehold improvements is amortized over the
useful life of the asset or the applicable lease term, whichever is less.
Computer hardware and software costs, net of amortization, of $106.7 million and
$125.8 million at January 30, 2010 and January 31, 2009, respectively, are
included in fixtures and equipment and are amortized over their estimated useful
life generally ranging from five to seven years. Capital leases, net of
depreciation, of $0.6 million at January 30, 2010 consist of distribution center
equipment and have terms of two to three years. The Company capitalizes interest
during the construction period. Interest capitalized was $1.8 million and $3.2
million in fiscal 2009 and fiscal 2008, respectively.
Other long-term
assets. Other
long-term assets as of January 30, 2010 and January 31, 2009 consisted of the
following:
|
|
|
|
|
|
|
($000) |
|
2009 |
|
2008 |
Deferred compensation (Note B) |
|
$ |
50,706 |
|
$ |
37,304 |
Goodwill |
|
|
2,889 |
|
|
2,889 |
Deposits |
|
|
3,000 |
|
|
3,851 |
Other |
|
|
6,744 |
|
|
8,082 |
Total |
|
$ |
63,339 |
|
$ |
52,126 |
|
|
|
|
|
|
|
Other
assets are principally comprised of prepaid rent
and other long term prepayments.
Property, other
long-term assets, and certain identifiable intangibles that are subject to
amortization are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Intangible assets that are not subject to amortization, including
goodwill, are tested for impairment annually or more frequently if events or
changes in circumstances indicate that the asset may be impaired. Based on the
Company’s evaluation during fiscal 2009, fiscal 2008, and fiscal 2007, no
impairment charges were recorded.
Store closures. The Company continually reviews the
operating performance of individual stores. For stores that are closed, the
Company records a liability for future minimum lease payments net of estimated
sublease recoveries and related ancillary costs at the time the liability is
incurred. In 2009, the Company closed three Ross Dress for Less and four dd’s
DISCOUNTS locations. In 2008, the Company closed six Ross Dress for Less and
five dd’s DISCOUNTS locations. The lease loss liability related to certain of
these closed stores was $6.2 million and $1.0 million, as of January 30, 2010
and January 31, 2009, respectively. Operating costs, including depreciation, of
stores to be closed are expensed during the period they remain in
use.
Accounts payable. Accounts payable represents amounts owed
to third parties at the end of the period. Accounts payable includes book cash
overdrafts (checks issued under zero balance accounts not yet presented for
payment) in excess of cash balances in such accounts of approximately $125.7
million and $97.2 million at January 30, 2010 and January 31, 2009,
respectively. The Company includes the change in book cash overdrafts in
operating cash flows.
35
Self-insurance. The Company is self-insured for workers’
compensation, general liability insurance costs and costs of certain medical
plans. The self-insurance liability is determined actuarially, based on claims
filed and an estimate of claims incurred but not yet reported. Self-insurance
reserves as of January 30, 2010 and January 31, 2009 consisted of the following:
|
|
|
|
|
($000) |
|
2009 |
|
2008 |
Workers’ Compensation |
|
$ |
61,525 |
|
$ |
57,466 |
General Liability |
|
|
19,196 |
|
|
18,294 |
Medical Plans |
|
|
3,107 |
|
|
3,166 |
Total |
|
$ |
83,828 |
|
$ |
78,926 |
|
|
|
|
|
|
|
Workers’
compensation and self-insured medical plan liabilities are included in accrued
payroll and benefits and accruals for general liability are included in accrued
expenses and other in the accompanying consolidated balance sheets.
Other long-term
liabilities. Other
long-term liabilities as of January 30, 2010 and January 31, 2009 consisted of
the following:
|
|
|
|
|
($000) |
|
2009 |
|
2008 |
Deferred rent |
|
$ |
58,954 |
|
$ |
57,428 |
Deferred compensation |
|
|
50,706 |
|
|
37,304 |
Tenant improvement allowances |
|
|
26,559 |
|
|
29,818 |
Income taxes (See Note F) |
|
|
33,570 |
|
|
26,019 |
Other |
|
|
4,754 |
|
|
6,157 |
Total |
|
$ |
174,543 |
|
$ |
156,726 |
|
|
|
|
|
|
|
Lease accounting. When a lease contains “rent holidays” or
requires fixed escalations of the minimum lease payments, the Company records
rental expense on a straight-line basis over the term of the lease and the
difference between the average rental amount charged to expense and the amount
payable under the lease is recorded as deferred rent. The Company amortizes
deferred rent on a straight-line basis over the lease term commencing on the
possession date. Tenant improvement allowances are included in other long-term
liabilities and are amortized over the lease term. Changes in tenant improvement
allowances are included as a component of operating activities in the
consolidated statements of cash flows.
Estimated fair value of financial
instruments. The
carrying value of cash and cash equivalents, short- and long-term investments,
accounts receivable, and accounts payable approximates their estimated fair
value. See Note B and Note D for additional fair value information.
Revenue recognition. The Company recognizes revenue at the
point of sale and maintains an allowance for estimated future returns. Sales of
gift cards are deferred until they are redeemed for the purchase of Company
merchandise. Sales tax collected is not recognized as revenue and is included in
accrued expenses and other.
36
Allowance for sales returns.
An allowance for the
gross margin loss on estimated sales returns is included in accrued expenses and
other in the consolidated balance sheets. The allowance for sales returns
consists of the following:
|
($000) |
|
Beginning balance |
|
Additions |
|
Returns |
|
Ending balance |
|
|
Year ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 30, 2010 |
|
|
$ |
4,702 |
|
$ |
506,249 |
|
$ |
(505,607 |
) |
|
|
$ |
5,344 |
|
|
January 31, 2009 |
|
|
$ |
4,559 |
|
$ |
452,035 |
|
$ |
(451,892 |
) |
|
|
$ |
4,702 |
|
|
February 2, 2008 |
|
|
$ |
4,320 |
|
$ |
408,434 |
|
$ |
(408,195 |
) |
|
|
$ |
4,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Store pre-opening. Store pre-opening costs are expensed in
the period incurred.
Advertising. Advertising costs are expensed in the
period incurred. Advertising costs for fiscal 2009, 2008, and 2007 were $53.5
million, $53.9 million, and $50.2 million, respectively.
Stock-based compensation.
The Company
recognizes compensation expense based upon the grant date fair value of all
stock-based awards, typically over the vesting period. See Note C for more
information on the Company’s stock-based compensation plans.
Taxes on earnings. The Company accounts for income taxes in
accordance with Accounting Standards Codification (“ASC”) 740-10, “Accounting
for Income Taxes,” which 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 consolidated financial statements or tax returns. In
estimating future tax consequences, the Company generally considers all expected
future events other than changes in the tax law or tax rates. ASC 740-10 also
clarifies the criteria that an individual tax position must satisfy for some or
all of the benefits of that position to be recognized in a company’s
consolidated financial statements and prescribes a recognition threshold of
more-likely-than-not, and a measurement standard for all tax positions taken or
expected to be taken on a tax return, in order for those tax positions to be
recognized in the consolidated financial statements. See Note F.
Treasury stock. The Company records treasury stock at
cost. Treasury stock includes shares purchased from employees for tax
withholding purposes related to vesting of restricted stock grants.
Earnings per share (“EPS”). The
Company computes and reports both basic EPS and diluted EPS. Basic EPS is
computed by dividing net earnings by the weighted average number of common
shares outstanding for the period. Diluted EPS is computed by dividing net
earnings by the sum of the weighted average number of common shares and dilutive
common stock equivalents outstanding during the period. Diluted EPS reflects the
total potential dilution that could occur from outstanding equity plan awards,
including unexercised stock options and unvested shares of both performance and
non-performance based awards of restricted stock.
In fiscal 2009,
2008, and 2007 there were 19,800, 583,000, and 1,277,000 weighted average
shares, respectively, that could potentially dilute basic EPS in the future that
were excluded from the calculation of diluted EPS because their effect would
have been anti-dilutive for those years.
37
The following is
a reconciliation of the number of shares (denominator) used in the basic and
diluted EPS computations:
|
|
|
|
|
|
Effect
of dilutive |
|
|
|
|
|
|
|
Basic |
|
common stock |
|
Diluted |
|
|
Shares in
(000s) |
|
EPS |
|
equivalents |
|
EPS |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
122,887 |
|
|
2,127 |
|
|
|
125,014 |
|
|
Amount |
|
$ |
3.60 |
|
$ |
(.06 |
) |
|
$ |
3.54 |
|
|
|
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
129,235 |
|
|
2,080 |
|
|
|
131,315 |
|
|
Amount |
|
$ |
2.36 |
|
$ |
(.03 |
) |
|
$ |
2.33 |
|
|
|
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
135,093 |
|
|
2,049 |
|
|
|
137,142 |
|
|
Amount |
|
$ |
1.93 |
|
$ |
(.03 |
) |
|
$ |
1.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales mix. The Company’s sales mix is shown below
for fiscal 2009, 2008, and 2007:
|
|
|
2009 |
|
2008 |
|
2007 |
|
|
Ladies |
|
30% |
|
32% |
|
32% |
|
|
Home accents and bed and bath |
|
24% |
|
23% |
|
23% |
|
|
Men’s |
|
13% |
|
14% |
|
15% |
|
|
Accessories, lingerie, fine jewelry, and fragrances |
|
13% |
|
12% |
|
11% |
|
|
Shoes |
|
11% |
|
10% |
|
10% |
|
|
Children’s |
|
9% |
|
9% |
|
9% |
|
|
Total |
|
100% |
|
100% |
|
100% |
|
|
|
|
|
|
|
|
|
|
Comprehensive income. Comprehensive income consists of net
earnings and other comprehensive income, principally unrealized investment gains
or losses. Components of comprehensive income are presented in the consolidated
statements of stockholders’ equity.
New accounting standards.
In June 2009, the
Financial Accounting Standards Board (“FASB”) issued ASC 810 (originally issued
as SFAS No. 167, “Amendments to FASB Interpretation No. 46(R))”. Among other
things, ASC 810 responds to concerns about the application of certain key
provisions of FIN 46(R), including those regarding the transparency of the
involvement with variable interest entities. ASC 810 is effective for fiscal
years beginning after November 15, 2009. The Company does not believe the
adoption of ASC 810 will have a material impact on its consolidated financial
statements.
38
Note B: Investments
The amortized cost and fair value of the
Company’s available-for-sale securities as of January 30, 2010
were:
|
|
|
Amortized |
|
Unrealized |
|
Unrealized |
|
Fair |
|
|
Short- |
|
Long- |
|
|
($000) |
|
cost |
|
gains |
|
losses |
|
value |
|
|
term |
|
term |
|
|
Auction-rate securities |
|
$ |
1,050 |
|
$ |
- |
|
$ |
(158 |
) |
|
$ |
892 |
|
|
$ |
- |
|
$ |
892 |
|
|
Corporate securities |
|
|
9,704 |
|
|
567 |
|
|
(67 |
) |
|
|
10,204 |
|
|
|
1,073 |
|
|
9,131 |
|
|
U.S. Government and
agency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities |
|
|
5,247 |
|
|
30 |
|
|
(187 |
) |
|
|
5,090 |
|
|
|
- |
|
|
5,090 |
|
|
Mortgage-backed securities |
|
|
2,340 |
|
|
79 |
|
|
(3 |
) |
|
|
2,416 |
|
|
|
681 |
|
|
1,735 |
|
|
Total |
|
$ |
18,341 |
|
$ |
676 |
|
$ |
(415 |
) |
|
$ |
18,602 |
|
|
$ |
1,754 |
|
$ |
16,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amortized cost and fair value of the
Company’s available-for-sale securities as of January 31, 2009
were:
|
|
|
Amortized |
|
Unrealized |
|
Unrealized |
|
Fair |
|
|
Short- |
|
Long- |
|
|
($000) |
|
cost |
|
gains |
|
losses |
|
value |
|
|
term |
|
term |
|
|
Auction-rate securities |
|
$ |
1,100 |
|
$ |
- |
|
$ |
- |
|
|
$ |
1,100 |
|
|
$ |
- |
|
$ |
1,100 |
|
|
Asset-backed securities |
|
|
984 |
|
|
5 |
|
|
(200 |
) |
|
|
789 |
|
|
|
389 |
|
|
400 |
|
|
Corporate securities |
|
|
13,773 |
|
|
152 |
|
|
(685 |
) |
|
|
13,240 |
|
|
|
- |
|
|
13,240 |
|
|
U.S. Government and agency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities |
|
|
15,940 |
|
|
446 |
|
|
- |
|
|
|
16,386 |
|
|
|
- |
|
|
16,386 |
|
|
Mortgage-backed
securities |
|
|
8,189 |
|
|
119 |
|
|
(1,011 |
) |
|
|
7,297 |
|
|
|
409 |
|
|
6,888 |
|
|
Total |
|
$ |
39,986 |
|
$ |
722 |
|
$ |
(1,896 |
) |
|
$ |
38,812 |
|
|
$ |
798 |
|
$ |
38,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 30, 2010, the Company had
investments of approximately $18.3 million of which $5.0 million had gross
unrealized losses of $0.2 million that had been in a continuous unrealized loss
position for more than twelve months. Of the remaining $13.3 million, $3.0
million of investments had gross unrealized losses of $0.2 million which had
been in a continuous unrealized loss position for less than twelve months. These
unrealized losses on investments were caused primarily by the decline in market
values of floating rate corporate and auction rate securities and the impact of
interest yield fluctuations on long-term treasury securities. The Company does
not consider these investments to be other than temporarily impaired at January
30, 2010.
In applying the valuation principles to
financial assets and liabilities, a three-tier fair value hierarchy was used to
prioritize the inputs used in the valuation methodologies as
follows:
Level 1—Observable inputs that reflect
quoted prices (unadjusted) for identical assets or liabilities in active
markets.
Level 2—Include other inputs that are
directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs which are
supported by little or no market activity.
This fair value hierarchy also requires
the Company to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. Asset-backed, corporate, U.S.
Government and agency, and mortgage-backed securities are classified within
Level 1 or Level 2 because these securities are valued using quoted market
prices or alternative pricing sources and models utilizing market observable
inputs. The Company’s investment in auction rate securities is classified within
Level 3 because these are valued using valuation techniques for which some of
the inputs to these models are unobservable in the market.
39
Assets measured
at fair value on a recurring basis at January 30, 2010 are summarized
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value Measurements at Reporting Date |
|
|
|
|
|
|
|
Quoted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active |
|
Significant |
|
|
|
|
|
|
|
|
|
|
|
Markets for |
|
Other |
|
Significant |
|
|
|
|
|
|
|
Identical |
|
Observable |
|
Unobservable |
|
|
|
|
January 30, |
|
Assets |
|
Inputs |
|
Inputs |
|
|
($000) |
|
2010 |
|
(Level
1) |
|
(Level
2) |
|
(Level
3) |
|
|
Auction-rate securities |
|
$ |
892 |
|
$ |
- |
|
$ |
- |
|
|
$ |
892 |
|
|
Corporate securities |
|
|
10,204 |
|
|
- |
|
|
10,204 |
|
|
|
- |
|
|
U.S. Government and agency
securities |
|
|
5,090 |
|
|
5,090 |
|
|
- |
|
|
|
- |
|
|
Mortgage-backed securities |
|
|
2,416 |
|
|
- |
|
|
2,416 |
|
|
|
- |
|
|
Total assets measured at fair
value |
|
$ |
18,602 |
|
$ |
5,090 |
|
$ |
12,620 |
|
|
$ |
892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets measured
at fair value on a recurring basis at January 31, 2009 are summarized
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value Measurements at Reporting Date |
|
|
|
|
|
|
|
Quoted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active |
|
Significant |
|
|
|
|
|
|
|
|
|
|
|
Markets for |
|
Other |
|
Significant |
|
|
|
|
|
|
|
Identical |
|
Observable |
|
Unobservable |
|
|
|
|
January 31, |
|
Assets |
|
Inputs |
|
Inputs |
|
|
($000) |
|
2009 |
|
(Level
1) |
|
(Level
2) |
|
(Level
3) |
|
|
Auction-rate securities |
|
$ |
1,100 |
|
$ |
- |
|
$ |
- |
|
|
$ |
1,100 |
|
|
Asset-backed securities |
|
|
789 |
|
|
- |
|
|
789 |
|
|
|
- |
|
|
Corporate securities |
|
|
13,240 |
|
|
- |
|
|
13,240 |
|
|
|
- |
|
|
U.S. Government and agency securities |
|
|
16,386 |
|
|
16,386 |
|
|
- |
|
|
|
- |
|
|
Mortgage-backed
securities |
|
|
7,297 |
|
|
- |
|
|
7,297 |
|
|
|
- |
|
|
Total assets measured at fair value |
|
$ |
38,812 |
|
$ |
16,386 |
|
$ |
21,326 |
|
|
$ |
1,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The maturities
of investment securities at January 30, 2010 were:
|
|
|
|
|
|
Estimated |
|
|
($000) |
|
Cost
basis |
|
fair
value |
|
|
Maturing in one year or
less |
|
$ |
1,722 |
|
$ |
1,754 |
|
|
Maturing after one year through five years |
|
|
6,446 |
|
|
6,812 |
|
|
Maturing after five years through
ten years |
|
|
9,123 |
|
|
9,144 |
|
|
Maturing after ten years |
|
|
1,050 |
|
|
892 |
|
|
Total |
|
$ |
18,341 |
|
$ |
18,602 |
|
|
|
|
|
|
|
|
|
|
40
The maturities
of investment securities at January 31, 2009 were:
|
|
|
|
|
|
Estimated |
|
|
($000) |
|
Cost
basis |
|
fair
value |
|
|
Maturing in one year or
less |
|
$ |
886 |
|
$ |
798 |
|
|
Maturing after one year through five years |
|
|
25,646 |
|
|
25,600 |
|
|
Maturing after five years through
ten years |
|
|
11,525 |
|
|
10,532 |
|
|
Maturing after ten years |
|
|
1,929 |
|
|
1,882 |
|
|
Total |
|
$ |
39,986 |
|
$ |
38,812 |
|
|
|
|
|
|
|
|
|
|
The underlying
assets in the Company’s non-qualified deferred compensation program totaling
$50.7 million as of January 30, 2010 (included in Other long-term assets and in
Other long-term liabilities) primarily consist of participant directed money
market mutual funds, as well as stable value, stock, and bond funds. The fair
value measurement for funds that are quoted market prices in active markets
(Level 1) totaled $43.9 million as of January 30, 2010. The fair value
measurement for the stable value funds without quoted market prices in active
markets (Level 2) totaled $6.8 million as of January 30, 2010. Fair market value
for these funds is considered to be the sum of participant funds invested under
the contract plus accrued interest.
Note C: Stock-based
compensation
For fiscal 2009,
2008, and 2007, the Company recognized stock-based compensation expense as
follows:
|
($000) |
|
2009 |
|
2008 |
|
2007 |
|
|
ESPP and stock options |
|
$ |
2,952 |
|
$ |
5,359 |
|
$ |
9,083 |
|
|
Restricted stock and performance awards |
|
|
22,794 |
|
|
17,216 |
|
|
16,082 |
|
|
Total |
|
$ |
25,746 |
|
$ |
22,575 |
|
$ |
25,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized
stock-based compensation cost was not significant in any year.
No stock options
were granted during 2009 or 2008. Beginning in 2008, the Company eliminated a
lookback option in determining the purchase price for shares purchased under the
ESPP. The Company recognizes expense for ESPP purchase rights equal to the value
of the 15% discount given on the purchase date. At January 30, 2010, the Company
had one stock-based compensation plan, which is further described in Note
H.
The fair value
of stock options granted during fiscal 2007 was estimated using a 3.9 year
expected life from grant date, volatility of 28.4%, risk-free interest rate of
4.7%, and dividend yield of 0.9%. The fair value of ESPP rights granted during
fiscal 2007 was estimated using a one year expected life from grant date, 26.4%
expected volatility, 5.0% risk-free interest rate, and 0.9% dividend yield. The
weighted average fair values per share of stock options granted and employee
stock purchase plan shares issued during 2007 were $9.12 and $8.02,
respectively.
41
Total
stock-based compensation recognized in the Company’s consolidated Statements of
Earnings for fiscal 2009, 2008, and 2007 is as follows:
|
Statements of Earnings Classification ($000) |
|
2009 |
|
2008 |
|
2007 |
|
|
Cost of goods sold |
|
$ |
11,912 |
|
$ |
10,021 |
|
$ |
10,736 |
|
|
Selling, general and administrative |
|
|
13,834 |
|
|
12,554 |
|
|
14,429 |
|
|
Total |
|
$ |
25,746 |
|
$ |
22,575 |
|
$ |
25,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Note D: Debt
Revolving credit
facilities. The
Company has a $600 million revolving credit facility with an expiration date of
July 2011 and interest pricing at LIBOR plus 45 basis points. This facility
contains a $300 million sublimit for issuance of standby letters of credit, of
which $234.8 million was available at January 30, 2010. Interest is payable upon
borrowing maturity but no less than quarterly. Borrowing under this credit
facility is subject to maintaining certain financial ratios. As of January 30,
2010 and January 31, 2009, the Company had no borrowings outstanding under this
facility and was in compliance with the covenants.
Senior Notes. The Company has two series of unsecured
senior notes with various institutional investors for $150 million. The Series A
notes, totaling $85 million are due in December 2018 and bear interest at a rate
of 6.38%. The Series B notes totaling $65 million are due in December 2021 and
bear interest at a rate of 6.53%. The fair value of these notes as of January
30, 2010 of approximately $164 million is estimated by obtaining comparable
market quotes. Borrowings under these notes are subject to certain covenants
including interest coverage and other financial ratios. As of January 30, 2010,
the Company was in compliance with these covenants. The senior notes are subject
to prepayment penalties for early payment of principal.
Letters of credit. The Company uses standby letters of
credit to collateralize certain obligations related to its self-insured workers’
compensation and general liability programs. The Company had $65.2 million and
$60.4 million in standby letters of credit at January 30, 2010 and January 31,
2009, respectively.
The Company also
had $32.9 million and $16.7 million in trade letters of credit outstanding at
January 30, 2010 and January 31, 2009, respectively.
Note E: Leases
The Company
leases all but two of its store sites with original, non-cancelable terms that
in general range from three to ten years. Store leases typically contain
provisions for three to four renewal options of five years each. Most store
leases also provide for minimum annual rentals and for payment of certain
expenses. In addition, some store leases also have provisions for additional
rent based on a percentage of sales.
The Company has
lease arrangements for certain equipment in its stores for its point-of-sale
(“POS”) hardware and software systems. These leases are accounted for as
operating leases for financial reporting purposes. The initial terms of these
leases are either two or three years and the Company typically has options to
renew the leases for two to three one-year periods. Alternatively, the Company
may purchase or return the equipment at the end of the initial or each renewal
term. The Company’s obligation under the residual value guarantee at the end of
the respective lease terms is $2.6 million.
42
The Company also leases a 1.3 million square foot distribution center in
Perris, California. The land and building for this distribution center are
financed under a $70 million ten-year synthetic lease facility that expires in
July 2013. Rent expense on this distribution center is payable monthly at a
fixed annual rate of 5.8% on the lease balance of $70 million. At the end of the
lease term, the Company must either refinance the distribution facility,
purchase it at the amount of the then-outstanding lease balance, or sell it to a
third party. If the distribution center is sold to a third party for less than
$70 million, the Company has agreed under a residual value guarantee to pay the
lessor any shortfall amount up to $56 million. The agreement includes a
prepayment penalty for early payoff of the lease.
The Company has recognized a liability and corresponding asset for the
inception date estimated fair value of the residual value guarantee in the
amount of $8.3 million for the Perris, California distribution center and $0.9
million for the POS leases. These residual value guarantees are amortized on a
straight-line basis over the original terms of the leases. The current portion
of the related asset and liability is recorded in “Prepaid expenses and other”
and “Accrued expenses and other,” respectively, and the long-term portion of the
related assets and liabilities is recorded in “Other long-term assets” and
“Other long-term liabilities,” respectively, in the accompanying consolidated
balance sheets.
The Company
leases two warehouses in Carlisle, Pennsylvania with one lease expiring in 2013
and the other expiring in 2014. In January 2009, the Company exercised a
three-year option for a 255,000 square foot warehouse in Fort Mill, South
Carolina, extending the term to February 2013. In June 2008, the Company
purchased a 423,000 square foot warehouse also in Fort Mill, South Carolina. All
four of these properties are used to store the Company’s packaway inventory. The
Company also leases a 10-acre parcel that has been developed for trailer parking
adjacent to its Perris distribution center.
The synthetic
lease facilities described above, as well as the Company’s revolving credit
facility and senior notes, have covenant restrictions requiring the Company to
maintain certain interest coverage and other financial ratios. In addition, the
interest rates under the revolving credit facility may vary depending on the
Company’s actual interest coverage ratios. As of January 30, 2010, the Company
was in compliance with these covenants.
The Company
leases approximately 181,000 square feet of office space for its corporate
headquarters in Pleasanton, California, under several facility leases. The lease
terms for these facilities expire between 2011 and 2015 and contain renewal
provisions.
The Company
leases approximately 197,000 and 26,000 square feet of office space for its New
York City and Los Angeles buying offices, respectively. The lease terms for
these facilities expire in 2021 and 2014, respectively and contain renewal
provisions.
43
The aggregate future minimum annual lease
payments under leases in effect at January 30, 2010 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
Residual |
|
|
|
|
|
|
|
Capital |
|
Operating |
|
Synthetic |
|
value |
|
|
|
|
|
($000) |
|
leases |
|
leases |
|
leases |
|
guarantees |
|
Total leases |
|
2010 |
|
$ |
291 |
|
$ |
333,077 |
|
$ |
5,681 |
|
$ |
1,564 |
|
$ |
340,613 |
|
|
2011 |
|
|
34 |
|
|
347,150 |
|
|
4,674 |
|
|
714 |
|
|
352,572 |
|
|
2012 |
|
|
11 |
|
|
313,200 |
|
|
4,212 |
|
|
316 |
|
|
317,739 |
|
|
2013 |
|
|
- |
|
|
276,459 |
|
|
1,705 |
|
|
56,000 |
|
|
334,164 |
|
|
2014 |
|
|
- |
|
|
225,677 |
|
|
- |
|
|
- |
|
|
225,677 |
|
|
Thereafter |
|
|
- |
|
|
500,278 |
|
|
- |
|
|
- |
|
|
500,278 |
|
|
Total minimum lease
payments |
|
$ |
336 |
|
$ |
1,995,841 |
|
$ |
16,272 |
|
$ |
58,594 |
|
$ |
2,071,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rent
expense for all leases was $336.5 million in 2009, $325.9 million in 2008, and
$301.6 million in 2007.
Note F: Taxes on
Earnings
The provision
for taxes consisted of the following:
|
($000) |
|
2009 |
|
2008 |
|
2007 |
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
242,111 |
|
$ |
152,833 |
|
$ |
160,155 |
|
|
State |
|
|
17,548 |
|
|
13,285 |
|
|
14,613 |
|
|
|
|
|
259,659 |
|
|
166,118 |
|
|
174,768 |
|
|
|
Deferred |
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
13,417 |
|
|
23,621 |
|
|
(9,263 |
) |
|
State |
|
|
2,696 |
|
|
183 |
|
|
(1,436 |
) |
|
|
|
|
16,113 |
|
|
23,804 |
|
|
(10,699 |
) |
|
Total |
|
$ |
275,772 |
|
$ |
189,922 |
|
$ |
164,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2009,
2008, and 2007, the Company realized tax benefits of $8.6 million, $8.5 million
and $6.5 million, respectively, related to employee equity programs that were
credited to additional paid-in capital.
The provision
for taxes for financial reporting purposes is different from the tax provision
computed by applying the statutory federal income tax rate. Differences are as
follows:
|
|
|
2009 |
|
2008 |
|
2007 |
|
|
Federal income taxes at the
statutory rate |
|
35% |
|
35% |
|
35% |
|
|
State income taxes (net of federal
benefit) and other, net |
|
3% |
|
3% |
|
4% |
|
|
|
|
38% |
|
38% |
|
39% |
|
|
|
|
|
|
|
|
|
|
44
The components
of deferred income taxes at January 30, 2010 and January 31, 2009 are as
follows:
|
($000) |
|
|
2009 |
|
|
2008 |
|
|
Deferred Tax
Assets |
|
|
|
|
|
|
|
|
|
Deferred compensation |
|
$ |
29,014 |
|
|
$ |
25,015 |
|
|
Deferred rent |
|
|
11,094 |
|
|
|
10,490 |
|
|
Employee benefits |
|
|
- |
|
|
|
7,861 |
|
|
Accrued liabilities |
|
|
20,275 |
|
|
|
18,776 |
|
|
California franchise taxes |
|
|
5,399 |
|
|
|
3,701 |
|
|
Stock-based compensation |
|
|
7,224 |
|
|
|
7,771 |
|
|
Other |
|
|
9,995 |
|
|
|
8,573 |
|
|
|
|
|
83,001 |
|
|
|
82,187 |
|
|
Deferred Tax
Liabilities |
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
(138,134 |
) |
|
|
(121,952 |
) |
|
Merchandise inventory |
|
|
(24,652 |
) |
|
|
(30,627 |
) |
|
Employee benefits |
|
|
(5,529 |
) |
|
|
- |
|
|
Supplies |
|
|
(7,811 |
) |
|
|
(7,015 |
) |
|
Prepaid expenses |
|
|
(6,052 |
) |
|
|
(5,657 |
) |
|
|
|
|
(182,178 |
) |
|
|
(165,251 |
) |
|
Net Deferred Tax
Liabilities |
|
$ |
(99,177 |
) |
|
$ |
(83,064 |
) |
|
Classified as: |
|
|
|
|
|
|
|
|
|
Current net deferred tax (liability) asset |
|
$ |
(2,894 |
) |
|
$ |
14,093 |
|
|
Long-term net deferred tax liability |
|
|
(96,283 |
) |
|
|
(97,157 |
) |
|
Net Deferred Tax
Liabilities |
|
$ |
(99,177 |
) |
|
$ |
(83,064 |
) |
|
|
|
|
|
|
|
|
|
|
Effective
February 4, 2007, the Company adopted new accounting guidance on the accounting
for uncertainty in income taxes. As a result, the Company established a $26.3
million reserve for unrecognized tax benefits, inclusive of $6.0 million of
related interest. The reserve is classified as a long-term liability and
included in other long-term liabilities in the Company’s consolidated balance
sheets. Upon adoption of ASC 740, the Company also recognized a reduction in
retained earnings of $7.4 million and certain other deferred income tax assets
and liabilities were reclassified.
The changes in
amounts of unrecognized tax benefits (gross of federal tax benefits and
excluding interest) at fiscal 2009, 2008, and 2007 are as follows:
|
($000) |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
Unrecognized tax benefits -
beginning of year |
|
$ |
26,338 |
|
|
$ |
23,218 |
|
|
$ |
25,680 |
|
|
Gross increases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax positions in current
period |
|
|
7,314 |
|
|
|
4,695 |
|
|
|
5,451 |
|
|
Tax positions in prior
period |
|
|
2,308 |
|
|
|
3,658 |
|
|
|
1,486 |
|
|
Gross decreases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax positions in prior
periods |
|
|
- |
|
|
|
(1,115 |
) |
|
|
(6,352 |
) |
|
Lapse of statute
limitations |
|
|
(1,731 |
) |
|
|
(1,783 |
) |
|
|
(3,004 |
) |
|
Settlements |
|
|
(880 |
) |
|
|
(2,335 |
) |
|
|
(43 |
) |
|
Unrecognized tax benefits - end of
year |
|
$ |
33,349 |
|
|
$ |
26,338 |
|
|
$ |
23,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
In fiscal 2009,
2008, and 2007, the reserves for unrecognized tax benefits (net of federal tax
benefits) were $33.6 million, $26.0 million, and $23.2 million inclusive of
$10.0 million, $6.5 million, and $5.6 million of related interest, respectively.
The Company accounts for interest and penalties related to unrecognized tax
benefits as a part of its provision for taxes on earnings. If recognized, $26.9
million would impact the Company’s effective tax rate. The difference between
the total amount of unrecognized tax benefits and the amounts that would impact
the effective tax rate relates to amounts attributable to deferred income tax
assets and liabilities. These amounts are net of federal and state income taxes.
During the next
twelve months, it is reasonably possible that the statute of limitations may
lapse pertaining to positions taken by the Company in prior year tax returns. If
this occurs, the total amount of unrecognized tax benefits may decrease,
reducing the provision for taxes on earnings by up to $2.3 million.
The Company is
generally open to audit by the Internal Revenue Service under the statute of
limitations for fiscal years 2006 through 2009. The Company’s state income tax
returns are generally open to audit under the various statutes of limitations
for fiscal years 2005 through 2009. Certain state tax returns are currently
under audit by state tax authorities. The Company does not expect the results of
these audits to have a material impact on the consolidated financial statements.
Note G: Employee Benefit Plans
The Company has
a defined contribution plan that is available to certain employees. 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.
This plan permits employees to make contributions up to the maximum limits
allowable under the Internal Revenue Code. The Company matches up to 4% of the
employee’s salary up to the plan limits. Company matching contributions to the
401(k) plan were $7.6 million, $7.3 million, and $6.8 million in fiscal 2009,
2008, and 2007, respectively.
The Company also
has an Incentive Compensation Plan, which provides cash awards to key management
and employees based on Company and individual performance.
The Company also
makes available to management a Non-qualified Deferred Compensation Plan which
allows management to make payroll contributions on a pre-tax basis in addition
to the 401(k) plan. Other long-term assets include $50.7 million and $37.3
million at January 30, 2010 and January 31, 2009, respectively, of long-term
plan investments, at market value, set aside or designated for the Non-qualified
Deferred Compensation Plan (See Note B). Plan investments are designated by the
participants, and investment returns are not guaranteed by the Company. The
Company has a corresponding liability to participants of $50.7 million and $37.3
million at January 30, 2010 and January 31, 2009, respectively, included in
other long-term liabilities in the consolidated balance sheets.
In addition, the
Company has certain individuals who receive or will receive post-employment
medical benefits. The estimated liability for these benefits of $3.9 million and
$4.3 million is included in accrued liabilities and other in the accompanying
consolidated balance sheets as of January 30, 2010 and January 31, 2009,
respectively.
46
Note H: Stockholders'
Equity
Common stock. In January 2008 the Company’s Board of
Directors approved a two-year stock repurchase program of up to $600 million for
fiscal 2008 and 2009. In November 2005, the Company’s Board of Directors
authorized a two-year stock repurchase program of up to $400 million for fiscal
2006 and 2007. In January 2010, the Company’s Board of Directors approved a
two-year $750 million stock repurchase program for fiscal 2010 and 2011. The
following table summarizes the Company’s stock repurchase activity in fiscal
2009, 2008, and 2007:
|
|
Shares
repurchased |
|
Average
repurchase |
|
Repurchased |
|
|
Fiscal
Year |
(in
millions) |
|
price |
|
(in
millions) |
|
|
2009 |
7.4 |
|
$ 40.68 |
|
|
$ 300 |
|
|
2008 |
9.3 |
|
$ 32.09 |
|
|
$ 300 |
|
|
2007 |
6.9 |
|
$ 29.10 |
|
|
$ 200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock. The Company has four million shares of
preferred stock authorized, with a par value of $.01 per share. No preferred
stock is issued or outstanding.
Dividends. In January 2010, the Company’s Board of
Directors declared a quarterly cash dividend of $.16 per common share, payable
on March 31, 2010. The Company’s Board of Directors declared quarterly cash
dividends of $.11 per common share in January, May, August, and November 2009,
cash dividends of $.095 per common share in January, May, August, and November
2008, and cash dividends of $.075 per common share in January, May, August, and
November 2007.
2008 Equity Incentive Plan.
On May 22, 2008, the Company’s
stockholders approved the adoption of the Ross Stores, Inc. 2008 Equity
Incentive Plan (the “2008 Plan”) with an initial share reserve of 8.3 million
shares of the Company’s common stock, of which 6.0 million shares can be issued
as full value awards. The 2008 Plan provides for various types of incentive
awards, which may potentially include the grant of stock options, stock
appreciation rights, restricted stock purchase rights, restricted stock bonuses,
restricted stock units, performance shares, performance units, and deferred
compensation awards.
47
As of January
30, 2010, there were 4.9 million shares that remained available for grant under
the 2008 Plan. A summary of the stock option activity for fiscal 2009 is
presented below.
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
Weighted |
|
average |
|
|
|
|
|
|
|
|
average |
|
remaining |
|
Aggregate |
|
|
|
|
Number of |
|
exercise |
|
contractual |
|
intrinsic |
|
|
(000, except per share data) |
|
shares |
|
price |
|
term |
|
value |
|
|
Outstanding at January 31,
2009 |
|
4,534 |
|
$ 25.39 |
|
|
|
|
|
|
Granted |
|
- |
|
$ |
- |
|
|
|
|
|
|
Exercised |
|
(1,733 |
) |
$ |
25.16 |
|
|
|
|
|
|
Forfeited |
|
(28 |
) |
$ 25.75 |
|
|
|
|
|
|
|
|
|
Outstanding at January 30,
2010 |
|
2,773 |
|
$ 25.53 |
|
4.54 |
|
$ 56,568 |
|
|
Vested and Expected to Vest at
January 30, 2010 |
|
2,751 |
|
$ 25.46 |
|
4.52 |
|
$ 56,319 |
|
|
Exercisable at January 30,
2010 |
|
2,451 |
|
$ 24.38 |
|
4.20 |
|
$ 52,827 |
|
|
|
|
|
|
|
|
|
|
|
|
The following
table summarizes information about the weighted average remaining contractual
life (in years) and the weighted average exercise prices for stock options both
outstanding and exercisable as of January 30, 2010 (number of shares in
thousands):
|
|
|
|
|
|
|
|
|
Options outstanding |
|
Options exercisable |
|
|
|
|
|
|
|
|
|
|
Number of |
|
Remaining |
|
Exercise |
|
Number of |
|
Exercise |
|
|
Exercise price range |
|
shares |
|
life |
|
price |
|
shares |
|
price |
|
|
$ |
7.19 |
|
to |
|
$ |
19.02 |
|
578 |
|
1.71 |
|
|
$ 14.49 |
|
578 |
|
|
$ 14.49 |
|
|
$ |
19.13 |
|
to |
|
$ |
26.86 |
|
561 |
|
4.06 |
|
|
$ 23.73 |
|
560 |
|
|
$ 23.73 |
|
|
$ |
26.99 |
|
to |
|
$ |
28.53 |
|
556 |
|
5.45 |
|
|
$ 27.79 |
|
555 |
|
|
$ 27.79 |
|
|
$ |
28.55 |
|
to |
|
$ |
29.42 |
|
563 |
|
4.85 |
|
|
$ 28.94 |
|
562 |
|
|
$ 28.94 |
|
|
$ |
29.57 |
|
to |
|
$ |
34.37 |
|
515 |
|
6.94 |
|
|
$ 33.67 |
|
196 |
|
|
$ 32.57 |
|
|
$ |
7.19 |
|
to |
|
$ |
34.37 |
|
2,773 |
|
4.54 |
|
|
$ 25.53 |
|
2,451 |
|
|
$ 24.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
A summary of the
restricted stock activity for fiscal 2009 is presented below:
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
average |
|
|
|
|
Number of |
|
|
grant date |
|
|
(000, except per share data) |
|
shares |
|
|
fair
value |
|
|
Unvested at February 3,
2007 |
|
1,964 |
|
|
$ |
27.11 |
|
|
Awarded |
|
572 |
|
|
$ |
32.61 |
|
|
Released |
|
(521 |
) |
|
$ |
24.31 |
|
|
Forfeited |
|
(43 |
) |
|
$ |
28.98 |
|
|
|
|
|
Unvested at February 2,
2008 |
|
1,972 |
|
|
$ |
29.40 |
|
|
Awarded |
|
618 |
|
|
$ |
29.79 |
|
|
Released |
|
(621 |
) |
|
$ |
28.15 |
|
|
Forfeited |
|
(33 |
) |
|
$ |
29.35 |
|
|
|
|
|
Unvested at January 31,
2009 |
|
1,936 |
|
|
$ |
29.93 |
|
|
Awarded |
|
1,271 |
|
|
$ |
37.93 |
|
|
Released |
|
(589 |
) |
|
$ |
30.12 |
|
|
Forfeited |
|
(50 |
) |
|
$ |
30.47 |
|
|
|
|
|
Unvested at January 30,
2010 |
|
2,568 |
|
|
$ |
33.83 |
|
|
|
|
|
|
|
|
|
|
The market value
of restricted shares at the date of grant is amortized to expense ratably over
the vesting period of generally three to five years. The unamortized
compensation expense at January 30, 2010 and January 31, 2009 was $56.1 million
and $31.0 million, respectively, which is expected to be recognized over a
weighted-average period of 2.2 years. During fiscal 2009, 2008, and 2007, shares
purchased by the Company for tax withholding totaled 163,000, 163,000, and
125,000 shares, respectively, and are considered treasury shares which are
available for reissuance. As of January 30, 2010 and January 31, 2009, the
Company held 1,291,000 and 1,128,000 shares of treasury stock, respectively.
Intrinsic value for restricted stock, defined as the market value on the last
business day of fiscal year 2009 (or $45.93), was $117.9 million. A total of
4,943,000, 5,840,000 and 2,709,000 shares were available for new restricted
stock awards at the end of fiscal 2009, 2008, and 2007,
respectively.
Performance share awards.
The Company has a performance share
award program for senior executives. A performance share award represents a
right to receive shares of common stock on a specified settlement date based on
the Company’s attainment of a profitability-based performance goal during a
performance period. If attained, the common stock then granted vests over a
specified remaining service period, generally two years. The Company recognized
$4.0 million, $1.5 million, and $0.6 million of expense related to performance
share awards in fiscal 2009, 2008, and 2007 respectively.
Employee Stock Purchase
Plan. Under the
Employee Stock Purchase Plan, eligible full-time employees participating in the
annual offering period can choose to have up to the lesser of 10% or $21,250 of
their annual base earnings withheld to purchase the Company’s common stock. The
purchase price of the stock is 85% of the closing market price on the date of
purchase. In addition, purchases occur on a quarterly basis (on the last trading
day of each calendar quarter). Prior to 2008, the purchase price of the stock
was the lower of 85% of the market price at the beginning of the offering period
or the end of the offering period. During fiscal 2009, 2008, and 2007, employees
purchased approximately 166,000, 188,000 and 214,000 shares, respectively, of
the Company’s common stock under the plan at weighted average per share prices
of $34.75, $27.89, and $21.73, respectively. Through January 30, 2010,
approximately 9,094,000 shares had been issued under this plan and 906,000
shares remained available for future issuance.
49
Note I: Related Party Transactions
The Company has
a consulting agreement with its Chairman of the Board of Directors, under which
the Company pays him an annual consulting fee of $1.1 million in monthly
installments through January 2012. In addition, the agreement provides for
administrative support and health and other benefits for the individual and his
dependents, which totaled approximately $0.2 million in fiscal 2009, 2008 and
2007, along with amounts to cover premiums through January 2012 on a life
insurance policy with a death benefit of $2 million. On termination of Mr.
Ferber’s consultancy with the Company, the Company will pay Mr. Ferber $75,000
per year for a period of 10 years.
Note J: Litigation, Claims, and
Assessments
Like many
California retailers, the Company has been named in class action lawsuits
regarding wage and hour claims. Class action litigation involving allegations
that hourly associates have missed meal and/or rest break periods, as well as
allegations of unpaid overtime wages to store managers and assistant store
managers at Company stores under state law remains pending as of January 30,
2010.
The Company is
also party to various other legal proceedings arising in the normal course of
business. Actions filed against the Company include commercial, product,
customer, intellectual property, and labor and employment-related claims,
including lawsuits in which plaintiffs allege that the Company violated state or
federal laws. Actions against the Company are in various procedural stages. Many
of these proceedings raise factual and legal issues and are subject to
uncertainties.
In the opinion
of management, the resolution of pending class action litigation and other
currently pending legal proceedings is not expected to have a material adverse
effect on the Company’s financial condition, results of operations, or cash
flows.
50
Note K: Quarterly Financial Data
(Unaudited)
Summarized
quarterly financial information for fiscal 2009 and 2008 is presented in the
tables below.
Year ended
January 30, 2010:
|
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
|
|
ended |
|
ended |
|
ended |
|
ended |
|
|
|
May 2, |
|
August 1, |
|
October 31, |
|
January 30, |
|
|
($000, except per
share data) |
2009 |
|
2009 |
|
2009 |
|
2010 |
|
|
Sales |
$ |
1,691,599 |
|
$ |
1,768,636 |
|
$ |
1,744,139 |
|
$ |
1,979,839 |
|
|
|
|
|
Cost of goods sold |
|
1,268,709 |
|
|
1,311,136 |
|
|
1,284,852 |
|
|
1,462,581 |
|
|
Selling, general and administrative |
|
272,030 |
|
|
286,158 |
|
|
286,511 |
|
|
286,114 |
|
|
Interest expense, net |
|
1,656 |
|
|
1,390 |
|
|
1,943 |
|
|
2,604 |
|
|
Total costs and expenses |
|
1,542,395 |
|
|
1,598,684 |
|
|
1,573,306 |
|
|
1,751,299 |
|
|
Earnings before taxes |
|
149,204 |
|
|
169,952 |
|
|
170,833 |
|
|
228,540 |
|
|
Provision for taxes on earnings |
|
57,817 |
|
|
66,545 |
|
|
65,753 |
|
|
85,657 |
|
|
Net earnings |
$ |
91,387 |
|
$ |
103,407 |
|
$ |
105,080 |
|
$ |
142,883 |
|
|
|
|
|
Earnings per share – basic1 |
$ |
.73 |
|
$ |
.84 |
|
$ |
.86 |
|
$ |
1.18 |
|
|
Earnings per share – diluted1 |
$ |
.72 |
|
$ |
.82 |
|
$ |
.84 |
|
$ |
1.16 |
|
|
|
|
|
Dividends declared per |
|
|
|
|
|
|
|
|
|
|
|
|
|
share on
common stock |
$ |
- |
|
$ |
.110 |
|
$ |
.110 |
|
$ |
.270 |
2 |
|
Stock price3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
$ |
39.86 |
|
$ |
44.49 |
|
$ |
48.46 |
|
$ |
46.74 |
|
|
Low |
$ |
28.25 |
|
$ |
35.19 |
|
$ |
42.14 |
|
$ |
42.51 |
|
|
1 Quarterly EPS
results may not equal full year amounts due to
rounding. |
2 Includes $.11
per share dividend declared in November 2009 and $.16 per share dividend
declared in January 2010. |
3 Ross Stores,
Inc. common stock trades on The NASDAQ Global Select Market® under the symbol
ROST. |
51
Year ended
January 31, 2009:
|
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
|
|
ended |
|
ended |
|
ended |
|
ended |
|
|
|
May 3, |
|
August 2, |
|
November 1, |
|
January 31, |
|
|
($000, except per
share data) |
2008 |
|
2008 |
|
2008 |
|
2009 |
|
|
Sales |
$ |
1,556,328 |
|
|
$ |
1,640,412 |
|
|
$ |
1,555,287 |
|
|
$ |
1,734,112 |
|
|
|
|
|
Cost of goods sold |
|
1,181,557 |
|
|
|
1,255,222 |
|
|
|
1,198,451 |
|
|
|
1,321,346 |
|
|
Selling, general and administrative |
|
247,672 |
|
|
|
268,839 |
|
|
|
262,534 |
|
|
|
255,312 |
|
|
Interest (income) expense,
net |
|
(1,621 |
) |
|
|
(1,052 |
) |
|
|
(15 |
) |
|
|
2,531 |
|
|
Total costs and expenses |
|
1,427,608 |
|
|
|
1,523,009 |
|
|
|
1,460,970 |
|
|
|
1,579,189 |
|
|
Earnings before taxes |
|
128,720 |
|
|
|
117,403 |
|
|
|
94,317 |
|
|
|
154,923 |
|
|
Provision for taxes on earnings |
|
49,235 |
|
|
|
46,104 |
|
|
|
37,047 |
|
|
|
57,536 |
|
|
Net earnings |
$ |
79,485 |
|
|
$ |
71,299 |
|
|
$ |
57,270 |
|
|
$ |
97,387 |
|
|
|
|
|
Earnings per share – basic1 |
$ |
.61 |
|
|
$ |
.55 |
|
|
$ |
.44 |
|
|
$ |
.77 |
|
|
Earnings per share – diluted1 |
$ |
.60 |
|
|
$ |
.54 |
|
|
$ |
.44 |
|
|
$ |
.76 |
|
|
|
|
|
Dividends declared per |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
share on
common stock |
$ |
- |
|
|
$ |
.095 |
|
|
$ |
.095 |
|
|
$ |
.205 |
2 |
|
Stock price3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
$ |
34.39 |
|
|
$ |
39.69 |
|
|
$ |
41.31 |
|
|
$ |
31.64 |
|
|
Low |
$ |
27.09 |
|
|
$ |
33.61 |
|
|
$ |
27.10 |
|
|
$ |
22.10 |
|
|
1 Quarterly EPS
results may not equal full year amounts due to
rounding. |
2 Includes $.095
per share dividend declared in November 2008 and $.11 per share dividend
declared in January 2009. |
3 Ross Stores,
Inc. common stock trades on The NASDAQ Global Select Market® under the symbol
ROST. |
52
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Board of
Directors and Stockholders
Ross Stores, Inc.
Pleasanton, California
We have audited
the accompanying consolidated balance sheets of Ross Stores, Inc. and
subsidiaries (the "Company") as of January 30, 2010 and January 31, 2009, and
the related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended January 30,
2010. We also have audited the Company's
internal control over financial reporting as of January 30, 2010, based on
criteria established in Internal Control — Integrated Framework
issued by the
Committee of Sponsoring Organizations of the Treadway Commission. The Company's
management is responsible for these consolidated financial statements, for
maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Annual Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on these
financial statements and an opinion on the Company's internal control over
financial reporting based on our audits.
We conducted our
audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether effective internal
control over financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
A company's
internal control over financial reporting is a process designed by, or under the
supervision of, the company's principal executive and principal financial
officers, or persons performing similar functions, and effected by the company's
board of directors, management, and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial
reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
53
Because of the
inherent limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely
basis. Also, projections of any evaluation of the effectiveness of the internal
control over financial reporting to future periods are subject to the risk that
the controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
In our opinion,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Ross Stores, Inc. and subsidiaries
as of January 30, 2010 and January 31, 2009, and the results of their operations
and their cash flows for each of the three years in the period ended January 30,
2010, in conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of January 30,
2010, based on the criteria established in Internal Control — Integrated Framework
issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
/s/DELOITTE & TOUCHE LLP
San
Francisco, California
March 25, 2010
54
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
ITEM 9A. CONTROLS AND
PROCEDURES.
Disclosure Controls and Procedures
Our management,
with the participation of our Chief Executive Officer and Chief Financial
Officer, conducted an evaluation of the effectiveness of our “disclosure
controls and procedures” (as defined in Exchange Act Rule 13a-15(e)) as of the
end of the period covered by this report. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of the end of the period covered by
this report.
It should be
noted that any system of controls, however well designed and operated, can
provide only reasonable, and not absolute, assurance that the objectives of the
system will be met. In addition, the design of any control system is based in
part upon certain assumptions about the likelihood of future events.
Management’s Annual Report on Internal
Control Over Financial Reporting
Our management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Exchange Act Rule 13a-15(f). Our internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
consolidated financial statements for external purposes in accordance with
generally accepted accounting principles.
Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the
framework established by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) as set forth in Internal Control — Integrated
Framework. Based on
our evaluation under the framework in Internal Control — Integrated
Framework, our
management concluded that our internal control over financial reporting was
effective as of January 30, 2010.
Our internal
control over financial reporting as of January 30, 2010 has also been audited by
Deloitte & Touche LLP, an independent registered public accounting firm, and
their opinion as to the effectiveness of our internal control over financial
reporting is stated in their report, dated March 25, 2010, which is included in
Item 8 in this Annual Report on Form 10-K.
Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. It should be noted that any system of controls, however
well designed and operated, can provide only reasonable, and not absolute,
assurance that the objectives of the system will be met. In addition, the design
of any control system is based in part upon certain assumptions about the
likelihood of future events. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
55
Quarterly Evaluation of Changes in
Internal Control Over Financial Reporting
Our management,
with the participation of our Chief Executive Officer and Chief Financial
Officer, also conducted an evaluation of our internal control over financial
reporting to determine whether any change occurred during the fourth fiscal
quarter of 2009 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting. Based on that
evaluation, our management concluded that there was no such change during the
fourth fiscal quarter.
ITEM 9B. OTHER
INFORMATION.
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE.
Information
required by item 401 of Regulation S-K is incorporated herein by reference to
the sections entitled “Executive Officers of the Registrant” at the end of Part
I of this report; and to the sections of the Ross Stores, Inc. Proxy Statement
for the Annual Meeting of Stockholders to be held on Wednesday, May 19, 2010
(the “Proxy Statement”) entitled “Information Regarding Nominees and Incumbent
Directors.” Information required by Item 405 of Regulation S-K is incorporated
by reference to the Proxy Statement under the section titled “Section 16(a)
Beneficial Ownership Reporting Compliance.” We have not made any material
changes to the procedures by which our stockholders may recommend nominees to
the Board of Directors. Information required by Item 407(d)(4) and (d)(5) of
Regulation S-K is incorporated by reference to the Proxy Statement under the
section entitled “Information Regarding Nominees and Incumbent Directors” under
the caption “Audit Committee.”
Our Board of
Directors has adopted a Code of Ethics for Senior Financial Officers that
applies to the Company's Chief Executive Officer, Chief Merchandising Officer,
Chief Development Officer, Chief Operating Officer, Chief Financial Officer,
Corporate Controller, Assistant Controller, Treasurer, Assistant Treasurer,
Investor and Media Relations personnel, and other positions that may be
designated by the Company. This Code of Ethics is posted on our corporate
website (www.rossstores.com). We intend to satisfy the disclosure requirements
of Item 5.05 of Form 8-K regarding any future amendments to, or waivers from,
our Code of Ethics for Senior Financial Officers by posting any changed version
on the same corporate website.
ITEM 11. EXECUTIVE
COMPENSATION.
The information
required by Item 402 of Regulation S-K is incorporated herein by reference to
the sections of the Proxy Statement entitled “Compensation of Directors” and
“Executive Compensation” under the captions “Compensation Discussion and
Analysis,” “Summary Compensation Table,” “All Other Compensation,”
“Perquisites,” “Discussion of Summary Compensation,” “Grants of Plan Based
Awards During Fiscal Year,” “Outstanding Equity Awards at Fiscal Year-End,”
“Option Exercises and Stock Vested,” “Non-Qualified Deferred Compensation,” and
“Potential Payments Upon Termination or Change In Control.”
The information
required by Items 407(e)(4) and (e)(5) of Regulation S-K are incorporated herein
by reference to the sections of the Proxy Statement entitled “Compensation
Committee Interlocks and Insider Participation” and “Compensation Committee
Report.”
56
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Equity compensation plan
information. The
following table summarizes the equity compensation plans under which the
Company’s common stock may be issued as of January 30, 2010:
|
|
(a) |
|
|
|
|
(c) |
|
|
|
Number of securities |
|
(b) |
|
Number of securities |
|
|
|
to be issued upon |
|
Weighted average |
|
remaining available for |
|
|
|
exercise of |
|
exercise price per |
|
future issuance |
|
|
|
outstanding options |
|
share of outstanding |
|
(excluding securities |
|
|
Shares in
(000s) |
and
rights |
|
options
and rights |
|
reflected in
column (a))1 |
|
|
Equity compensation |
|
|
|
|
|
|
|
|
plans approved by |
|
|
|
|
|
|
|
|
security holders |
2,037 |
2 |
|
$ 27.55 |
|
5,849 |
3 |
|
|
|
|
Equity compensation |
|
|
|
|
|
|
|
|
plans not approved by |
|
|
|
|
|
|
|
|
security holders4 |
736 |
|
|
$
19.93 |
|
- |
|
|
|
|
|
Total |
2,773 |
|
|
$
25.53 |
|
5,849 |
|
|
1 After approval
by stockholders of the 2008 Equity Incentive Plan in May 2008, any shares
remaining available for grant in the share reserves of the 2004 Equity
Incentive Plan, 1992 Stock Option Plan, the 2000 Equity Plan, the 1991
Outside Directors Stock Option Plan and the 1988 Restricted Stock Plan
were automatically canceled. |
2 Represents
shares reserved for options granted under the prior 1992 Stock Option
Plan, the prior 1991 Outside Directors Stock Option Plan, and the 2004
Equity Incentive Plan. |
3 Includes 906,000
shares reserved for issuance under the Employee Stock Purchase Plan and
4,943,000 shares reserved for issuance under the 2008 Equity Incentive
Plan. |
4 Represents
shares reserved for options granted under the prior 2000 Equity Incentive
Plan, which was approved by the Company’s Board of Directors in March
2000. |
The information
required by Item 403 of Regulation S-K is 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, AND DIRECTOR INDEPENDENCE.
The information
required by Items 404 and 407(a) of Regulation S-K are incorporated herein by
reference to the section of the Proxy Statement entitled “Information Regarding
Nominees and Incumbent Directors” including the captions “Audit Committee,”
“Compensation Committee,” and “Nominating and Corporate Governance Committee”
and the section of the Proxy Statement entitled “Certain Transactions.”
57
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND
SERVICES.
Information
concerning principal accountant fees and services will appear in the Proxy
Statement in the Ross Stores, Inc. Board of Directors Audit Committee Report
under the caption “Summary of Audit, Audit-Related, Tax and All Other Fees.”
Such information is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES.
|
(a) |
|
The following consolidated financial statements, schedules and
exhibits are filed as part of this report or are incorporated herein as
indicated: |
|
|
|
|
|
1. |
|
List of Consolidated Financial Statements. |
|
|
|
|
|
|
|
The following consolidated financial statements are included herein
under Item 8: |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Earnings for the years ended January 30,
2010, January 31, 2009, and February 2, 2008.
Consolidated Balance Sheets at January 30, 2010 and January 31,
2009.
Consolidated Statements of Stockholders' Equity for the years ended
January 30, 2010, January 31, 2009, and February 2, 2008.
Consolidated Statements of Cash Flows for the years ended January
30, 2010, January 31, 2009, and February 2, 2008.
Notes to
Consolidated Financial Statements.
Report of
Independent Registered Public Accounting Firm.
|
|
|
|
|
|
|
|
|
|
|
2. |
|
List of
Consolidated Financial Statement Schedules. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedules are
omitted because they are not required, not applicable, or such information
is included in the consolidated financial statements or notes thereto
which are included in this Report. |
|
|
|
|
|
|
|
|
|
|
3. |
|
List of
Exhibits (in accordance with Item 601 of Regulation S-K). |
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated
herein by reference to the list of Exhibits contained in the Exhibit Index
within this Report. |
58
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: |
March 30, 2010 |
By: |
/s/Michael Balmuth |
|
|
|
Michael Balmuth |
|
|
|
Vice Chairman 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/Michael Balmuth |
Vice Chairman and |
March 30, 2010 |
Michael Balmuth |
Chief Executive Officer, Director |
|
|
/s/J. Call |
Senior Vice President, |
March 30, 2010 |
John G. Call |
Chief Financial Officer and |
|
|
Principal Accounting Officer |
|
|
/s/Norman A. Ferber |
Chairman of the Board, Director |
March 30, 2010 |
Norman A. Ferber |
|
|
|
/s/K. Gunnar Bjorklund |
Director |
March 30, 2010 |
K. Gunnar Bjorklund |
|
|
|
/s/Michael J. Bush |
Director |
March 30, 2010 |
Michael J. Bush |
|
|
|
/s/Sharon D. Garrett |
Director |
March 30, 2010 |
Sharon D. Garrett |
|
|
|
/s/G. Orban |
Director |
March 30, 2010 |
George P. Orban |
|
|
|
/s/G. L. Quesnel |
Director |
March 30, 2010 |
Gregory L. Quesnel |
|
|
|
/s/Donald H. Seiler |
Director |
March 30, 2010 |
Donald H. Seiler |
|
|
59
INDEX TO EXHIBITS
Exhibit |
|
|
Number |
|
Exhibit |
3.1 |
|
Amendment of
Certificate of Incorporation dated May 21, 2004 and Amendment of
Certificate of Incorporation dated June 5, 2002 and Corrected First
Restated Certificate of Incorporation incorporated by reference to Exhibit
3.1 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended July
31, 2004.
|
|
|
|
3.2 |
|
Amended
By-laws, dated August 25, 1994, incorporated by reference to Exhibit 3.2
to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended July 30,
1994.
|
|
|
|
4.1 |
|
Note Purchase
Agreement dated October 17, 2006 incorporated by reference to Exhibit 10.2
to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended October
28, 2006.
|
|
|
|
10.1 |
|
Lease dated
July 23, 2003 of Certain Property located in Perris, California,
incorporated by reference to Exhibit 10.1 to the Form 10-Q filed by Ross
Stores, Inc. for its quarter ended August 2, 2003.
|
|
|
|
MANAGEMENT CONTRACTS AND COMPENSATORY
PLANS (EXHIBITS 10.2 - 10.72) |
|
|
|
10.2 |
|
Third Amended
and Restated Ross Stores, Inc. 1992 Stock Option Plan, incorporated by
reference to Exhibit 10.5 to the Form 10-K filed by Ross Stores, Inc. for
its fiscal year ended January 29, 2000.
|
|
|
|
10.3 |
|
Amendment to
Third Amended and Restated Ross Stores, Inc. 1992 Stock Option Plan,
incorporated by reference to Exhibit 10.4 to the Form 10-Q filed by Ross
Stores, Inc. for its quarter ended August 4, 2001.
|
|
|
|
10.4 |
|
Ross Stores,
Inc. 2000 Equity Incentive Plan, incorporated by reference to Exhibit 10.7
to the Form 10-K filed by Ross Stores, Inc. for its fiscal year ended
January 29, 2000.
|
|
|
|
10.5 |
|
Fourth Amended
and Restated Ross Stores, Inc. Employee Stock Purchase Plan, incorporated
by reference to Exhibit 10.3 to the Form 10-Q filed by Ross Stores, Inc.
for its quarter ended July 29, 2000.
|
|
|
|
10.6 |
|
Amended and
Restated Ross Stores, Inc. Employee Stock Purchase Plan dated November 20,
2007 incorporated by reference to Exhibit 10.6 to the Form 10-K filed by
Ross Stores, Inc. for its fiscal year ended February 2,
2008.
|
|
|
|
10.7 |
|
Fourth Amended
and Restated Ross Stores, Inc. 1988 Restricted Stock Plan, incorporated by
reference to Exhibit 10.9 to the Form 10-K filed by Ross Stores, Inc. for
its fiscal year ended January 29, 2000.
|
|
|
|
10.8 |
|
Amended and
Restated Ross Stores, Inc. 1991 Outside Directors Stock Option Plan, as
amended through January 30, 2003, incorporated by reference to Exhibit
10.9 to the Form 10-K filed by Ross Stores, Inc. for its fiscal year ended
February 1, 2003.
|
|
|
|
10.9 |
|
Ross Stores
Executive Medical Plan, incorporated by reference to Exhibit 10.9 to the
Form 10-K filed by Ross Stores, Inc. for its fiscal year ended January 30,
1999.
|
|
|
|
10.10 |
|
Ross Stores
Executive Dental Plan, incorporated by reference to Exhibit 10.10 to the
Form 10-K filed by Ross Stores, Inc. for its fiscal year ended January 30,
1999.
|
60
10.11 |
|
Ross Stores Second Amended and
Restated Ross Stores, Inc. Non-Qualified Deferred Compensation Plan,
incorporated by reference to Exhibit 10.12 to the Form 10-K filed by Ross
Stores, Inc. for its fiscal year ended January 30, 1999. |
|
10.12 |
|
Amended and Restated Ross Stores,
Inc. Incentive Compensation Plan, incorporated by reference to Exhibit
10.18 to the Form 10-K filed by Ross Stores, Inc. for its year ended
January 29, 2000. |
|
10.13 |
|
Ross Stores, Inc. Second Amended
and Restated Incentive Compensation Plan, incorporated by reference to the
appendix to the Definitive Proxy Statement on Schedule 14A filed by Ross
Stores, Inc. on April 12, 2006. |
|
10.14 |
|
Ross Stores, Inc. 2004 Equity
Incentive Plan, incorporated by reference to Exhibit 99 to the Definitive
Proxy Statement on Schedule 14A filed by Ross Stores, Inc. on April 15,
2004. |
|
10.15 |
|
First Amendment to the Ross Stores,
Inc. 2004 Equity Incentive Plan, effective May 17, 2005, incorporated by
reference to Exhibit 10.2 to the Form 10-Q filed by Ross Stores, Inc. for
its quarter ended July 30, 2005. |
|
10.16 |
|
Second Amendment to the Ross
Stores, Inc. 2004 Equity Incentive Plan effective March 22, 2007
incorporated by reference to Exhibit 10.7 to the Form 10-Q filed by Ross
Stores, Inc. for its quarter ended May 5, 2007. |
|
10.17 |
|
Form of Stock Option Agreement for
options granted pursuant to Ross Stores, Inc. 2004 Equity Incentive Plan,
incorporated by reference to Exhibit 10.32 to the Form 10-Q filed by Ross
Stores, Inc. for its quarter ended July 31, 2004. |
|
10.18 |
|
Form of Restricted Stock Agreement
for stock awards granted pursuant to the Ross Stores, Inc. 2004 Equity
Incentive Plan, incorporated by reference to Exhibit 10.33 to the Form
10-Q filed by Ross Stores, Inc. for its quarter ended July 31,
2004. |
|
10.19 |
|
Form of Stock Option Agreement for
Non-Employee Directors for options granted pursuant to Ross Stores, Inc.
2004 Equity Incentive Plan, incorporated by reference to Exhibit 10.3 to
the Form 10-Q filed by Ross Stores, Inc. for its quarter ended July 30,
2005. |
|
10.20 |
|
Ross Stores, Inc. 2008 Equity
Incentive Plan, incorporated by reference to the appendix to the
Definitive Proxy Statement on Schedule 14A filed by Ross Stores, Inc. on
April 14, 2008. |
|
10.21 |
|
Form of Nonemployee Director Equity
Notice of Grant of Restricted Stock and Restricted Stock Agreement under
the Ross Stores, Inc. 2008 Equity Incentive Plan, incorporated by
reference to Exhibit 99.2 to the Form 8-K filed by Ross Stores, Inc. on
May 23, 2008. |
|
10.22 |
|
Form of Nonemployee Director Equity
Notice of Grant of Restricted Stock Units and Restricted Stock Units
Agreement under the Ross Stores, Inc. 2008 Equity Incentive Plan,
incorporated by reference to Exhibit 99.3 to the Form 8-K filed by Ross
Stores, Inc. on May 23, 2008. |
|
10.23 |
|
Form of Notice of Grant of
Restricted Stock and Restricted Stock Agreement under the Ross Stores,
Inc. 2008 Equity Incentive Plan, incorporated by reference to Exhibit 99.4
to the Form 8-K filed by Ross Stores, Inc. on May 23,
2008. |
61
10.24 |
|
Form of Notice of Grant of
Restricted Stock Units and Restricted Stock Units Agreement under the Ross
Stores, Inc. 2008 Equity Incentive Plan, incorporated by reference to
Exhibit 99.5 to the Form 8-K filed by Ross Stores, Inc. on May 23,
2008. |
|
10.25 |
|
Form of Notice of Grant of
Performance Shares and Performance Share Agreement under the Ross Stores,
Inc. 2008 Equity Incentive Plan, incorporated by reference to Exhibit 99.6
to the Form 8-K filed by Ross Stores, Inc. on May 23, 2008. |
|
10.26 |
|
Form of Notice of Grant of Stock
Option and Stock Option Agreement under the Ross Stores, Inc. 2008 Equity
Incentive Plan, incorporated by reference to Exhibit 99.7 to the Form 8-K
filed by Ross Stores, Inc. on May 23, 2008. |
|
10.27 |
|
Ross Stores, Inc. 2008 Equity
Incentive Plan, as Amended Through March 18, 2009 incorporated by
reference to Exhibit 10.1 to the Form 10-Q filed by Ross Stores, Inc. for
its quarter ended May 2, 2009. |
|
10.28 |
|
Ross Stores, Inc. Restricted Stock
Agreement incorporated by reference to Exhibit 10.2 to the Form 10-Q filed
by Ross Stores, Inc. for its quarter ended May 2, 2009. |
|
10.29 |
|
Ross Stores, Inc. Restricted Stock
Agreement for Nonemployee Director incorporated by reference to Exhibit
10.3 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended May
2, 2009. |
|
10.30 |
|
Form of Performance Share Award
Agreement incorporated by reference to Exhibit 10.6 to the Form 10-Q filed
by Ross Stores, Inc. for its quarter ended May 5, 2007. |
|
10.31 |
|
Ross Stores, Inc. Form of Notice of
Grant and Performance Share Agreement incorporated by reference to Exhibit
10.4 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended May
2, 2009. |
|
10.32 |
|
Form of Indemnity Agreement between
Ross Stores, Inc. for Directors and Executive Officers, incorporated by
reference to Exhibit 10.27 to the Form 10-K filed by Ross Stores, Inc. for
its fiscal year ended February 2, 2002. |
|
10.33 |
|
Form of Executive Employment
Agreement between Ross Stores, Inc. and Executive Vice Presidents or
Senior Vice Presidents, incorporated by reference to Exhibit 10.35 to the
Form 10-K filed by Ross Stores, Inc. for its fiscal year ended January 29,
2005. |
|
10.34 |
|
Form of Executive Employment
Agreement between Ross Stores, Inc. and Executive Vice Presidents or
Senior Vice Presidents incorporated by reference to Exhibit 10.48 to the
Form 10-K filed by Ross Stores, Inc. for its year ended January 31,
2009. |
|
10.35 |
|
Form of Executive Employment
Agreement between Ross Stores, Inc. and Executives incorporated by
reference to Exhibit 10.5 to the Form 10-Q filed by Ross Stores, Inc. for
its quarter ended May 2, 2009. |
|
10.36 |
|
Form of Executive Employment
Agreement between Ross Stores, Inc. and Executives. |
|
10.37 |
|
Independent Contractor Consultancy
Agreement effective February 1, 2000 between Norman A. Ferber and Ross
Stores, Inc., incorporated by reference to Exhibit 10.41 to the Form 10-Q
filed by Ross Stores, Inc. for its quarter ended April 29,
2000. |
|
10.38 |
|
Retirement Benefit Package
Agreement effective February 1, 2000 between Norman A. Ferber and Ross
Stores, Inc., incorporated by reference to Exhibit 10.42 to the Form 10-Q
filed by Ross Stores, Inc. for its quarter ended April 29,
2000. |
62
10.39 |
|
Amendment to Independent Contractor
Consultancy Agreement dated January 10, 2001 between Norman A. Ferber and
Ross Stores, Inc., incorporated by reference to Exhibit 10.16 to the Form
10-K filed by Ross Stores, Inc. for its fiscal year ended February 3,
2001. |
|
10.40 |
|
Amendment #2 to the Independent
Contractor Consultancy Agreement dated January 7, 2002 between Norman A.
Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.16
to the Form 10-K filed by Ross Stores, Inc. for its fiscal year ended
February 2, 2002. |
|
10.41 |
|
Third Amendment to the Independent
Contractor Consultancy Agreement effective February 1, 2003 between Norman
A. Ferber and Ross Stores, Inc., incorporated by reference to Exhibit
10.19 of the Form 10-K filed by Ross Stores, Inc. for its fiscal year
ended February 1, 2003. |
|
10.42 |
|
Fourth Amendment to the Independent
Contractor Consultancy Agreement effective February 1, 2004 between Norman
A. Ferber and Ross Stores, Inc., incorporated by reference to Exhibit
10.19 to the Form 10-K filed by Ross Stores, Inc. for its fiscal year
ended January 29, 2005. |
|
10.43 |
|
Fifth Amendment to the Independent
Contractor Consultancy Agreement effective February 1, 2005 between Norman
A. Ferber and Ross Stores, Inc., incorporated by reference to Exhibit
10.20 to the Form 10-K filed by Ross Stores, Inc. for its fiscal year
ended January 29, 2005. |
|
10.44 |
|
Sixth Amendment to the Independent
Contractor Consultancy Agreement between Norman A. Ferber and Ross Stores,
Inc. effective February 1, 2006, incorporated by reference to Exhibit 10.1
to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended April
29, 2006. |
|
10.45 |
|
Revised and Restated Sixth
Amendment to the Independent Contractor Consultancy Agreement executed
June 2007 between Norman A. Ferber and Ross Stores, Inc., incorporated by
reference to Exhibit 10.1 to the Form 10-Q filed by Ross Stores, Inc. for
its quarter ended August 4, 2007. |
|
10.46 |
|
Seventh Amendment to the
Independent Contractor Consultancy Agreement executed March 2008 between
Norman A. Ferber and Ross Stores, Inc., incorporated by reference to
Exhibit 10.1 to the Form 10-Q filed by Ross Stores, Inc. for its quarter
ended May 3, 2008. |
|
10.47 |
|
Amended and Restated Independent
Contractor Consultancy Agreement effective January 6, 2010 between Norman
A. Ferber and Ross Stores, Inc. |
|
10.48 |
|
Amended and Restated Retirement
Benefit Package Agreement effective January 6, 2010 between Norman A.
Ferber and Ross Stores, Inc. |
|
10.49 |
|
Employment Agreement effective May
31, 2001 between Michael Balmuth and Ross Stores, Inc., incorporated by
reference to Exhibit 10.3 to the Form 10-Q filed by Ross Stores, Inc. for
its quarter ended August 4, 2001. |
|
10.50 |
|
First Amendment to the Employment
Agreement effective January 30, 2003 between Michael Balmuth and Ross
Stores, Inc., incorporated by reference to Exhibit 10.1 to the Form 10-Q
filed by Ross Stores, Inc. for its quarter ended May 3, 2003. |
|
10.51 |
|
Second Amendment to the Employment
Agreement effective May 18, 2005 between Michael Balmuth and Ross Stores,
Inc., incorporated by reference to Exhibit 10.1 to the Form 10-Q filed by
Ross Stores, Inc. for its quarter ended July 30,
2005. |
63
10.52 |
|
Third Amendment to the Employment
Agreement executed April 2007 between Michael Balmuth and Ross Stores,
Inc. incorporated by reference to Exhibit 10.8 to the Form 10-Q filed by
Ross Stores, Inc. for its quarter ended May 5, 2007. |
|
10.53 |
|
Restated Third Amendment to the
Employment Agreement executed December 29, 2008 between Michael Balmuth
and Ross Stores, Inc. incorporated by reference to Exhibit 10.42 to the
Form 10-K filed by Ross Stores, Inc. for its year ended January 31,
2009. |
|
10.54 |
|
Fourth Amendment to the Employment
Agreement effective June 9, 2009 between Michael Balmuth and Ross Stores,
Inc. incorporated by reference to Exhibit 10.10 to the Form 10-Q filed by
Ross Stores, Inc. for its quarter ended August 1, 2009. |
|
10.55 |
|
Employment Agreement effective
January 3, 2005 between Lisa Panattoni and Ross Stores, Inc., incorporated
by reference to Exhibit 10.36 to the Form 10-K filed by Ross Stores, Inc.
for its fiscal year ended January 29, 2005. |
|
10.56 |
|
First Amendment to the Employment
Agreement effective October 1, 2005 between Lisa Panattoni and Ross
Stores, Inc., incorporated by reference to Exhibit 10.1 to the Form 10-Q
filed by Ross Stores, Inc. for its quarter ended October 29,
2005. |
|
10.57 |
|
Employment Agreement executed April
2007 between Lisa Panattoni and Ross Stores, Inc. incorporated by
reference to Exhibit 10.3 to the Form 10-Q filed by Ross Stores, Inc. for
its quarter ended May 5, 2007. |
|
10.58 |
|
First Amendment to the Employment
Agreement effective December 31, 2008 between Lisa Panattoni and Ross
Stores, Inc. incorporated by reference to Exhibit 10.52 to the Form 10-K
filed by Ross Stores, Inc. for its year ended January 31,
2009. |
|
10.59 |
|
Employment Agreement executed April
2009 between Lisa Panattoni and Ross Stores, Inc. incorporated by
reference to Exhibit 10.6 to the Form 10-Q filed by Ross Stores, Inc. for
its quarter ended May 2, 2009. |
|
10.60 |
|
Executive Employment Agreement
effective December 4, 2009 between Lisa Panattoni and Ross Stores,
Inc. |
|
10.61 |
|
Employment Agreement executed April
2007 between Barbara Rentler and Ross Stores, Inc., incorporated by
reference to Exhibit 10.4 to the Form 10-Q filed by Ross Stores, Inc. for
its quarter ended May 5, 2007. |
|
10.62 |
|
First Amendment to the Employment
Agreement executed April 2007 between Barbara Rentler and Ross Stores,
Inc., incorporated by reference to Exhibit 10.5 to the Form 10-Q filed by
Ross Stores, Inc. for its quarter ended May 5, 2007. |
|
10.63 |
|
Second Amendment to the Employment
Agreement effective December 31, 2008 between Barbara Rentler and Ross
Stores, Inc. incorporated by reference to Exhibit 10.55 to the Form 10-K
filed by Ross Stores, Inc. for its year ended January 31,
2009. |
|
10.64 |
|
Employment Agreement executed April
2009 between Barbara Rentler and Ross Stores, Inc. incorporated by
reference to Exhibit 10.7 to the Form 10-Q filed by Ross Stores, Inc. for
its quarter ended May 2, 2009. |
|
10.65 |
|
Executive Employment Agreement
effective December 4, 2009 between Barbara Rentler and Ross Stores,
Inc. |
64
10.66 |
|
Employment Agreement executed
October 2007 between John G. Call and Ross Stores, Inc., incorporated by
reference to Exhibit 10.3 to the Form 10-Q filed by Ross Stores, Inc. for
its quarter ended November 3, 2007. |
|
10.67 |
|
First Amendment to the Employment
Agreement effective December 31, 2008 between John G. Call and Ross
Stores, Inc. incorporated by reference to Exhibit 10.58 to the Form 10-K
filed by Ross Stores, Inc. for its year ended January 31,
2009. |
|
10.68 |
|
Employment Agreement executed April
2009 between John G. Call and Ross Stores, Inc. incorporated by reference
to Exhibit 10.9 to the Form 10-Q filed by Ross Stores, Inc. for its
quarter ended May 2, 2009. |
|
10.69 |
|
Employment Agreement executed March
22, 2007 between Michael O’Sullivan and Ross Stores, Inc. incorporated by
reference to Exhibit 10.59 to the Form 10-K filed by Ross Stores, Inc. for
its year ended January 31, 2009. |
|
10.70 |
|
First Amendment to the Employment
Agreement effective December 31, 2008 between Michael O’Sullivan and Ross
Stores, Inc. incorporated by reference to Exhibit 10.60 to the Form 10-K
filed by Ross Stores, Inc. for its year ended January 31,
2009. |
|
10.71 |
|
Employment Agreement executed April
2009 between Michael O’Sullivan and Ross Stores, Inc. incorporated by
reference to Exhibit 10.8 to the Form 10-Q filed by Ross Stores, Inc. for
its quarter ended May 2, 2009. |
|
10.72 |
|
Executive Employment Agreement
effective December 4, 2009 between Michael O’Sullivan and Ross Stores,
Inc. |
|
21 |
|
Subsidiaries. |
|
23 |
|
Consent of Independent Registered
Public Accounting Firm. |
|
31.1 |
|
Certification of Chief Executive
Officer Pursuant to Sarbanes-Oxley Act Section 302(a). |
|
31.2 |
|
Certification of Chief Financial
Officer Pursuant to Sarbanes-Oxley Act Section 302(a). |
|
32.1 |
|
Certification of Chief Executive
Officer Pursuant to 18 U.S.C. Section 1350. |
|
32.2 |
|
Certification of Chief Financial
Officer Pursuant to 18 U.S.C. Section
1350. |
65
exhibit10-36.htm
EXECUTIVE EMPLOYMENT
AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made effective __________, (the
“Effective Date”) by and between Ross Stores, Inc. (the
“Company”), a Delaware corporation, and
______________ (the “Executive”).
RECITALS
A. The Company wishes to employ the
Executive, and the Executive is willing to accept such employment, as
_______________________.
B. It is now the mutual desire of the
Company and the Executive to enter into a written employment agreement to govern
the terms of the Executive’s employment by the Company as of and following the
Effective Date on the terms and conditions set forth below.
TERMS AND CONDITIONS
In consideration for the promises of the
parties set forth below, the Company and the Executive hereby agree as follows:
1. Term. Subject
to the provisions of Section 6 of this Agreement, the term of employment of the
Executive by the Company under this Agreement (the “Term of Employment”) shall be as follows:
(a)
Initial Term. The initial Term of Employment of the
Executive by the Company under this Agreement shall begin on the Effective Date
and end on _____________ (the “Initial Term”), unless extended or terminated earlier
in accordance with this Agreement.
(b) Renewal Term.
Upon the timely written request of the Executive to extend the Term of
Employment, the Compensation Committee (the “Committee”) of the Board of Directors (the
“Board”) of the Company shall consider
extending the Executive’s employment with the Company under this Agreement. To
be timely, such request must be delivered to the Company’s Chief Executive
Officer not earlier than twelve (12) months prior to the end of the then
effective Initial Term or Renewal Term and, in any case, while the Executive
remains an employee of the Company. Such request must contain no proposed
modification to the provisions of this Agreement other than an extension of the
Term of Employment as then in effect for an additional two (2) years. Within
thirty (30) days following the receipt of such notice, the Chief Executive
Officer will discuss such request with the Committee and advise the Executive,
in writing, within thirty (30) days following its consideration of the
Executive’s written request, of the approval or disapproval of such extension
request. The failure to provide such written advice shall constitute a denial of
the Executive’s request for extension. If the Executive’s request for an
extension is approved, the Term of Employment shall be extended for two (2)
additional years commencing on the date immediately following the date of
expiration of the Term of Employment in effect at the time of the Executive’s
written request. Such additional two-year period is referred to herein as a
“Renewal Term.”
2. Position and Duties. During the Term of Employment, the Executive shall serve as
_______________________. As used in this Agreement, the term “Company” includes
Ross Stores, Inc. and each and any of its divisions, affiliates or subsidiaries
(except that, where the term relates to stock, stockholders, stock options or
other stock-based awards or the Board, it means Ross Stores, Inc.). The
Executive’s employment may be transferred, assigned, or reassigned to Ross
Stores, Inc. or a division, affiliate or subsidiary of Ross Stores, Inc., and
such transfer, assignment, or re-assignment will not constitute a termination of
employment or “Good Reason” for the Executive’s termination of employment under
this Agreement. During the Term of Employment, the Executive may engage in
outside activities provided those activities (including but not limited to
membership on boards of directors of not-for-profit and for-profit
organizations) do not conflict with the Executive’s duties and responsibilities
hereunder, and provided further that the Executive gives written notice to the
Board of any significant outside business activity in which the Executive plans
to become involved, whether or not such activity is pursued for profit.
3. Principal Place of Employment. The Executive shall be employed at the
Company’s offices in
_______________, except for required travel on the Company’s business to an
extent substantially consistent with present business travel obligations of the
Executive’s position.
4. Compensation and Related Matters.
(a) Salary. During
the Term of Employment, the Company shall pay to the Executive a salary at a
rate of not less than _________________ ($ ) per annum. The Executive’s salary
shall be payable in substantially equal installments in accordance with the
Company’s normal payroll practices applicable to senior executives. Subject to
the first sentence of this Section 4(a), the Executive’s salary may be adjusted
from time to time by the Committee in accordance with normal business practices
of the Company.
(b) Bonus. During
the Term of Employment, the Executive shall be eligible to receive an annual
bonus paid under the Company’s existing incentive bonus plan under which the
Executive is eligible (which is currently the Incentive Compensation Plan) or
any replacement plan that may subsequently be established and in effect during
the Term of Employment. The current target annual bonus the Executive is
eligible to earn upon achievement of 100% of all applicable performance targets
under such incentive bonus plan is ____% of the Executive’s then effective
annual salary rate. The Executive’s death, termination for Cause or Voluntary
Termination (as described in Sections 6(a), 6(c) and 6(f), respectively) prior
to the Company’s payment of the bonus for a fiscal year of the Company will
cause the Executive to be ineligible for any annual bonus for that fiscal year
or any pro-rata portion of such bonus.
(c) Expenses.
During the Term of Employment, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in
performing services hereunder, including all reasonable expenses of travel and
living while away from home, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company.
(d) Benefits.
During the Term of Employment, the Executive shall be entitled to participate in
all of the Company’s employee benefit plans and arrangements in which senior
executives of the Company are eligible to participate. The Company shall not
make any changes in such plans or arrangements which would adversely affect the
Executive’s rights or benefits thereunder, unless such change occurs pursuant to
a program applicable to all senior executives of the Company and does not result
in a proportionately greater reduction in the rights or benefits of the
Executive as compared with any other similarly situated senior executive of the
Company. The Executive shall be entitled to participate in, or receive benefits
under, any employee benefit plan or arrangement made available by the Company in
the future to its senior executives, subject to, and on a basis consistent with,
the terms, conditions and overall administration of such plans and arrangements.
Except as otherwise specifically provided herein, nothing paid to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be in lieu of the salary or bonus otherwise payable under this
Agreement.
(e) Vacations.
During the Term of Employment, the Executive shall be entitled to ________ ( )
vacation days in each calendar year, and to compensation in respect of earned
but unused vacation days, determined in accordance with the Company’s vacation
plan. The Executive shall also be entitled to all paid holidays given by the
Company to its senior executives. Unused vacation days shall not be forfeited
once they have been earned and, if still unused at the time of the Executive’s
termination of employment with the Company, shall be promptly paid to the
Executive at their then-current value, based on the Executive’s daily salary
rate at the time of the Executive’s termination of employment.
(f) Services Furnished. The Company shall furnish the Executive with office space and such
services as are suitable to the Executive’s position and adequate for the
performance of the Executive’s duties during the Term of Employment.
5. Confidential Information and Intellectual Property.
(a) Other than in the performance of the
Executive’s duties hereunder, the Executive agrees not to use in any manner or
disclose, distribute, publish, communicate or in any way cause to be used,
disclosed, distributed, published, or communicated in any way or at any time,
either while in the Company's employ or at any time thereafter, to any person
not employed by the Company, or not engaged to render services to the Company,
any Confidential Information (as defined below) obtained while in the employ of
the Company.
(b) Confidential Information includes any
written or unwritten information which relates to and/or is used by the Company
or its subsidiaries, affiliates or divisions, including, without limitation (i)
the names, addresses, buying habits and other special information regarding
past, present and potential customers, employees and suppliers of the Company,
(ii) customer and supplier contracts and transactions or price lists of the
Company and suppliers, (iii) methods of distribution, (iv) all agreements,
files, books, logs, charts, records, studies, reports, processes, schedules and
statistical information, (v) data, figures, projections, estimates, pricing
data, customer lists, buying manuals or procedures, distribution manuals or
procedures, other policy and procedure manuals or handbooks, (vi) supplier
information, tax records, personnel histories and records, sales information,
and property information, (vii) information regarding the present or future
phases of business, (viii) ideas, inventions, trademarks, business information,
know-how, processes, techniques, improvements, designs, redesigns, creations,
discoveries, trade secrets, and developments, (ix) all computer software
licensed or developed by the Company or its subsidiaries, affiliates or
divisions, computer programs, computer-based and web-based training programs,
and systems, and (x) finances and financial information, but Confidential
Information will not include information of the Company or its subsidiaries,
affiliates or divisions that (1) became or becomes a matter of public knowledge
through sources independent of the Executive, (2) has been or is disclosed by
the Company or its subsidiaries, affiliates or divisions without restriction on
its use, or (3) has been or is required or specifically permitted to be
disclosed by law or governmental order or regulation. The Executive also agrees
that, if there is any reasonable doubt whether an item is public knowledge, to
not regard the item as public knowledge until and unless the Company’s Chief
Executive Officer confirms to the Executive that the information is public
knowledge.
(c) The provisions of this Section 5 shall
not preclude the Executive from disclosing such information to the Executive's
professional tax advisor or legal counsel solely to the extent necessary to the
rendering of their professional services to the Executive if such individuals
agree to keep such information confidential.
(d) The Executive agrees that upon leaving
the Company’s employ the Executive will remain reasonably available to answer
questions from Company officers regarding the Executive’s former duties and
responsibilities and the knowledge the Executive obtained in connection
therewith.
(e) The Executive agrees that upon leaving
the Company's employ the Executive will not communicate with, or give statements
to, any member of the media (including print, television, or radio media)
relating to any matter (including pending or threatening lawsuits or
administrative investigations) about which the Executive has knowledge or
information (other than knowledge or information that is not Confidential
Information) as a result of employment with the Company. The Executive further
agrees to notify the Chief Executive Officer or his or her designee immediately
after being contacted by any member of the media with respect to any matter
affected by this section.
(f) The Executive agrees that all
information, inventions, and discoveries, whether or not patented or patentable,
made or conceived by the Executive, either alone or with others, at any time
while employed by the Company, which arises out of such employment or is
pertinent to any field of business or research in which, during such employment,
the Company, its subsidiaries, affiliates or divisions is engaged or (if such is
known to or ascertainable by the Executive) is considering engaging
(“Intellectual Property”) shall (i) be and remain the sole
property of the Company and the Executive shall not seek a patent with respect
to such Intellectual Property without the prior consent of an authorized
representative of the Company and (ii) be disclosed promptly to an authorized
representative of the Company along with all information the Executive possesses
with regard to possible applications and uses. Further, at the request of the
Company, and without expense or additional compensation to the Executive, the
Executive agrees to execute such documents and perform such other acts as the
Company deems necessary to obtain patents on such Intellectual Property in a
jurisdiction or jurisdictions designated by the Company, and to assign to the
Company or its designee such Intellectual Property and all patent applications
and patents relating thereto.
(g) The Executive and the Company agree that
the Executive intends all original works of authorship within the purview of the
copyright laws of the United States authored or created by the Executive in the
course of the Executive’s employment with the Company will be works for hire
within the meaning of such copyright law.
(h) Upon termination of the Executive’s
employment, or at any time upon request of the Company, the Executive will
return to the Company all Confidential Information and Intellectual Property, in
any form, including but not limited to letters, memoranda, reports, notes,
notebooks, books of account, drawings, prints, specifications, formulae, data
printouts, microfilms, magnetic tapes, disks, recordings, documents, and all
copies thereof.
6. Termination.
The Executive’s employment may be terminated during the Term of Employment only
as follows:
(a) Death. The
Executive’s employment shall terminate upon the Executive’s death.
(b) Disability.
If, as a result of the Executive’s Disability (as defined below), the Executive
shall have been absent from the Executive’s duties hereunder on a full-time
basis for the entire period of six consecutive months, and, within thirty days
after written notice of termination is given by the Company (which may occur
before or after the end of such six-month period), the Executive shall not have
returned to the performance of the Executive’s duties hereunder on full-time
basis, the Executive’s employment shall terminate. For purposes of this
Agreement, the term “Disability” shall mean a physical or mental
illness, impairment or condition reasonably determined by the Board that
prevents the Executive from performing the duties of the Executive’s position
under this Agreement.
(c) For Cause. The
Company may terminate the Executive’s employment for Cause. For this purpose,
“Cause” means the occurrence of any of the
following (i) the Executive’s continuous failure to substantially perform the
Executive’s duties hereunder (unless such failure is a result of a Disability as
defined in Section 6(b)), (ii) the Executive’s theft, dishonesty, breach of
fiduciary duty for personal profit or falsification of any documents of the
Company, (iii) the Executive’s material failure to abide by the applicable
code(s) of conduct or other policies (including, without limitation, policies
relating to confidentiality and reasonable workplace conduct) of the Company,
(iv) knowing or intentional misconduct by the Executive as a result of which the
Company is required to prepare an accounting restatement, (v) the Executive’s
unauthorized use, misappropriation, destruction or diversion of any tangible or
intangible asset or corporate opportunity of the Company (including, without
limitation, the Executive’s improper use or disclosure of confidential or
proprietary information of the Company), (vi) any intentional misconduct or
illegal or grossly negligent conduct by the Executive which is materially
injurious to the Company monetarily or otherwise, (vii) any material breach by
the Executive of the provisions of Section 9 [Certain Employment Obligations] of
this Agreement, or (viii) the Executive’s conviction (including any plea of
guilty or nolo contendere) of any criminal act involving fraud, dishonesty,
misappropriation or moral turpitude, or which materially impairs the Executive’s
ability to perform his or her duties with the Company. A termination for Cause
shall not take effect unless: (1) the Executive is given written notice by the
Company of its intention to terminate the Executive for Cause; (2) the notice
specifically identifies the particular act or acts or failure or failures to act
which are the basis for such termination; (3) where practicable, the notice is
given within sixty (60) days of the Company’s learning of such act or acts or
failure or failures to act; and (4) only in the case of clause (i), (iii), (v),
(vi) or (vii) of the second sentence of this Section 6(c), the Executive fails
to substantially cure such breach, to the extent such cure is possible, within
sixty (60) days after the date that such written notice is given to the
Executive.
(d) Without Cause.
The Company may terminate the Executive’s employment at any time Without Cause.
A termination “Without Cause” is a termination by the Company of the
Executive’s employment with the Company for any reasons other than the death or
Disability of the Executive or the termination by the Company of the Executive
for Cause as described in Section 6(c).
(e) Termination by the Executive for Good Reason. The Executive may terminate the
Executive’s employment with the Company for “Good Reason,” which shall be deemed to occur if the
Executive terminates the Executive’s employment with the Company within sixty
(60) days after written notice to the Company by the Executive of the occurrence
of one or more of the following conditions, which condition(s) have not been
cured within thirty (30) business
days after the Company’s receipt of such written notice: (1) a failure by the
Company to comply with any material provision of this Agreement (including but
not limited to the reduction of the Executive’s salary or the target annual
bonus opportunity set forth in Section 4(b), (2) a significant diminishment in
the nature or scope of the authority, power, function or duty attached to the
position which the Executive currently maintains without the express written
consent of the Executive, or (3) the relocation of the Executive’s Principal
Place of Employment as described in Section 3 to a location that increases the
regular one-way commute distance between the Executive’s residence and Principal
Place of Employment by more than 25 miles without the Executive’s prior written
consent. In order to constitute a termination of employment for Good Reason, such
termination must occur
within two (2) years following the initial
existence of any of the conditions set forth in this Section 6(e), the Executive
must provide written notice to the Company of the existence of the condition
giving rise to the Good Reason termination within sixty (60) days of the initial
existence of the condition, and the Company shall have thirty (30) days during
which it may remedy the condition and in the event such condition is timely
remedied, the termination shall not constitute a termination for Good
Reason.
(f) Voluntary Termination. The Executive may voluntarily resign from the Executive’s employment
with the Company at any time (a “Voluntary Termination”). A voluntary resignation from
employment by the Executive for Good Reason pursuant to Section 6(e) shall not
be deemed a Voluntary Termination.
(g) Non-Renewal Termination. If the Executive fails to request an
extension of the Term of Employment in accordance with Section 1(b) or if the
Committee fails to approve such request, this Agreement shall automatically
expire at the end of the then current Term of Employment (a “Non-Renewal
Termination”).
7. Notice and Effective Date of Termination
(a) Notice. Any
termination of the Executive’s employment by the Company or by the Executive
during the Term of Employment (other than as a result of the death of the
Executive or a Non-Renewal Termination described in Section 6(g)) shall be
communicated by written notice of termination to the other party hereto. Such
notice shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive’s employment under
that provision.
(b) Date of Termination. The date of termination of the Executive’s employment shall be:
(i) if the Executive’s employment is
terminated by the Executive’s death, the date of the Executive’s death;
(ii) if the Executive’s employment is
terminated due to Disability pursuant to Section 6(b), the date of termination
shall be the last to occur of the 31st day following delivery of the notice of
termination to the Executive by the Company or the end of the consecutive
six-month period referred to in Section 6(b).
(iii) if the Executive’s employment is
terminated for any other reason by either party, the date on which a notice of
termination is delivered to the other party; and
(iv) if the Agreement expires pursuant to a
Non-Renewal Termination described in Section 6(g), the parties’ employment
relationship shall terminate on the last day of the then current Term of
Employment without any notice.
8. Compensation and Benefits Upon Termination.
(a) Termination Due To Disability, Without Cause or For Good
Reason. If the
Executive’s employment terminates pursuant to Section 6(b) [Disability], Section
6(d) [Without Cause], or Section 6(e) [Termination by Executive for Good
Reason], then, subject to Section 22 [Compliance with Section 409A], in addition
to all salary, annual bonuses, expense reimbursements, benefits and accrued
vacation days earned by the Executive pursuant to Section 4 through the date of
the Executive’s termination of employment, the Executive shall be entitled to
the following, provided that within sixty (60) days following the Executive’s
termination of employment the Executive executes a general release of claims
against the Company and its subsidiaries, affiliates, stockholders, directors,
officers, employees, agents, successors and assigns in the current form approved
by the Company and attached as Exhibit A (subject to any amendments required by
law or regulation)(the “Release”) and the period for revocation, if any,
of such Release has expired without the Release having been revoked:
(i) Salary. The
Company shall continue to pay to the Executive the Executive’s salary, at the
rate in effect immediately prior to such termination of employment, through the
remainder of the Term of Employment then in effect.
(ii) Bonus. The
Company shall continue to pay to the Executive an annual bonus through the
remainder of the Term of Employment then in effect; provided, however, that the
amount of the annual bonus determined in accordance with this Section 8(a)(ii)
for the fiscal year of the Company in which such Term of Employment ends shall
be prorated on the basis of the number of days of such Term of Employment
occurring within such fiscal year. The amount of each annual bonus payable
pursuant to this Section 8(a)(ii), prior to any proration, shall be equal to the
annual bonus that the Executive would have earned had no such termination under
Section 8(a)(i) occurred, contingent on the relevant annual bonus plan
performance goals for the respective year having been obtained. However, in no
case shall any such post-termination annual bonus exceed 100% of the Executive's
target bonus for the fiscal year of the Company in which the Executive's
termination of employment occurs. Such bonuses shall not be paid until due under
the applicable Company bonus plan.
(iii) Stock Options.
Stock options granted to the Executive by the Company and which remain
outstanding immediately prior to the date of termination of the Executive’s
employment, as provided in Section 7(b), shall immediately become vested in full
upon such termination of employment.
(iv) Restricted Stock. Shares of restricted stock granted to the Executive by the Company which
have not become vested as of the date of termination of the Executive’s
employment, as provided in Section 7(b), shall immediately become vested on a
pro rata basis. The number of such additional shares of restricted stock that
shall become vested as of the date of the Executive’s termination of employment
shall be that number of additional shares that would have become vested through
the date of such termination of employment at the rate(s) determined under the
vesting schedule applicable to such shares had such vesting schedule provided
for the accrual of vesting on a daily basis (based on a 365 day year). The pro
rata amount of shares vesting through the date of termination/non-renewal shall
be calculated by multiplying the number of unvested shares scheduled to vest in
each respective vesting year by the ratio of the number of days from the date of
grant through the date of termination/non-renewal, and the number of days from
the date of grant through the original vesting date of the respective vesting
tranche. Any shares of restricted stock remaining unvested after such pro rata
acceleration of vesting shall automatically be reacquired by the Company in
accordance with the provisions of the applicable restricted stock agreement, and
the Executive shall have no further rights in such unvested portion of the
restricted stock. In addition, the Company shall waive any reacquisition or
repayment rights for dividends paid on restricted stock prior to Executive’s
termination of employment.
(v) Other Equity Awards. Except as set forth in Sections 8(a)(iii) and 8(a)(iv), performance
share awards and all other equity awards granted to the Executive by the Company
which remain outstanding immediately prior to the date of termination of the
Executive’s employment, as provided in Section 7(b), shall vest and be settled
in accordance with their terms.
The Company shall have no further
obligations to the Executive as a result of termination of employment described
in this Section 8(a) except as set forth in Section 12.
(b) Death, Termination for Cause or Voluntary Termination. If the Executive’s employment
terminates pursuant to Section 6(a) [Death], Section 6(c) [For Cause] or Section
6(f) [Voluntary Termination], the Executive (or the Executive’s designee or the
Executive’s estate) shall be entitled to receive only the salary, annual
bonuses, expense reimbursements, benefits and accrued vacation days earned by
the Executive pursuant to Section 4 through the date of the Executive’s
termination of employment. The Executive shall not be entitled to any bonus not
paid prior to the date of the Executive’s termination of employment, and the
Executive shall not be entitled to any prorated bonus payment for the year in
which the Executive’s employment terminates. Any stock options granted to the
Executive by the Company shall continue to vest only through the date on which
the Executive’s employment terminates, and unless otherwise provided by their
terms, any restricted stock, performance share awards or other equity awards
that were granted to the Executive by the Company that remain unvested as of the
date on which the Executive’s employment terminates shall automatically be
forfeited and the Executive shall have no further rights with respect to such
awards. The Company shall have no further obligations to the Executive as a
result of termination of employment described in this Section 8(b) except as set
forth in Section 12. In addition, provided the Executive terminates pursuant to
Death, the Company shall waive any reacquisition or repayment rights for
dividends paid on restricted stock prior to Executive’s termination of
employment.
(c) Non-Renewal Termination. If the Agreement expires as set forth
in Section 6(g) [Non-Renewal Termination], then, subject to Section 22
[Compliance with Section 409A], in addition to all salary, annual bonuses,
expense reimbursements, benefits and accrued vacation days earned by the
Executive pursuant to Section 4 through the date of the Executive’s termination
of employment, the Executive shall be entitled to the following, provided that
within sixty (60) days following the Executive’s termination of employment the
Executive executes the Release and the period for revocation, if any, of such
Release has expired without the Release having been revoked:
(i) Bonus. The
Company shall pay the Executive an annual bonus for the fiscal year of the
Company in which the date of the Executive’s termination of employment occurs,
which shall be prorated for the portion of such fiscal year that the Executive
is employed by the Company. The amount of such annual bonus, prior to proration,
shall be equal to the annual bonus that the Executive would have earned under
the Company’s bonus plan for the fiscal year of the Company in which the
Executive’s termination of employment occurs had the Executive remained in its
employment, contingent on the relevant annual bonus plan performance goals for
the year in which Executive terminates having been obtained. However, in no case
shall any such post-termination annual bonus exceed 100% of the Executive's
target bonus for the fiscal year of the Company in which the Executive's
termination of employment occurs. Such bonus shall not be paid until due under
the applicable Company bonus plan.
(ii) Stock Options.
Stock options granted to the Executive by the Company and which remain
outstanding immediately prior to the date of termination of the Executive’s
employment, as provided in Section 7(b), shall be vested and exercisable in
accordance with their terms.
(iii) Restricted Stock. Shares of restricted stock granted to the Executive by the Company which
have not become vested as of the date of termination of the Executive’s
employment, as provided in Section 7(b), shall immediately become vested on a
pro rata basis. The number of such additional shares of restricted stock that
shall become vested as of the date of the Executive’s termination of employment
shall be that number of additional shares that would have become vested through
the date of such termination of employment at the rate(s) determined under the
vesting schedule applicable to such shares had such vesting schedule provided
for the accrual of vesting on a daily basis (based on a 365 day year). The pro
rata amount of shares vesting through the date of termination/non-renewal shall
be calculated by multiplying the number of unvested shares scheduled to vest in
each respective vesting year by the ratio of the number of days from the date of
grant through the date of termination/non-renewal, and the number of days from
the date of grant through the original vesting date of the respective vesting
tranche. Any shares of restricted stock remaining unvested after such pro rata
acceleration of vesting shall automatically be reacquired by the Company in
accordance with the provisions of the applicable restricted stock agreement, and
the Executive shall have no further rights in such unvested portion of the
restricted stock. In addition, the Company shall waive any reacquisition or
repayment rights for dividends paid on restricted stock prior to Executive’s
termination of employment.
(iv) Other Equity Awards. Except as set forth in Sections 8(c)(ii) and 8(c)(iii), performance share
awards and all other equity awards granted to the Executive by the Company which
remain outstanding immediately prior to the date of termination of the
Executive’s employment, as provided in Section 7(b), shall vest and be settled
in accordance with their terms.
The Company shall have no further
obligations to the Executive as a result of termination of employment described
in this Section 8(c) except as set forth in Section 12.
(d) Special Change in Control Provisions.
(i) Change in Control Benefits.
(1) Without Regard to Termination of Employment. In the event of a Change in Control (as
defined below), all shares of restricted stock granted to the Executive by the
Company shall become vested in full immediately prior to the consummation of
such Change in Control, and, subject to Section 22 [Compliance with Section
409A], the Executive shall be entitled to receive an additional salary equal to
_______________________ ($ )
per month for a period of two (2) years following the Change in Control provided
the Executive does not Terminate employment as defined in Sections 6(a) – 6(g).
Except as set forth in this Section 8(d)(i)(1) or Section 8(d)(i)(2) below, the
treatment of stock options, performance share awards and all other equity awards
granted to the Executive by the Company which remain outstanding immediately
prior to the date of such Change in Control shall be determined in accordance
with their terms.
(2) Upon Certain Termination of Employment. In addition to the payments and benefits
provided by Section 8(d)(i)(1) above, if the Executive’s employment is
terminated either by the Company Without Cause (as defined in Section 6(d)) or
by the Executive for Good Reason (as defined in Section 6(e)), in either case
within a period commencing one (1) month prior to and ending twelve (12) months
following a Change in Control, then, subject to Section 22 [Compliance with
Section 409A], the Executive shall be entitled to the following (in addition to
any other payments or benefits provided under this Agreement), provided that
within sixty (60) days following the Executive’s termination of employment the
Executive executes the Release and the period for revocation, if any, of such
Release has expired without the Release having been revoked:
a. Salary. The
Executive shall be entitled to a cash payment equal to 2.99 times the
Executive’s then-current annual base salary. Such payment shall be payable in
full to Executive within 30 days following such termination of employment. The
payment under this Section 8(d)(i)(2)(a) shall take the place of any payment
under Section 8(a)(i) and the Executive shall not be entitled to receive a
payment under Section 8(a)(i) if the Executive is entitled to a payment under
this Section 8(d)(i)(2)(a).
b. Bonus. The
Executive shall be entitled to a cash payment equal to 2.99 times the
Executive’s target annual bonus for the Company’s fiscal year then in effect on
the date termination of employment occurs. Such payment shall be payable in full
to Executive within 30 days following such termination of employment. The
payment under this Section 8(d)(i)(2)(b) shall take the place of any payment
under Section 8(a)(ii) and the Executive shall not be entitled to receive a
payment under Section 8(a)(ii) if the Executive is entitled to a payment under
this Section 8(d)(i)(2)(b).
c. Health Care Coverage. The Executive shall be entitled to the continuation of the Executive’s
health care coverage under the Company’s employee benefit plans (including
medical, dental, vision and mental coverage) which the Executive had at the time
of the termination of employment (including coverage for the Executive’s
dependents to the extent such dependents were covered immediately prior to such
termination of employment) at the Company’s expense for the greater of (i) the
remainder of the Term of Employment then in effect or (ii) a period of two (2)
years commencing on the date of the Executive’s termination of employment. Such
health care continuation rights will be in addition to any rights the Executive
may have under ERISA Sections 600 and thereafter and Section 4980B of the
Internal Revenue Code (“COBRA coverage”).
d. Estate Planning. The Executive shall be entitled to reimbursement of the Executive’s
estate planning expenses (including attorneys’ fees) on the same basis, if any,
as to which the Executive was entitled to such reimbursements immediately prior
to such termination of employment for the greater of (i) the remainder of the
Term of Employment then in effect or (ii) a period of two (2) years commencing
on the date of termination of employment.
(ii) Change in Control Defined. A “Change in Control” shall be deemed to have occurred if:
(1) any person or group (within the meaning of Rule 13d-3 of the rules and
regulations promulgated under the Securities Exchange Act of 1934, as amended)
shall acquire during the twelve-month period ending on the date of the most
recent acquisition by such person or group, in one or a series of transactions,
whether through sale of stock or merger, ownership of stock of the Company that
constitutes 35% or more of the total voting power of the stock of the Company or
any successor to the Company; (2) a merger in which the Company is a party
pursuant to which any person or such group acquires ownership of stock of the
Company that, together with stock held by such person or group, constitutes more
than 50% of the total fair market value or total voting power of the stock of
the Company, or (3) the sale, exchange, or transfer of all or substantially all
of the Company’s assets (other than a sale, exchange, or transfer to one or more
corporations where the stockholders of the Company before and after such sale,
exchange, or transfer, directly or indirectly, are the beneficial owners of at
least a majority of the voting stock of the corporation(s) to which the assets
were transferred).
(iii) Excise Tax Gross-Up. If the Executive becomes entitled to one or more payments (with a
“payment” for this purpose including the accelerated vesting of restricted
stock, stock options or other equity awards, or other non-cash benefits or
property), whether pursuant to the terms of this Agreement or any other plan or
agreement with the Company or any affiliated company (collectively,
“Change in Control
Payments”), which are
or become subject to the tax (the “Excise Tax”) imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”), the Company shall pay to the
Executive at the time specified below such amount (the “Gross-up Payment”) as may be necessary to place the
Executive in the same after-tax position as if no portion of the Change in
Control Payments and any amounts paid to the Executive pursuant to Section 8 had
been subject to the Excise Tax. The Gross-up Payment shall include, without
limitation, reimbursement for any penalties and interest that may accrue in
respect of such Excise Tax. For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed: (A) to pay federal income taxes
at the highest marginal rate of federal income taxation for the year in which
the Gross-up Payment is to be made; and (B) to pay any applicable state and
local income taxes at the highest marginal rate of taxation for the calendar
year in which the Gross-up Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
local taxes if paid in such year. If the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder at the time the Gross-up
Payment is made, the Executive shall repay to the Company at the time that the
amount such reduction in Excise Tax is finally determined (but, if previously
paid to the taxing authorities, not prior to the time the amount of such
reduction is refunded to the Executive or otherwise realized as a benefit by the
Executive) the portion of the Gross-up Payment that would not have been paid if
such Excise Tax had been used in initially calculating the Gross-up payment,
plus interest on the amount of such repayment at the rate provided in Section
1274 (b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time the Gross-up Payment
is made, the Company shall make an additional Gross-up Payment in respect of
such excess (plus any interest and penalties payable with respect to such
excess) at the time that the amount of such excess is finally determined.
(iv) The Gross-up Payment provided for above
shall be paid, subject to Section 22 [Compliance with Section 409A], on the 30th
day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Change in Control
Payments (or any portion thereof) are subject to the Excise Tax; provided,
however, that if the amount of such Gross-up Payment or portion thereof cannot
be finally determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined by counsel or auditors selected
by the Company and reasonably acceptable to the Executive, of the minimum amount
of such payments. The Company shall pay to the Executive the remainder of such
payments (together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code) as soon as the amount thereof can be determined. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, the Executive shall repay such amount on the fifth day after
demand by the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code). The Company shall have the right to control all
proceedings with the Internal Revenue Service that may arise in connection with
the determination and assessment of any Excise Tax and, at its sole option, the
Company may pursue or forego any and all administrative appeals, proceedings,
hearings, and conferences with any taxing authority in respect of such Excise
Tax (including any interest or penalties thereon); provided, however, that the
Company’s control over any such proceedings shall be limited to issues with
respect to which a Gross-up Payment would be payable hereunder, and the
Executive shall be entitled to settle or contest any other issue raised by the
Internal Revenue Service or any other taxing authority. The Executive shall
cooperate with the Company in any proceedings relating to the determination and
assessment of any Excise Tax and shall not take any position or action that
would materially increase the amount of any Gross-up Payment hereunder.
(e) Timing of Payments. Any cash payments to
which the Executive is entitled under Sections 8(a), (c) and (d) shall be
payable in accordance with the Company’s payroll schedule and shall commence as
soon as practicable upon the period for revocation of the Release having expired
(and in any event on or prior to December 31 of the year in which Executive has
a Separation from Service); provided, however, that in the event that Executive
becomes entitled to such payments in connection with a Separation from Service
that occurs on or after November 1 of any calendar year, such payments shall
commence on the later of (i) the period for revocation of the Release having
expired or (ii) January 1 of the calendar year that immediately follows the year
in which the Executive has a Separation from Service.
9. Certain Employment Obligations.
(a) Employee Acknowledgement. The Company and the Executive
acknowledge that (i) the Company has a special interest in and derives
significant benefit from the unique skills and experience of the Executive; (ii)
as a result of the Executive’s service with the Company, the Executive will use
and have access to some of the Company’s proprietary and valuable Confidential
Information during the course of the Executive’s employment; (iii) the
Confidential Information has been developed and created by the Company at
substantial expense and constitutes valuable proprietary assets of the Company,
and the Company will suffer substantial damage and irreparable harm which will
be difficult to compute if, during the term of the Executive’s employment or
thereafter, the Executive should disclose or improperly use such Confidential
Information in violation of the provisions of this Agreement; (iv) the Company
will suffer substantial damage and irreparable harm which will be difficult to
compute if the Executive competes with the company in violation of this
Agreement; (v) the Company will suffer substantial damage which will be
difficult to compute if, the Executive solicits or interferes with the Company’s
employees, clients, or customers; (vi) the provisions of this Agreement are
reasonable and necessary for the protection of the business of the Company; and
(vii) the provisions of this Agreement will not preclude the Executive from
obtaining other gainful employment or service.
(b) Non-Compete.
(i) During the Term of Employment and for a
period of twenty-four (24) months following the Executive's termination of
employment with the Company, the Executive shall not, directly or indirectly,
own, manage, control, be employed by, consult with, participate in, or be
connected in any manner with the ownership, management, operation, control of,
or otherwise become involved with, any Competing Business, nor shall the
Executive undertake any planning to engage in any such activity.
For purposes of this Agreement, a
Competing Business shall mean any of the following: (1) any business that is
listed as a peer retailer in the Compensation Discussion and Analysis section of
the Company’s most current Proxy Statement filed with the U.S. Securities and
Exchange Commission as of the date of Executive’s termination of employment with
the Company, (2) any off-price retailer or retailer of discount merchandise,
including without limitation, Burlington Coat Factory Warehouse Corporation,
Macy’s, Inc., TJX Companies Inc., Retail Ventures Inc., Kohl’s Corporation,
Stein Mart, Inc., and (3) any affiliates, subsidiaries or successors of
businesses identified above.
(ii) The foregoing restrictions in Section
9(b)(i) shall have no force or effect in the event that: (i) the Executive’s
employment with the Company is terminated either by the Company pursuant to
Section 6(d)[Without Cause] or by the Executive pursuant to Section 6(e)
[Termination by the Executive for Good Reason]; or (ii) the Company fails to
approve or grant an extension of this Agreement in accordance with Section 1
hereof.
(iii) Section 9(b)(i) shall not prohibit the
Executive from making any investment of 1% or less of the equity securities of
any publicly-traded corporation which is considered to be a Competing Business.
(c) Non-Solicitation of Employees. During the Term of Employment and for a
period of 24 months following the Executive’s termination of that employment
with the Company, the Executive shall not, without the written permission of the
Company or an affected affiliate, directly or indirectly (i) solicit, employ or
retain, or have or cause any other person or entity to solicit, employ or
retain, any person who is employed by the Company or was employed by the Company
during the 6-month period prior to such solicitation, employment, or retainer,
(ii) encourage any such person not to devote his or her full business time to
the Company, or (iii) agree to hire or employ any such person.
(d) Non-Solicitation of Third Parties. During the Term of Employment and for a
period of 24 months following the Executive’s termination of employment with the
Company, the Executive shall not directly or indirectly solicit or otherwise
influence any entity with a business arrangement with the Company, including,
without limitation, suppliers, sales representatives, lenders, lessors, and
lessees, to discontinue, reduce, or otherwise materially or adversely affect
such relationship.
(e) Non-Disparagement. The Executive acknowledges and agrees that the Executive will not defame
or criticize the services, business, integrity, veracity, or personal or
professional reputation of the Company or any of its directors, officers,
employees, affiliates, or agents of any of the foregoing in either a
professional or personal manner either during the term of the Executive’s
employment or thereafter.
10. Company Remedies for Executive’s Breach of Certain Obligations.
(a) The Executive acknowledges and agrees
that in the event that the Executive breaches or threatens to breach Sections 5
or 9 of this Agreement, all compensation and benefits otherwise payable pursuant
to this Agreement and the vesting and/or exercisability of all stock options,
restricted stock, performance shares and other forms of equity compensation
previously awarded to the Executive, notwithstanding the provisions of any
agreement evidencing any such award to the contrary, shall immediately cease.
(b) The Company shall give prompt notice to
the Executive of its discovery of a breach by the Executive of Section 9 of this
Agreement. If it is determined by a vote of not less than two-thirds of the
members of the Board that the Executive has breached Section 9 of this Agreement
and has not cured such breach within ten (10) business days of such notice,
then:
(i) the Executive shall forfeit to the
Company (A) all stock options, stock appreciation rights, performance shares and
other equity compensation awards (other than shares of restricted stock,
restricted stock units or similar awards) granted to the Executive by the
Company which remain outstanding and unexercised or unpaid as of the date of
such determination by the Board (the “Breach Determination
Date”) and (B) all
shares of restricted stock, restricted stock units and similar awards granted to
the Executive by the Company which continue to be held by the Executive as of
the Breach Determination Date to the extent that such awards vested during the
Forfeiture Period (as defined below); and
(ii) the Executive shall pay to the Company
all gains realized by the Executive upon (A) the exercise by or payment in
settlement to the Executive on and after the commencement of the Forfeiture
Period of stock options, stock appreciation rights, performance shares and other
equity compensation awards (other than shares of restricted stock, restricted
stock units or similar awards) granted to the Executive by the Company and (B)
the sale on and after the commencement of the Forfeiture Period of shares or
other property received by the Executive pursuant to awards of restricted stock,
restricted stock units or similar awards granted to the Executive by the Company
and which vested during the Forfeiture Period.
(c) For purposes of this Section, the gain
realized by the Executive upon the exercise or payment in settlement of stock
options, stock appreciation rights, performance shares and other equity
compensation awards shall be equal to (A) the closing sale price on the date of
exercise or settlement (as reported on the stock exchange or market system
constituting the principal market for the shares subject to the applicable
award) of the number of vested shares issued to the Executive upon such exercise
or settlement, reduced by the purchase price, if any, paid by the Executive to
acquire such shares, or (B) if any such award was settled by payment in cash to
the Executive, the gain realized by the Executive shall be equal to the amount
of cash paid to the Executive. Further, for purposes of this Section, the gain
realized by the Executive upon the sale of shares or other property received by
the Executive pursuant to awards of restricted stock, restricted stock units or
similar awards shall be equal to the gross proceeds of such sale realized by the
Executive. Gains determined for purposes of this Section shall be determined
without regard to any subsequent increase or decrease in the market price of the
Company’s stock or taxes paid by or withheld from the Executive with respect to
such transactions.
(d) For the purposes of this Section, the
“Forfeiture Period” shall be the
period ending on the Breach Determination Date and beginning on the earlier of
(A) the date six months prior to the Breach Determination Date or (B) the
business day immediately preceding the date of the Executive’s termination of
employment with the Company.
(e) The Company shall have the right (but not
the obligation) to deduct from any amounts payable from time to time to the
Executive by the Company pursuant to this Agreement or otherwise (including
wages or other compensation, vacation pay or other benefits, and any other
amounts owed to the Executive by the Company) any and all amounts the Executive
is required to pay to the Company pursuant to this Section. The Executive agrees
to pay to the Company immediately upon the Breach Determination Date the amount
payable by the Executive to the Company pursuant to this Section which the
Company has not recovered by means of such deductions.
(f) The Executive acknowledges that money
will not adequately compensate the Company for the substantial damages that will
arise upon the breach or threatened breach of Sections 5 or 9 of this Agreement
and that the Company will not have any adequate remedy at law. For this reason,
such breach or threatened breach will not be subject to the arbitration clause
in Section 19; rather, the Company will be entitled, in addition to other rights
and remedies, to specific performance, injunctive relief, and other equitable
relief to prevent or restrain such breach or threatened breach. The Company may
obtain such relief from (1) any court of competent jurisdiction, (2) an
arbitrator pursuant to Section 19 hereof, or (3) a combination of the two (e.g.,
by simultaneously seeking arbitration under Section 19 and a temporary
injunction from a court pending the outcome of the arbitration). It shall be the
Company’s sole and exclusive right to elect which approach to use to vindicate
its rights. The Executive further agrees that in the event of a breach or
threatened breach, the Company shall be entitled to obtain an immediate
injunction and restraining order to prevent such breach and/or threatened breach
and/or continued breach, without posting a bond or having to prove irreparable
harm or damages, and to obtain all costs and expenses, including reasonable
attorneys’ fees and costs. In addition, the existence of any claim or cause of
action by the Executive against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the restrictive covenants in this Agreement.
11. Exercise of Stock Options Following Termination. If the Executive's employment terminates,
Executive (or the Executive's estate) may exercise the Executive's right to
purchase any vested stock under the stock options granted to Executive by the
Company as provided in the applicable stock option agreement or Company plan.
All such purchases must be made by the Executive in accordance with the
applicable stock option plans and agreements between the parties.
12. Successors; Binding Agreement. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to the Executive hereunder, all
such amounts shall be paid in accordance with the terms of this Agreement and
applicable law to the Executive’s beneficiary pursuant to a written designation
of beneficiary, or, if there is no effective written
designation of beneficiary by the Executive, to the Executive’s estate.
13. Insurance and Indemnity. The Company shall, to the extent
permitted by law, include the Executive during the Term of Employment under any
directors and officers liability insurance policy maintained for its directors
and officers, with coverage at least as favorable to the Executive in amount and
each other material respect as the coverage of other officers covered thereby.
The Company’s obligation to provide insurance and indemnify the Executive shall
survive expiration or termination of this Agreement with respect to proceedings
or threatened proceedings based on acts or omissions of the Executive occurring
during the Executive’s employment with the Company. Such obligations shall be
binding upon the Company’s successors and assigns and shall inure to the benefit
of the Executive’s heirs and personal representatives.
14. Notice. For
the purposes of this Agreement, notices, demands and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or (unless otherwise specified) mailed by United
States registered mail, return receipt requested, postage prepaid, addressed as
follows:
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Ross Stores, Inc. |
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Attention: General Counsel |
or to such other
address as any party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.
15. Complete Agreement; Modification, Waiver; Entire
Agreement. This
Agreement, along with any stock option, restricted stock, performance share or
other equity compensation award agreements between the parties, and term sheet
referencing such specific awards, represents the complete agreement of the
parties with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, promises or representations of the parties, except
those relating to repayment of signing and related bonuses, or relocation
expense reimbursements. To the extent that the bonus payment provisions (i.e.,
post-termination bonus payments) provided in this Agreement differ from the
provisions of the Company’s incentive bonus plans (currently the Incentive
Compensation Plan) or any replacement plans, such bonus payments shall be paid
pursuant to the provisions of this Agreement except to the extent expressly
prohibited by law. Except as provided by Section 22 [Compliance with Section
409A], no provision of this Agreement may be amended or modified except in a
document signed by the Executive and the chairman of the Committee or such other
person as may be designated by the Board. No waiver by the Executive or the
Company of any breach of, or lack of compliance with, any condition or provision
of this Agreement by the other party shall be considered a waiver of any other
condition or provision or the same condition or provision at another time. To
the extent that this Agreement is in any way deemed to be inconsistent with any
prior or contemporaneous stock option, restricted stock, performance share or
other equity compensation award agreements between the parties, or term sheet
referencing such specific awards, the terms of this Agreement shall control. No
agreements or representations, oral or otherwise, with respect to the subject
matter hereof have been made by either party which are not set forth expressly
in this Agreement.
16. Governing Law - Severability. The validity, interpretation,
construction, performance, and enforcement of this Agreement shall be governed
by the laws of the state in which the Executive’s principle place of employment
described in Section 3 is located without reference to that state’s choice of
law rules. If any provision of this Agreement shall be held or deemed to be
invalid, illegal, or unenforceable in any jurisdiction, for any reason, the
invalidity of that provision shall not have the effect of rendering the
provision in question unenforceable in any other jurisdiction or in any other
case or of rendering any other provisions herein unenforceable, but the invalid
provision shall be substituted with a valid provision which most closely
approximates the intent and the economic effect of the invalid provision and
which would be enforceable to the maximum extent permitted in such jurisdiction
or in such case.
17. Mitigation Not Required. In the event the Executive’s employment
with the Company terminates for any reason, the Executive shall not be obligated
to seek other employment following such termination. However, any amounts due
the Executive under Sections 8(a)(i); 8(a)(ii); 8(d)(i)(2)(a),(b),(c) or (d);
and/or any additional salary provided under Section 8(d)(i)(1) of this Agreement
shall be offset by any cash remuneration, health care coverage and/or estate
planning reimbursements attributable to any subsequent employment that the
Executive may obtain during the period of payment of compensation under this
Agreement following the termination of the Executive’s employment with the
Company.
18. Withholding. All payments required to be made by the Company hereunder to the
Executive or the Executive’s estate or beneficiaries shall be subject to the
withholding of such amounts as the Company may reasonably determine it should
withhold pursuant to any applicable law. To the extent permitted, the Executive
may provide all or any part of any necessary withholding by contributing Company
stock with value, determined on the date such withholding is due, equal to the
number of shares contributed multiplied by the closing price per share as
reported on the securities exchange constituting the primary market for the
Company’s stock on the date preceding the date the withholding is
determined.
19. Arbitration.
In the event of any dispute or claim relating to or arising out of the parties’
employment relationship or this Agreement (including, but not limited to, any
claims of breach of contract, wrongful termination, or age, race, sex,
disability or other discrimination), all such disputes shall be fully, finally
and exclusively resolved by binding arbitration conducted by the American
Arbitration Association in the city in which the Executive’s principal place of
employment is located by an arbitrator mutually agreed upon by the parties
hereto or, in the absence of such agreement, by an arbitrator selected in
accordance with the Employment Arbitration Rules of the American Arbitration
Association, provided, however, that this arbitration provision shall not apply,
unless the Company elects otherwise, to any disputes or claims relating to or
arising out of the Executive’s breach of Sections 5 or 9 of this Agreement. If
either the Company or the Executive shall request, arbitration shall be
conducted by a panel of three arbitrators, one selected by the Company, one
selected by the Executive, and the third selected by agreement of the first two,
or, in the absence of such agreement, in accordance with such Rules. The Company
shall pay all costs of any arbitration; provided, however, that each party shall
pay its own attorney and advisor fees.
If there is termination of the
Executive’s employment with the Company followed by a dispute as to whether the
Executive is entitled to the benefits provided under this Agreement, then,
during the period of that dispute the Company shall pay the Executive fifty
percent (50%) of the amount specified in Section 8 hereof (except that the
Company shall pay one hundred percent (100%) of any insurance premiums provided
for in Section 8), if, and only if, the Executive agrees in writing that if the
dispute is resolved against the Executive, the Executive shall promptly refund
to the Company all such payments received by, or made by the Company on behalf
of, the Executive. If the dispute is resolved in the Executive’s favor, promptly
after resolution of the dispute the Company shall pay the Executive the sum that
was withheld during the period of the dispute plus interest at the rate provided
in Section 1274(d) of the Code, compounded quarterly.
20. Attorney’s Fees. Each party shall bear its own attorney’s fees and costs incurred in any
action or dispute arising out of this Agreement.
21. Miscellaneous.
No right or interest to, or in, any payments shall be assignable by the
Executive; provided, however, that the Executive shall not be precluded from
designating in writing one or more beneficiaries to receive any amount that may
be payable after the Executive’s death and the legal representative of the
Executive’s estate shall not be precluded from assigning any right hereunder to
the person or persons entitled thereto. This Agreement shall be binding upon and
shall inure to the benefit of the Executive, the Executive’s heirs and legal
representatives and, the Company and its successors.
22. Compliance with Section 409A. Notwithstanding any other provision of
this Agreement to the contrary, the provision, time and manner of payment or
distribution of all compensation and benefits provided by this Agreement that
constitute nonqualified deferred compensation subject to and not exempted from
the requirements of Code Section 409A (“Section 409A Deferred
Compensation”) shall
be subject to, limited by and construed in accordance with the requirements of
Code Section 409A and all regulations and other guidance promulgated by the
Secretary of the Treasury pursuant to such Section (such Section, regulations
and other guidance being referred to herein as “Section 409A”), including the following:
(a) Separation from Service. Payments and benefits constituting
Section 409A Deferred Compensation otherwise payable or provided pursuant to
Section 8 upon the Executive’s termination of employment shall be paid or
provided only at the time of a termination of the Executive’s employment which
constitutes a Separation from Service. For the purposes of this Agreement, a
“Separation from
Service” is a
separation from service within the meaning of Treasury Regulation Section
1.409A-1(h).
(b) Six-Month Delay Applicable to Specified Employees. If, at the time of a Separation from
Service of the Executive, the Executive is a “specified employee” within the
meaning of Section 409A(a)(2)(B(i) (a “Specified Employee”), then any payments and benefits
constituting Section 409A Deferred Compensation to be paid or provided pursuant
to Section 8 upon the Separation from Service of the Executive shall be paid or
provided commencing on the later of (i) the date that is six (6) months after
the date of such Separation from Service or, if earlier, the date of death of
the Executive (in either case, the “Delayed Payment Date”), or (ii) the
date or dates on which such Section 409A Deferred Compensation would otherwise
be paid or provided in accordance with Section 8. All such amounts that would,
but for this Section 22(b), become payable prior to the Delayed Payment Date
shall be accumulated and paid on the Delayed Payment Date.
(c) Health Care and Estate Planning Benefits. In the event that all or any of the
health care or estate planning benefits to be provided pursuant to Sections
8(d)(i)(2)(c) or 8(d)(i)(2)(d) as a result of a Participant’s Separation from
Service constitute Section 409A Deferred Compensation, the Company shall provide
for such benefits constituting Section 409A Deferred Compensation in a manner
that complies with Section 409A. To the extent necessary to comply with Section
409A, the Company shall determine the health care premium cost necessary to
provide such benefits constituting Section 409A Deferred Compensation for the
applicable coverage period and shall pay such premium cost which becomes due and
payable during the applicable coverage period on the applicable due date for
such premiums; provided, however, that if the Executive is a Specified Employee,
the Company shall not pay any such premium cost until the Delayed Payment Date.
If the Company’s payment pursuant to the previous sentence is subject to a
Delayed Payment Date, the Executive shall pay the premium cost otherwise payable
by the Company prior to the Delayed Payment Date, and on the Delayed Payment
Date the Company shall reimburse the Executive for such Company premium cost
paid by the Executive and shall pay the balance of the Company’s premium cost
necessary to provide such benefit coverage for the remainder of the applicable
coverage period as and when it becomes due and payable over the applicable
period.
(d) Stock-Based Awards. The vesting of any stock-based compensation awards which constitute
Section 409A Deferred Compensation and are held by the Executive, if the
Executive is a Specified Employee, shall be accelerated in accordance with this
Agreement to the extent applicable; provided, however, that the payment in
settlement of any such awards shall occur on the Delayed Payment Date. Any
stock-based compensation which vests and becomes payable upon a Change in
Control in accordance with Section 8(d)(i)(1) shall not be subject to this
Section 22(d).
(e) Installments.
Executive’s right to receive any installment payments payable hereunder shall be
treated as a right to receive a series of separate payments and, accordingly,
each such installment payment shall at all times be considered a separate and
distinct payment for purposes of Section 409A.
(f) Reimbursements. To the extent that any reimbursements payable to Executive pursuant to
this Agreement are subject to the provisions of Section 409A of the Code, such
reimbursements shall be paid to Executive no later than December 31 of the year
following the year in which the cost was incurred, the amount of expenses
reimbursed in one year shall not affect the amount eligible for reimbursement in
any subsequent year, and Executive’s right to reimbursement under this Agreement
will not be subject to liquidation or exchange for another benefit.
(g) Rights of the Company; Release of Liability. It is the mutual intention of the
Executive and the Company that the provision of all payments and benefits
pursuant to this Agreement be made in compliance with the requirements of
Section 409A. To the extent that the provision of any such payment or benefit
pursuant to the terms and conditions of this Agreement would fail to comply with
the applicable requirements of Section 409A, the Company may, in its sole and
absolute discretion and without the consent of the Executive, make such
modifications to the timing or manner of providing such payment and/or benefit
to the extent it determines necessary or advisable to comply with the
requirements of Section 409A; provided, however, that the Company shall not be
obligated to make any such modifications. Any such modifications made by the
Company shall, to the maximum extent permitted in compliance with the
requirements of Section 409A, preserve the aggregate monetary face value of such
payments and/or benefits provided by this Agreement in the absence of such
modification; provided, however, that the Company shall in no event be obligated
to pay any interest or other compensation in respect of any delay in the
provision of such payments or benefits in order to comply with the requirements
of Section 409A. The Executive acknowledges that (i) the provisions of this
Section 22 may result in a delay in the time at which payments would otherwise
be made pursuant to this Agreement and (ii) the Company is authorized to amend
the this Agreement, to void or amend any election made by the Executive under
this Agreement and/or to delay the payment of any monies and/or provision of any
benefits in such manner as may be determined by the Company, in its discretion,
to be necessary or appropriate to comply with Section 409A (including any
transition or grandfather rules thereunder) without prior notice to or consent
of the Executive. The Executive hereby releases and holds harmless the Company,
its directors, officers and stockholders from any and all claims that may arise
from or relate to any tax liability, penalties, interest, costs, fees or other
liability incurred by the Executive as a result of the application of Code
Section 409A.
23. Future Equity Compensation. The Executive understands and
acknowledges that all awards, if any, of stock options, restricted stock,
performance shares and other forms of equity compensation by the Company are
made at the sole discretion of the Board of Directors of the Company or a
committee thereof. The Executive further understands and acknowledges, however,
that unless the Executive has executed this Agreement and each successive
amendment extending the Initial Term or any subsequent Renewal Term of the
Agreement as may be agreed to by the Company and the Executive, it is the
intention of the Board of Directors and the Executive that, notwithstanding any
continued employment with the Company, (a) the Company shall have no obligation
to grant any award of stock options, restricted stock, performance shares or any
other form of equity compensation which might otherwise have been granted to the
Executive on or after the intended commencement of the Initial Term or such
successive Renewal Term for which the Executive has failed to sign the Agreement
or the applicable Term of Employment extension amendment and (b) any such award
which is nevertheless granted to the Executive after the intended commencement
of the Initial Term or Renewal Term for which the Executive has failed to sign
such Agreement or applicable extension amendment shall not vest unless and until
the Executive has executed the Agreement or applicable extension amendment,
notwithstanding the provisions of any agreement evidencing such award to the
contrary.
IN WITNESS WHEREOF, the parties have executed this
Executive Employment Agreement effective as of the date and year first above
written.
ROSS STORES, INC. |
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By: Michael Balmuth |
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Vice Chairman and Chief |
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Executive Officer |
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exhibit10-47.htm
AMENDED AND RESTATED INDEPENDENT
CONTRACTOR
CONSULTANCY AGREEMENT
This Amended and Restated Independent
Contractor Consultancy Agreement (the “Agreement”) made and entered into on January 6,
2010 (the “Effective Date”), by
and between Ross Stores, Inc. (“Company”), and Norman A.
Ferber, an individual (“Contractor”), amends and restates the Independent
Contractor Consultancy Agreement entered into by Company and Contractor
effective as of February 1, 2000 and amended through March 19, 2008 (the
“Prior Agreement”).
1. Engagement of Services. Company hereby retains Contractor to
provide consulting services in connection with the management and operation of
Company’s business.
2. Compensation.
2.1 Fees. Company will pay Contractor an annual
fee for services rendered in the amount of $1,100,000, payable in equal monthly
installments on or before the tenth day of each month during the Term (as
defined herein).
2.2 Expenses. Contractor will be reimbursed only for
reasonable expenses incurred in connection with Contractor’s performance of
services to Company under this Agreement, provided that Contractor promptly
provides documentation for expenses as Company may reasonably
request.
2.3 Life Insurance. Company will pay directly to Contractor
the amount necessary to cover the aggregate premium payments for the period from
June 1, 2012 through January 31, 2014 (the “Remaining Insured
Period”) for the
existing life insurance policy on the life of Contractor (the policy issued for
the benefit of the Norman A. Ferber and Rosine Ferber 2001 Insurance Trust or as
otherwise designated by Contractor), with a death benefit in the amount of
$2,000,000 (the “Policy”). Company acknowledges and agrees that
it has paid all applicable premiums on the Policy through June 1, 2012 and shall
pay amounts each year during the Remaining Insured Period equal to that year’s
premiums on the Policy through January 31, 2014. Each such annual premium
payment by Company shall (a) be paid no later than the last day of the calendar
year in which the premium is due, (b) not be affected by any other expenses that
are eligible for reimbursement in any year and (c) not be subject to liquidation
or exchange for another benefit. In addition to such premium payments, Company
shall pay to Contractor an amount equal to any federal, state and local income
taxes imposed on Contractor as a result of such premium payments by the Company,
including the amount of any additional taxes imposed on Contractor due to the
Company’s payment of the initial taxes imposed on Contractor, which amount will
in no event be paid later
than the end of the calendar year following the calendar year in which such
taxes are paid by Contractor. Contractor shall designate the beneficiaries of the Policy.
3. Independent Contractor
Relationship.
Contractor’s relationship with Company is that of an independent contractor, and
nothing in this Agreement is intended to, or should be construed to, create a
partnership, agency, joint venture or employment relationship. Contractor is not
authorized to make any representation, contract or commitment on behalf of
Company unless specifically
requested or authorized in writing to do so by Company’s Chief Executive Officer
(the “CEO”). Contractor will be solely responsible
for obtaining any business or similar licenses required by any federal, state or
local authority. Contractor is solely responsible for, and will file, on a
timely basis, all tax returns and payments required to be filed with, or made
to, any federal, state or local tax authority with respect to the performance of
services and receipt of fees under this Agreement. Contractor is solely
responsible for, and must maintain adequate records of, expenses incurred in the
course of performing services under this Agreement. No part of Contractor’s
compensation will be subject to withholding by Company for the payment of any
social security, federal, state or any other employee payroll taxes. Company
will regularly report amounts paid to Contractor by filing Form 1099-MISC with
the Internal Revenue Service as required by law.
3.1 Method of Performing Services;
Results. In
accordance with Company’s objectives, Contractor will determine the method,
details and means of performing the services required by this Agreement. Company
shall have no right to, and shall not, control the manner or determine the
method of performing Contractor’s services. Contractor shall perform such
consultancy services as shall be reasonably requested by the CEO.
3.2 Workplace, Hours and
Instrumentalities.
Contractor may perform the services required by this Agreement at any place or
location and at such time as Contractor shall determine. Contractor shall
provide consulting services no more than 2-3 days per week and it is understood
that Contractor will not be available for consulting services during
Contractor’s extended vacation periods. Contractor shall provide all tools and
instrumentalities, if any, required to perform the services under this
Agreement.
4. Consulting Services in Connection With a
Business Transaction.
In addition to the fees set forth in Section 2.1 above, upon the consummation of
a Business Transaction (as defined below) and provided that Ross’ Board of
Directors has requested that Ferber provide consulting services in connection
with any such Business Transaction, Ross shall pay to Ferber an additional lump
sum consulting fee in the amount of $1,500,000 (the “Lump Sum Fee”). Ferber shall be
entitled to payment of the Lump Sum Fee with respect to any Business Transaction
for which Ferber provided consulting services, notwithstanding that the
consummation thereof occurred after the expiration or termination of this
Agreement, which Lump Sum Fee shall be paid as soon as practicable following the
consummation of such transaction but in no event later than March 15 of the year
following the year in which such transaction is consummated. If the Lump Sum Fee
is subject to the tax imposed by Section 4999 of the Internal Revenue Code (the
“Excise Tax”), Ross shall reimburse Ferber in an
amount such that, after deduction of any Excise Tax payments paid by Ferber, and
any federal, state or local income tax and Excise Taxes paid as a result of such
reimbursement, the net funds retained by Ferber shall be equal to the Lump Sum
Fee; such amount to be reimbursed as soon as practicable after such taxes are
paid but in no event later
than the end of the calendar year following the calendar year in which such
taxes are paid. For purposes
of this Agreement, a “Business Transaction” shall be deemed to have occurred if:
(a) Any person or group (within the meaning
of Rule 13d-3 of the rules and regulations promulgated under the Securities
Exchange Act of 1934, as amended), shall acquire, in or a series of
transactions, whether through sale of stock or merger, ownership of stock of
Company that possesses more than 30% of the total fair market value or total
voting power of the stock of Company or any successor to Company;
or
(b) A merger in which Company is a party,
after which merger the stockholders of Company do not retain, directly or
indirectly, at least a majority of the beneficial interest in the voting stock
of the surviving company; or
(c) The sale, exchange, or transfer of all or
substantially all of Company’s assets (other than a sale, exchange, or transfer
to one or more corporations where the stockholders of Company before and after
such sale, exchange, or transfer, directly or indirectly, are the beneficial
owners of at least a majority of the voting stock of the corporation(s) to which
the assets were transferred).
5. Confidentiality.
5.1 Confidential Information.
(a) Definition of Confidential
Information.
“Confidential
Information” as used
in this Agreement shall mean any and all technical and non-technical information
including patent, copyright, trade secret, and proprietary information,
techniques, sketches, drawings, models, inventions, know-how, processes,
apparatus, equipment, algorithms, software programs, software source documents,
and formulae related to the current, future and proposed products and services
of Company and Company’s suppliers and customers, and includes, without
limitation, Company innovations, Company property, and Company’s information
concerning research, experimental work, development, design details and
specifications, engineering, financial information, procurement requirements,
purchasing manufacturing, customer lists, business forecasts, sales and
merchandising and marketing plans and information.
(b) Nondisclosure and Nonuse
Obligations. Except
as permitted in this section, Contractor shall neither use nor disclose the
Confidential Information. Contractor may use the Confidential Information solely
to perform services for the benefit of Company. Contractor agrees that
Contractor shall treat all Confidential Information of Company with the same
degree of care as Contractor accords to Contractor’s own Confidential
Information, but in no case less than reasonable care. Contractor agrees not to
communicate any information to Company in violation of the proprietary rights of
any third party. Contractor will immediately give notice to Company of any
unauthorized use or disclosure of the Confidential Information and agrees to
assist Company in remedying any such unauthorized use or disclosure.
(c) Exclusions from Nondisclosure and Nonuse
Obligations.
Contractor’s obligations under Section 4.1(b) with respect to any portion of the
Confidential Information shall not apply to any such portion which Contractor
can demonstrate, (i) was in the public domain at or subsequent to the time such
portion was communicated to Contractor by Company through no fault of
Contractor; (ii) was rightfully in Contractor’s possession free of any
obligation of confidence at or subsequent to the time such portion was
communicated to Contractor by Company; or (iii) was developed by Contractor
independently of and without reference to any information communicated to
Contractor by Company. A disclosure of Confidential Information by Contractor,
either (A) in response to a valid order by a court or other governmental body,
(B) otherwise required by law, or (C) necessary to establish the rights of
either party under this Agreement, shall not be considered to be a breach of
this Agreement or a waiver of confidentiality for other purposes; provided, however, that Contractor shall provide prompt
prior written notice thereof to Company to enable Company to seek a protective
order or otherwise prevent such disclosure.
5.2 Ownership and Return of Company
Property. All
materials (including, without limitation, documents, drawings, models,
apparatus, sketches, designs, blueprints, studies, memoranda, specifications,
lists, and all other tangible media of expression) furnished to Contractor by
Company, whether delivered to Contractor by Company or made by Contractor in the
performance of services under this Agreement (collectively, the “Company Property”) are the sole and exclusive property of
Company or Company’s suppliers or customers, and Contractor hereby does and will
assign to Company all rights, title and interest Contractor may have or acquire
in the Company Property. Contractor agrees to keep all Company Property at
Company’s or Contractor’s
premises unless otherwise permitted in writing by Company. At Company’s request
and no later than five (5) days after such request, Contractor shall destroy or
deliver to Company, at Company’s option, (a) all Company Property, (b) all
tangible media of expression in Contractor’s possession or control which
incorporate or in which are fixed any Confidential Information, and (c) written
certification of Contractor’s compliance with Contractor’s obligations under
this sentence.
6. Observance of Company
Rules. At all times
while on Company’s premises, Contractor will observe Company’s rules and regulations with respect to
conduct, health and safety and protection of persons and property.
7. No Conflict of
Interest. Contractor
may perform services for any other person or entity so long as Contractor’s
performance of such services does not interfere, or become incompatible or
inconsistent with Contractor’s obligations to, or the scope of services rendered
for, Company under this Agreement. Contractor warrants that, to the best of
Contractor’s knowledge, there is no other contract or duty on Contractor’s part
that conflicts with or is inconsistent with this Agreement. Contractor agrees
that during the term of this Agreement, Contractor shall not provide any labor,
work, services or assistance (whether as an officer, director, employee,
partner, agent, owner, independent contractor or otherwise) to Burlington Coat
Factory Warehouse Corporation, Dillard Department Stores, Inc., The Federated
Stores, Filene’s Basement Corp., The TJX Companies, Inc., and/or the May
Department Stores Company, as well as all subsidiaries, divisions and/or the
surviving entity of any of the above that do business in the retail industry in
the event of a merger or acquisition.
8. Term and Termination.
8.1 Term. This Agreement is effective as of the
Effective Date and will continue until January 31, 2014 (such date, the
“Termination Date” and such period, the “Term”). This Agreement is renewable upon the
mutual consent of both parties. The terms of such renewal must be in writing and
signed by both Company and Contractor.
8.2 Termination of Agreement Prior to the
Termination Date.
Other than as provided in Section 8.4 below, Contractor shall receive the full
annual fees specified in Section 2.1 for the duration of this Agreement or any
renewal term, regardless of whether this Agreement terminates prior to the
Termination Date, unless this Agreement is terminated by Company for Cause or by
Contractor without Good Reason. For purposes of this Agreement, “Cause” shall mean Contractor’s breach of
Section 5 or 7, and “Good Reason” shall mean Company’s material breach of
this Agreement.
8.3 Survival. The rights and obligations contained in
Sections 4, 5 and 9 will survive any termination or expiration of this
Agreement.
8.4 Termination Due to
Death. Except as is
specifically provided in Section 4, in the event of Contractor’s death, this
Agreement will immediately terminate and no further fees or payment will by owed
by the Company to Contractor, his heirs or assigns.
9. General Provisions.
9.1 Successors and Assigns. The rights and obligations of Company
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of Company. Contractor may not assign Contractor’s
rights, subcontract or otherwise delegate his obligations under this Agreement
without Company’s prior written consent. This shall not, however, prevent
Contractor from employing employees to assist in Contractor’s rendering of
services to Company under Contractor’s supervision, as deemed necessary by
Contractor.
9.2 Governing Law. This Agreement shall be governed in all
respects by the laws of the United States of America and by the laws of the
State of California, as such laws are applied to agreements entered into and to
be performed entirely within California between California residents. Each of
the parties irrevocably consents to the exclusive personal jurisdiction of the
federal and state courts located in California, as applicable, for any matter
arising out of or relating to this Agreement, except that in actions seeking to
enforce any order or any judgment of such federal or state courts located in
California, such personal jurisdiction shall be nonexclusive.
9.3 Severability. If any provision of this Agreement is
held by a court of law to be illegal, invalid or unenforceable, (a) that
provision shall be deemed amended to achieve as nearly as possible the same
economic effect as the original provision, and (b) the legality, validity and
enforceability of the remaining provisions of this Agreement shall not be
affected or impaired thereby.
9.4 Waiver; Amendment;
Modification. No term
or provision hereof will be considered waived by the parties, and no breach
excused by the parties, unless such waiver or consent is in writing signed by
that party. The waiver by the parties of, or consent by the parties to, a breach
of any provision of this Agreement by the other party, shall not operate or be
construed as a waiver of, consent to, or excuse of any other or subsequent
breach by that party. This Agreement may only be amended or modified by a
writing signed by the parties or their authorized representatives.
9.5 Entire Agreement. This Agreement constitutes the entire
agreement between the parties relating to this subject matter and supersedes all
prior or contemporaneous oral or written agreements concerning such subject
matter, including the Prior Agreement.
9.6 Notices. For purposes of this Agreement,
notices, demands and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
or (unless otherwise specified) mailed by United States registered mail, return
receipt requested, postage prepaid, addressed as follows:
|
If to Contractor: |
Norman A. Ferber |
|
|
459 Hamilton Avenue |
|
|
Palo Alto, CA 94301 |
|
|
|
If to Company: |
Ross Stores, Inc. |
|
|
4440 Rosewood Drive |
|
|
Pleasanton, CA 94588 |
|
|
Attn: General Counsel |
9.7 Arbitration. In the event of any dispute or claim
relating to arising out of this Agreement, all such disputes or claims shall be
fully, finally and exclusively be resolved through binding arbitration conducted
by the American Arbitration Association pursuant to its rules and procedures,
with such arbitration conducted in Alameda County, California, to the fullest
extent permitted by law; provided however that the parties shall be entitled to
pursue all provisional remedies allowed by California Code of Civil Procedure
Section 1281.8.
IN WITNESS WHEREOF, the parties have
executed this Restated Agreement on the date first above written.
Company: |
|
Contractor: |
|
ROSS STORES, INC. |
|
NORMAN A. FERBER |
|
|
By: |
/s/ Michael
Balmuth |
|
/s/ Norman A.
Ferber |
|
Michael Balmuth |
|
Chairman of the Board, Ross Stores, Inc. |
|
Vice Chairman and CEO |
|
|
exhibit10-48.htm
AMENDED AND
RESTATED
RETIREMENT BENEFIT PACKAGE AGREEMENT
This Amended and Restated Retirement
Benefit Package Agreement (the “Retirement Agreement”) made and entered into on January 6,
2010 by and between Ross Stores, Inc. (“Ross”) and Norman A.
Ferber (“Ferber”), amends and restates the Retirement
Benefit Package Agreement entered into by Ross and Ferber effective as of
February 1, 2000, as amended on May 31, 2001 (the “Prior Agreement”). In recognition of Ferber’s past
valued services as Ross’ Chief Executive Officer, Ross desires to give Ferber
the following “Retirement Benefit Package.” The retirement benefits provided
under this Retirement Agreement shall be payable without regard to the provision
of any additional services by Ferber.
1. Continued Benefits.
1.1 Benefit Plans.
(a) Until the death of both Ferber and his
spouse, (1) Ferber and his “Immediate Family” (defined as Ferber, Ferber's spouse and
Ferber's children under the age of twenty one and children twenty one or older
if living at home or at college) shall be entitled to continue to participate
(at no cost to them) in the following Ross employee benefit plans, in effect on
the date hereof, in which Ferber now participates: executive medical, dental,
vision and mental health insurance; group life insurance; accidental death and
dismemberment insurance; business travel insurance; group excess personal
liability; and matching of Ferber's 401(k); and (2) subject to the last sentence
of this Section 1.1(a), Ross shall not make any changes in such plans or
arrangements that would adversely affect Ferber's rights or benefits thereunder,
unless such change occurs pursuant to a program applicable to all senior
executives of Ross, including Ross' Chief Executive Officer, and does not result
in a proportionately greater reduction in the rights of, or benefits to, Ferber
as compared with any other senior executive of Ross. Ferber shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement made available by Ross in the future to its executives and key
management employees, subject to, and on a basis consistent with, the terms,
conditions and overall administration of such plans and arrangements.
Notwithstanding the foregoing, the medical, dental and vision benefits provided
under this Section 1.1(a) shall be provided at a minimum level of coverage equal
to the greater of (i) the level of coverage provided to Ferber in 2009 (which
coverage shall include, without limitation, the benefits set forth on Part II of
the attached Exhibit A) or (ii) the level of coverage provided
to Ross’ Chief Executive Officer during the year such coverage is provided.
(b) In order to implement the applicable
provisions of Section 1.1(a), Ferber and Ross agree that (1) in lieu of Ross
itself providing group life insurance and accidental death and dismemberment
insurance coverage for Ferber, Ross will continue to pay directly to Ferber an
amount representing the proportionate cost of providing equivalent life
insurance and accidental death and dismemberment insurance to Ferber under Ross'
existing executive life insurance program, along with an amount equal to the
additional tax on such benefits to Ferber, as reflected on Part I of the
attached Exhibit A, and (2) in lieu of Ferber participating
directly in Ross' existing 401(k) matching program, Ross will continue to pay
directly to Ferber an amount representing the 401(k) matching payment otherwise
payable to Ross’ senior executives (including, without limitation, Ross’ Chief
Executive Officer) under the terms of Ross' then current 401(k) matching
program, as reflected on the attached Exhibit A. During the term of the Amended and
Restated Independent Contractor Consultancy Agreement between Ross and Ferber
dated the date hereof (the “Consultancy Agreement”), such payments shall be paid to Ferber
on a pro rata basis each month on the same date the monthly installment of the
annual consulting fee provided for in the Consultancy Agreement is paid and,
following the termination of the Consultancy Agreement for any reason other than
Ferber’s death, shall be paid in a single lump sum on the date the payment
provided for in Section 1.4 is paid.
(c) Ross shall provide all benefits described
in this Section 1.1 at no cost to Ferber and his Immediate Family and shall
reimburse Ferber and his Immediate Family for any and all taxes associated with
Ferber's continued receipt of such benefits, including taxes based on any cash
payment paid to them as reimbursement for such taxes.
(d) If for any reason, Ferber becomes
ineligible to participate in any of Ross’ employee benefit plans provided for in
Section 1.1(a) (and not addressed in Section 1.1(b)), Ross shall reimburse
Ferber for the cost of continuing these benefits, including all taxes associated
with such and taxes based on any cash payment paid to Ferber as reimbursement
for such taxes.
1.2 Discount Cards. Until Ferber’s death, Ferber and all
members of his Immediate Family shall be entitled to Ross discount cards.
1.3 Estate Planning. Until Ferber’s death, Ferber shall be
reimbursed by Ross, or any successor to Ross, on an annual basis, for any estate
planning fees or expenses actually incurred by Ferber, up to a maximum annual
reimbursement equal to that provided to the Chief Executive Officer of Ross, or
any successor to Ross, but in no event less than $20,000. Ross shall also
reimburse Ferber for all federal and state income taxes that may be payable by
him as a result of the foregoing reimbursement.
1.4 Annual Payments. Upon the termination of the Consultancy
Agreement for any reason other than Ferber’s death, Ross shall pay Ferber
annually the amount of $75,000 for a period of ten (10) years with the first
such payment to be made in the year in which the Consultancy Agreement so
terminates and each annual payment made on February 10th (or, if February 10th is not a business day, the immediately
following business day) of each year during this ten-year period.
2. Secretary. Ross agrees to provide Ferber with a
full-time secretary for so long as Ferber serves as a member of Ross’ Board of Directors, including the
services of his present secretary for so long as she is able and willing to
serve.
3. Change of Control. For purposes of this Retirement
Agreement, in the event of a Change of Control, “Ross” shall include any other entity that is a
successor to Ross and the provisions of this Retirement Agreement shall continue
to be binding on and shall be performed by such successor, if any, for the
benefit of Ferber and his heirs and successors. Further, in the event of any
such Change of Control, the “senior executives” referred to in Section 1 of this
Retirement Agreement shall mean the senior executives who are members of the
successor entity’s
executive committee, or equivalent; or if there is no such committee, who hold
the most senior rank in the successor entity (in each case, including the
successor entity’s Chief Executive Officer). For purposes of this Retirement
Agreement, a “Change of Control”
shall be deemed to have occurred if:
(a) Any person or group (within the meaning
of Rule 13d-3 of the rules and regulations promulgated under the Securities
Exchange Act of 1934, as amended), shall acquire, in or a series of
transactions, whether through sale of stock or merger, ownership of stock of
Ross that possesses more than 50% of the total fair market value or total voting
power of the stock of Ross or any successor to Ross; or
(b) A merger in which Ross is a party, after
which merger the stockholders of Ross do not retain, directly or indirectly, at
least a majority of the beneficial interest in the voting stock of the surviving
company; or
(c) The sale, exchange, or transfer of all or
substantially all of Ross’ assets (other than a sale, exchange, or transfer to
one or more corporations where the stockholders of Ross before and after such
sale, exchange, or transfer, directly or indirectly, are the beneficial owners
of at least a majority of the voting stock of the corporation(s) to which the
assets were transferred).
4. General Provisions.
4.1 Amendment;
Modification. This
Retirement Agreement may be amended or modified only with the written consent of
Ferber and the Board of Directors of Ross, or its designated representative. No
oral waiver, amendment or modification will be effective under any circumstances
whatsoever
4.2 Successors and Assigns. This Retirement Agreement and all
rights of Ferber hereunder shall inure to the benefit of and be enforceable by
Ferber’s personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. In addition, the
promises and obligations contained herein will be binding on the successors and
assigns of Ross.
4.3 Entire Agreement. This Retirement Agreement constitutes
the entire agreement between the parties relating to this subject matter and
supersedes all prior or contemporaneous oral or written agreements concerning
such subject matter, including the Prior Agreement.
4.4 Notice. For the purposes of this Retirement
Agreement, notices, demands and all other communications provided for in the
Retirement Agreement shall be in writing and shall be deemed to have been duly
given when delivered or (unless otherwise specified) mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
|
If to Ferber: |
Norman A. Ferber |
|
|
459 Hamilton Avenue |
|
|
Palo Alto, CA 94301 |
|
If to Ross: |
Ross Stores, Inc. |
|
|
4440 Rosewood Drive |
|
|
Pleasanton, CA 94588 |
|
|
Attention: General Counsel |
or to such other
address as any party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.
4.5 Arbitration. In the event of any dispute or claim
relating to or arising out of this Retirement Agreement, all such disputes shall
be fully, finally and exclusively resolved by binding arbitration conducted by
the American Arbitration Association in Alameda County, California.
4.6 Attorney’s Fees. Ross agrees to pay for Ferber’s
reasonable attorney’s fees incurred in the negotiation of terms of the
Retirement Agreement.
IN WITNESS WHEREOF, the parties have
executed this Agreement on the date first above written.
ROSS STORES, INC. |
|
NORMAN A. FERBER |
|
|
By: |
/s/ Michael
Balmuth |
|
/s/ Norman A.
Ferber |
|
Michael Balmuth |
|
Chairman of the Board, Ross Stores,
Inc. |
|
Vice Chairman and CEO |
|
|
|
Date: |
January 6,
2010 |
|
Date: |
January 6,
2010 |
exhibit10-60.htm
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made effective December 4, 2009,
(the “Effective Date”) by and between Ross Stores, Inc. (the
“Company”), a Delaware corporation, and Lisa
Panattoni (the “Executive”).
RECITALS
A. The Company wishes to employ the Executive, and the Executive is willing
to accept such employment, as Group Executive Vice President, Merchandising,
Ross Dress for Less.
B. It is now the mutual desire of the Company and the Executive to enter
into a written employment agreement to govern the terms of the Executive’s
employment by the Company as of and following the Effective Date on the terms
and conditions set forth below.
TERMS AND CONDITIONS
In consideration for the promises of the
parties set forth below, the Company and the Executive hereby agree as follows:
Term. Subject
to the provisions of Section 6 of this Agreement, the term of employment of the
Executive by the Company under this Agreement (the “Term of Employment”) shall be as follows:
Initial Term. The initial Term of Employment of the
Executive by the Company under this Agreement shall begin on the Effective Date
and end on March 31, 2014 (the “Initial Term”), unless extended or terminated earlier
in accordance with this Agreement.
Renewal Term.
Upon the timely written request of the Executive to extend the Term of
Employment, the Compensation Committee (the “Committee”) of the Board of Directors (the
“Board”) of the Company shall consider
extending the Executive’s employment with the Company under this Agreement. To
be timely, such request must be delivered to the Company’s Chief Executive
Officer not earlier than twelve (12) months prior to the end of the then
effective Initial Term or Renewal Term and, in any case, while the Executive
remains an employee of the Company. Such request must contain no proposed
modification to the provisions of this Agreement other than an extension of the
Term of Employment as then in effect for an additional two (2) years. Within
thirty (30) days following the receipt of such notice, the Chief Executive
Officer will discuss such request with the Committee and advise the Executive,
in writing, within thirty (30) days following its consideration of the
Executive’s written request, of the approval or disapproval of such extension
request. The failure to provide such written advice shall constitute a denial of
the Executive’s request for extension. If the Executive’s request for an
extension is approved, the Term of Employment shall be extended for two (2)
additional years commencing on the date immediately following the date of
expiration of the Term of Employment in effect at the time of the Executive’s
written request. Such additional two-year period is referred to herein as a
“Renewal Term.”
Position and Duties. During the Term of Employment, the Executive shall serve as Group
Executive Vice President, Merchandising, Ross Dress for Less. As used in this
Agreement, the term “Company” includes Ross Stores, Inc. and each and any of its
divisions, affiliates or subsidiaries (except that, where the term relates to
stock, stockholders, stock options or other stock-based awards or the Board, it
means Ross Stores, Inc.). The Executive’s employment may be transferred,
assigned, or re-assigned to Ross Stores, Inc. or a division, affiliate or
subsidiary of Ross Stores, Inc., and such transfer, assignment, or re-assignment
will not constitute a termination of employment or “Good Reason” for the
Executive’s termination of employment under this Agreement. During the Term of
Employment, the Executive may engage in outside activities provided those
activities (including but not limited to membership on boards of directors of
not-for-profit and for-profit organizations) do not conflict with the
Executive’s duties and responsibilities hereunder, and provided further that the
Executive gives written notice to the Board of any significant outside business
activity in which the Executive plans to become involved, whether or not such
activity is pursued for profit.
Principal Place of Employment. The Executive shall be employed at the
Company’s offices in New York, except for required travel on the Company’s
business to an extent substantially consistent with present business travel
obligations of the Executive’s position.
Compensation and Related Matters.
Salary. During
the Term of Employment, the Company shall pay to the Executive a salary at a
rate of not less than Eight Hundred and Thirty Thousand Dollars ($830,000) per
annum. The Executive’s salary shall be payable in substantially equal
installments in accordance with the Company’s normal payroll practices
applicable to senior executives. Subject to the first sentence of this Section
4(a), the Executive’s salary may be adjusted from time to time by the Committee
in accordance with normal business practices of the Company.
Bonus. During
the Term of Employment, the Executive shall be eligible to receive an annual
bonus paid under the Company’s existing incentive bonus plan under which the
Executive is eligible (which is currently the Incentive Compensation Plan) or
any replacement plan that may subsequently be established and in effect during
the Term of Employment. The current target annual bonus the Executive is
eligible to earn upon achievement of 100% of all applicable performance targets
under such incentive bonus plan is 75% of the Executive’s then effective annual
salary rate. The Executive’s death, termination for Cause or Voluntary
Termination (as described in Sections 6(a), 6(c) and 6(f), respectively) prior
to the Company’s payment of the bonus for a fiscal year of the Company will
cause the Executive to be ineligible for any annual bonus for that fiscal year
or any pro-rata portion of such bonus.
Expenses. During the Term of Employment, the Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses incurred by the Executive in
performing services hereunder, including all reasonable expenses of travel and
living while away from home, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company.
Benefits.
During the Term of Employment, the Executive shall be entitled to participate in
all of the Company’s employee benefit plans and arrangements in which senior
executives of the Company are eligible to participate. The Company shall not
make any changes in such plans or arrangements which would adversely affect the
Executive’s rights or benefits thereunder, unless such change occurs pursuant to
a program applicable to all senior executives of the Company and does not result
in a proportionately greater reduction in the rights or benefits of the
Executive as compared with any other similarly situated senior executive of the
Company. The Executive shall be entitled to participate in, or receive benefits
under, any employee benefit plan or arrangement made available by the Company in
the future to its senior executives, subject to, and on a basis consistent with,
the terms, conditions and overall administration of such plans and arrangements.
Except as otherwise specifically provided herein, nothing paid to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be in lieu of the salary or bonus otherwise payable under this
Agreement.
Vacations.
During the Term of Employment, the Executive shall be entitled to twenty (20)
vacation days in each calendar year, and to compensation in respect of earned
but unused vacation days, determined in accordance with the Company’s vacation
plan. The Executive shall also be entitled to all paid holidays given by the
Company to its senior executives. Unused vacation days shall not be forfeited
once they have been earned and, if still unused at the time of the Executive’s
termination of employment with the Company, shall be promptly paid to the
Executive at their then-current value, based on the Executive’s daily salary
rate at the time of the Executive’s termination of employment.
Services Furnished. The Company shall furnish the Executive with office space and such
services as are suitable to the Executive’s position and adequate for the
performance of the Executive’s duties during the Term of Employment.
Confidential Information and
Intellectual Property.
Other than in the performance of the
Executive’s duties hereunder, the Executive agrees not to use in any manner or
disclose, distribute, publish, communicate or in any way cause to be used,
disclosed, distributed, published, or communicated in any way or at any time,
either while in the Company's employ or at any time thereafter, to any person
not employed by the Company, or not engaged to render services to the Company,
any Confidential Information (as defined below) obtained while in the employ of
the Company.
Confidential Information includes any
written or unwritten information which relates to and/or is used by the Company
or its subsidiaries, affiliates or divisions, including, without limitation (i)
the names, addresses, buying habits and other special information regarding
past, present and potential customers, employees and suppliers of the Company,
(ii) customer and supplier contracts and transactions or price lists of the
Company and suppliers, (iii) methods of distribution, (iv) all agreements,
files, books, logs, charts, records, studies, reports, processes, schedules and
statistical information, (v) data, figures, projections, estimates, pricing
data, customer lists, buying manuals or procedures, distribution manuals or
procedures, other policy and procedure manuals or handbooks, (vi) supplier
information, tax records, personnel histories and records, sales information,
and property information, (vii) information regarding the present or future
phases of business, (viii) ideas, inventions, trademarks, business information,
knowhow, processes, techniques, improvements, designs, redesigns, creations,
discoveries, trade secrets, and developments, (ix) all computer software
licensed or developed by the Company or its subsidiaries, affiliates or
divisions, computer programs, computer-based and web-based training programs,
and systems, and (x) finances and financial information, but Confidential
Information will not include information of the Company or its subsidiaries,
affiliates or divisions that (1) became or becomes a matter of public knowledge
through sources independent of the Executive, (2) has been or is disclosed by
the Company or its subsidiaries, affiliates or divisions without restriction on
its use, or (3) has been or is required or specifically permitted to be
disclosed by law or governmental order or regulation. The Executive also agrees
that, if there is any reasonable doubt whether an item is public knowledge, to
not regard the item as public knowledge until and unless the Company’s Chief
Executive Officer confirms to the Executive that the information is public
knowledge.
The provisions of this Section 5 shall
not preclude the Executive from disclosing such information to the Executive's
professional tax advisor or legal counsel solely to the extent necessary to the
rendering of their professional services to the Executive if such individuals
agree to keep such information confidential.
The Executive agrees that upon leaving
the Company’s employ the Executive will remain reasonably available to answer
questions from Company officers regarding the Executive’s former duties and
responsibilities and the knowledge the Executive obtained in connection
therewith.
The Executive agrees that upon leaving
the Company's employ the Executive will not communicate with, or give statements
to, any member of the media (including print, television, or radio media)
relating to any matter (including pending or threatening lawsuits or
administrative investigations) about which the Executive has knowledge or
information (other than knowledge or information that is not Confidential
Information) as a result of employment with the Company. The Executive further
agrees to notify the Chief Executive Officer or his or her designee immediately
after being contacted by any member of the media with respect to any matter
affected by this section.
The Executive agrees that all
information, inventions, and discoveries, whether or not patented or patentable,
made or conceived by the Executive, either alone or with others, at any time
while employed by the Company, which arises out of such employment or is
pertinent to any field of business or research in which, during such employment,
the Company, its subsidiaries, affiliates or divisions is engaged or (if such is
known to or ascertainable by the Executive) is considering engaging
(“Intellectual Property”) shall (i) be and remain the sole
property of the Company and the Executive shall not seek a patent with respect
to such Intellectual Property without the prior consent of an authorized
representative of the Company and (ii) be disclosed promptly to an authorized
representative of the Company along with all information the Executive possesses
with regard to possible applications and uses. Further, at the request of the
Company, and without expense or additional compensation to the Executive, the
Executive agrees to execute such documents and perform such other acts as the
Company deems necessary to obtain patents on such Intellectual Property in a
jurisdiction or jurisdictions designated by the Company, and to assign to the
Company or its designee such Intellectual Property and all patent applications
and patents relating thereto.
The Executive and the Company agree that
the Executive intends all original works of authorship within the purview of the
copyright laws of the United States authored or created by the Executive in the
course of the Executive’s employment with the Company will be works for hire
within the meaning of such copyright law.
Upon termination of the Executive’s
employment, or at any time upon request of the Company, the Executive will
return to the Company all Confidential Information and Intellectual Property, in
any form, including but not limited to letters, memoranda, reports, notes,
notebooks, books of account, drawings, prints, specifications, formulae, data
printouts, microfilms, magnetic tapes, disks, recordings, documents, and all
copies thereof.
Termination.
The Executive’s employment may be terminated during the Term of Employment only
as follows:
Death. The Executive’s employment shall
terminate upon the Executive’s death.
Disability.
If, as a result of the Executive’s Disability (as defined below), the Executive
shall have been absent from the Executive’s duties hereunder on a full-time
basis for the entire period of six consecutive months, and, within thirty days
after written notice of termination is given by the Company (which may occur
before or after the end of such six-month period), the Executive shall not have
returned to the performance of the Executive’s duties hereunder on full-time
basis, the Executive’s employment shall terminate. For purposes of this
Agreement, the term “Disability” shall mean a physical or mental
illness, impairment or condition reasonably determined by the Board that
prevents the Executive from performing the duties of the Executive’s position
under this Agreement.
For Cause. The
Company may terminate the Executive’s employment for Cause. For this purpose,
“Cause” means the occurrence of any of the
following (i) the Executive’s continuous failure to substantially perform the
Executive’s duties hereunder (unless such failure is a result of a Disability as
defined in Section 6(b)), (ii) the Executive’s theft, dishonesty, breach of
fiduciary duty for personal profit or falsification of any documents of the
Company, (iii) the Executive’s material failure to abide by the applicable
code(s) of conduct or other policies (including, without limitation, policies
relating to confidentiality and reasonable workplace conduct) of the Company,
(iv) knowing or intentional misconduct by the Executive as a result of which the
Company is required to prepare an accounting restatement, (v) the Executive’s
unauthorized use, misappropriation, destruction or diversion of any tangible or
intangible asset or corporate opportunity of the Company (including, without
limitation, the Executive’s improper use or disclosure of confidential or
proprietary information of the Company), (vi) any intentional misconduct or
illegal or grossly negligent conduct by the Executive which is materially
injurious to the Company monetarily or otherwise, (vii) any material breach by
the Executive of the provisions of Section 9 [Certain Employment Obligations] of
this Agreement, or (viii) the Executive’s conviction (including any plea of
guilty or nolo contendere) of any criminal act involving fraud, dishonesty,
misappropriation or moral turpitude, or which materially impairs the Executive’s
ability to perform his or her duties with the Company. A termination for Cause
shall not take effect unless: (1) the Executive is given written notice by the
Company of its intention to terminate the Executive for Cause; (2) the notice
specifically identifies the particular act or acts or failure or failures to act
which are the basis for such termination; (3) where practicable, the notice is
given within sixty (60) days of the Company’s learning of such act or acts or
failure or failures to act; and (4) only in the case of clause (i), (iii), (v),
(vi) or (vii) of the second sentence of this Section 6(c), the Executive fails
to substantially cure such breach, to the extent such cure is possible, within
sixty (60) days after the date that such written notice is given to the
Executive.
Without Cause. The Company may terminate the Executive’s employment at any time Without
Cause. A termination “Without Cause” is a termination by the Company of the
Executive’s employment with the Company for any reasons other than the death or
Disability of the Executive or the termination by the Company of the Executive
for Cause as described in Section 6(c).
Termination by the Executive for Good Reason. The Executive may terminate the
Executive’s employment with the Company for “Good Reason,” which shall be deemed to occur if the
Executive terminates the Executive’s employment with the Company within sixty
(60) days after written notice to the Company by the Executive of the occurrence
of one or more of the following conditions, which condition(s) have not been
cured within thirty (30) business
days after the Company’s receipt of such written notice: (1) a failure by the
Company to comply with any material provision of this Agreement (including but
not limited to the reduction of the Executive’s salary or the target annual
bonus opportunity set forth in Section 4(b), (2) a significant diminishment in
the nature or scope of the authority, power, function or duty attached to the
position which the Executive currently maintains without the express written
consent of the Executive, or (3) the relocation of the Executive’s Principal
Place of Employment as described in Section 3 to a location that increases the
regular one-way commute distance between the Executive’s residence and Principal
Place of Employment by more than 25 miles without the Executive’s prior written
consent. In order to constitute a termination of employment
for Good Reason, such termination must occur within two (2) years following the initial
existence of any of the conditions set forth in this Section 6(e), the Executive
must provide written notice to the Company of the existence of the condition
giving rise to the Good Reason termination within sixty (60) days of the initial
existence of the condition, and the Company shall have thirty (30) days during
which it may remedy the condition and in the event such condition is timely
remedied, the termination shall not constitute a termination for Good
Reason.
Voluntary Termination. The Executive may voluntarily resign from the Executive’s employment
with the Company at any time (a “Voluntary
Termination”). A voluntary resignation from employment by the Executive
for Good Reason pursuant to Section 6(e) shall not be deemed a Voluntary
Termination.
Non-Renewal Termination. If the Executive fails to request an
extension of the Term of Employment in accordance with Section 1(b) or if the
Committee fails to approve such request, this Agreement shall automatically
expire at the end of the then current Term of Employment (a “Non-Renewal
Termination”).
Notice and Effective Date of
Termination
Notice. Any
termination of the Executive’s employment by the Company or by the Executive
during the Term of Employment (other than as a result of the death of the
Executive or a Non-Renewal Termination described in Section 6(g)) shall be
communicated by written notice of termination to the other party hereto. Such
notice shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive’s employment under
that provision.
Date of
Termination. The date
of termination of the Executive’s employment shall be:
(i) if the Executive’s employment is terminated by the Executive’s death, the
date of the Executive’s death;
(ii) if the Executive’s employment is terminated due to Disability pursuant to
Section 6(b), the date of termination shall be the last to occur of the 31st day
following delivery of the notice of termination to the Executive by the Company
or the end of the consecutive six-month period referred to in Section 6(b).
(iii) if the Executive’s employment is terminated for any other reason by
either party, the date on which a notice of termination is delivered to the
other party; and
(iv) if the Agreement expires pursuant to a Non-Renewal Termination described
in Section 6(g), the parties’ employment relationship shall terminate on the
last day of the then current Term of Employment without any notice.
Compensation and Benefits Upon
Termination.
Termination Due To Disability, Without Cause or For Good
Reason. If the
Executive’s employment terminates pursuant to Section 6(b) [Disability], Section
6(d) [Without Cause], or Section 6(e) [Termination by Executive for Good
Reason], then, subject to Section 22 [Compliance with Section 409A], in addition
to all salary, annual bonuses, expense reimbursements, benefits and accrued
vacation days earned by the Executive pursuant to Section 4 through the date of
the Executive’s termination of employment, the Executive shall be entitled to
the following, provided that within sixty (60) days following the Executive’s
termination of employment the Executive executes a general release of claims
against the Company and its subsidiaries, affiliates, stockholders, directors,
officers, employees, agents, successors and assigns in the current form approved
by the Company and attached as Exhibit A (subject to any amendments required by
law or regulation)(the “Release”) and the period for revocation, if any,
of such Release has expired without the Release having been revoked:
(v) Salary. The
Company shall continue to pay to the Executive the Executive’s salary, at the
rate in effect immediately prior to such termination of employment, through the
remainder of the Term of Employment then in effect.
(vi) Bonus. The
Company shall continue to pay to the Executive an annual bonus through the
remainder of the Term of Employment then in effect; provided, however, that the
amount of the annual bonus determined in accordance with this Section 8(a)(ii)
for the fiscal year of the Company in which such Term of Employment ends shall
be prorated on the basis of the number of days of such Term of Employment
occurring within such fiscal year. The amount of each annual bonus payable
pursuant to this Section 8(a)(ii), prior to any proration, shall be equal to the
annual bonus that the Executive would have earned had no such termination under
Section 8(a)(i) occurred, contingent on the relevant annual bonus plan
performance goals for the respective year having been obtained. However, in no
case shall any such post-termination annual bonus exceed 100% of the Executive's
target bonus for the fiscal year of the Company in which the Executive's
termination of employment occurs. Such bonuses shall not be paid until due under
the applicable Company bonus plan.
(vii) Stock Options.
Stock options granted to the Executive by the Company and which remain
outstanding immediately prior to the date of termination of the Executive’s
employment, as provided in Section 7(b), shall immediately become vested in full
upon such termination of employment.
(viii) Restricted Stock. Shares of restricted stock granted to the Executive by the Company which
have not become vested as of the date of termination of the Executive’s
employment, as provided in Section 7(b), shall immediately become vested on a
pro rata basis. The number of such additional shares of restricted stock that
shall become vested as of the date of the Executive’s termination of employment
shall be that number of additional shares that would have become vested through
the date of such termination of employment at the rate(s) determined under the
vesting schedule applicable to such shares had such vesting schedule provided
for the accrual of vesting on a daily basis (based on a 365 day year). The pro
rata amount of shares vesting through the date of termination/non-renewal shall
be calculated by multiplying the number of unvested shares scheduled to vest in
each respective vesting year by the ratio of the number of days from the date of
grant through the date of termination/non-renewal, and the number of days from
the date of grant through the original vesting date of the respective vesting
tranche. Any shares of restricted stock remaining unvested after such pro rata
acceleration of vesting shall automatically be reacquired by the Company in
accordance with the provisions of the applicable restricted stock agreement, and
the Executive shall have no further rights in such unvested portion of the
restricted stock. In addition, the Company shall waive any reacquisition or
repayment rights for dividends paid on restricted stock prior to Executive’s
termination of employment.
(ix) Other Equity Awards. Except as set forth in Sections 8(a)(iii) and 8(a)(iv), performance
share awards and all other equity awards granted to the Executive by the Company
which remain outstanding immediately prior to the date of termination of the
Executive’s employment, as provided in Section 7(b), shall vest and be settled
in accordance with their terms.
The Company shall have no further
obligations to the Executive as a result of termination of employment described
in this Section 8(a) except as set forth in Section 12.
Death, Termination for Cause or Voluntary Termination. If the Executive’s employment
terminates pursuant to Section 6(a) [Death], Section 6(c) [For Cause] or Section
6(f) [Voluntary Termination], the Executive (or the Executive’s designee or the
Executive’s estate) shall be entitled to receive only the salary, annual
bonuses, expense reimbursements, benefits and accrued vacation days earned by
the Executive pursuant to Section 4 through the date of the Executive’s
termination of employment. The Executive shall not be entitled to any bonus not
paid prior to the date of the Executive’s termination of employment, and the
Executive shall not be entitled to any prorated bonus payment for the year in
which the Executive’s employment terminates. Any stock options granted to the
Executive by the Company shall continue to vest only through the date on which
the Executive’s employment terminates, and unless otherwise provided by their
terms, any restricted stock, performance share awards or other equity awards
that were granted to the Executive by the Company that remain unvested as of the
date on which the Executive’s employment terminates shall automatically be
forfeited and the Executive shall have no further rights with respect to such
awards. The Company shall have no further obligations to the Executive as a
result of termination of employment described in this Section 8(b) except as set
forth in Section 12. In addition, provided the Executive terminates pursuant to
Death, the Company shall waive any reacquisition or repayment rights for
dividends paid on restricted stock prior to Executive’s termination of
employment.
Non-Renewal Termination. If the Agreement expires as set forth
in Section 6(g) [Non-Renewal Termination], then, subject to Section 22
[Compliance with Section 409A], in addition to all salary, annual bonuses,
expense reimbursements, benefits and accrued vacation days earned by the
Executive pursuant to Section 4 through the date of the Executive’s termination
of employment, the Executive shall be entitled to the following, provided that
within sixty (60) days following the Executive’s termination of employment the
Executive executes the Release and the period for revocation, if any, of such
Release has expired without the Release having been revoked:
(x) Bonus. The
Company shall pay the Executive an annual bonus for the fiscal year of the
Company in which the date of the Executive’s termination of employment occurs,
which shall be prorated for the portion of such fiscal year that the Executive
is employed by the Company. The amount of such annual bonus, prior to proration,
shall be equal to the annual bonus that the Executive would have earned under
the Company’s bonus plan for the fiscal year of the Company in which the
Executive’s termination of employment occurs had the Executive remained in its
employment, contingent on the relevant annual bonus plan performance goals for
the year in which Executive terminates having been obtained. However, in no case
shall any such post-termination annual bonus exceed 100% of the Executive's
target bonus for the fiscal year of the Company in which the Executive's
termination of employment occurs. Such bonus shall not be paid until due under
the applicable Company bonus plan.
(xi) Stock Options.
Stock options granted to the Executive by the Company and which remain
outstanding immediately prior to the date of termination of the Executive’s
employment, as provided in Section 7(b), shall be vested and exercisable in
accordance with their terms.
(xii) Restricted Stock. Shares of restricted stock granted to the Executive by the Company which
have not become vested as of the date of termination of the Executive’s
employment, as provided in Section 7(b), shall immediately become vested on a
pro rata basis. The number of such additional shares of restricted stock that
shall become vested as of the date of the Executive’s termination of employment
shall be that number of additional shares that would have become vested through
the date of such termination of employment at the rate(s) determined under the
vesting schedule applicable to such shares had such vesting schedule provided
for the accrual of vesting on a daily basis (based on a 365 day year). The pro
rata amount of shares vesting through the date of termination/non-renewal shall
be calculated by multiplying the number of unvested shares scheduled to vest in
each respective vesting year by the ratio of the number of days from the date of
grant through the date of termination/non-renewal, and the number of days from
the date of grant through the original vesting date of the respective vesting
tranche. Any shares of restricted stock remaining unvested after such pro rata
acceleration of vesting shall automatically be reacquired by the Company in
accordance with the provisions of the applicable restricted stock agreement, and
the Executive shall have no further rights in such unvested portion of the
restricted stock. In addition, the Company shall waive any reacquisition or
repayment rights for dividends paid on restricted stock prior to Executive’s
termination of employment.
(xiii) Other Equity Awards. Except as set forth in Sections 8(c)(ii) and 8(c)(iii), performance share
awards and all other equity awards granted to the Executive by the Company which
remain outstanding immediately prior to the date of termination of the
Executive’s employment, as provided in Section 7(b), shall vest and be settled
in accordance with their terms.
The Company shall have no further
obligations to the Executive as a result of termination of employment described
in this Section 8(c) except as set forth in Section 12.
Special Change in Control
Provisions.
(xiv) Change in Control Benefits.
(1) Without Regard to Termination of Employment. In the event of a Change in Control (as
defined below), all shares of restricted stock granted to the Executive by the
Company shall become vested in full immediately prior to the consummation of
such Change in Control, and, subject to Section 22 [Compliance with Section
409A], the Executive shall be entitled to receive an additional salary equal to
Sixty-Two Thousand and Five Hundred ($62,500) per month for a period of two (2)
years following the Change in Control provided the Executive does not Terminate
employment as defined in Sections 6(a) – 6(g). Except as set forth in this
Section 8(d)(i)(1) or Section 8(d)(i)(2) below, the treatment of stock options,
performance share awards and all other equity awards granted to the Executive by
the Company which remain outstanding immediately prior to the date of such
Change in Control shall be determined in accordance with their terms.
(2) Upon Certain Termination of Employment. In addition to the payments and benefits
provided by Section 8(d)(i)(1) above, if the Executive’s employment is
terminated either by the Company Without Cause (as defined in Section 6(d)) or
by the Executive for Good Reason (as defined in Section 6(e)), in either case
within a period commencing one (1) month prior to and ending twelve (12) months
following a Change in Control, then, subject to Section 22 [Compliance with
Section 409A], the Executive shall be entitled to the following (in addition to
any other payments or benefits provided under this Agreement), provided that
within sixty (60) days following the Executive’s termination of employment the
Executive executes the Release and the period for revocation, if any, of such
Release has expired without the Release having been revoked:
a. Salary. The
Executive shall be entitled to a cash payment equal to 2.99 times the
Executive’s then-current annual base salary. Such payment shall be payable in
full to Executive within 30 days following such termination of employment. The
payment under this Section 8(d)(i)(2)(a) shall take the place of any payment
under Section 8(a)(i) and the Executive shall not be entitled to receive a
payment under Section 8(a)(i) if the Executive is entitled to a payment under
this Section 8(d)(i)(2)(a).
b. Bonus. The
Executive shall be entitled to a cash payment equal to 2.99 times the
Executive’s target annual bonus for the Company’s fiscal year then in effect on
the date termination of employment occurs. Such payment shall be payable in full
to Executive within 30 days following such termination of employment. The
payment under this Section 8(d)(i)(2)(b) shall take the place of any payment
under Section 8(a)(ii) and the Executive shall not be entitled to receive a
payment under Section 8(a)(ii) if the Executive is entitled to a payment under
this Section 8(d)(i)(2)(b).
c. Health Care Coverage. The Executive shall be entitled to the continuation of the Executive’s
health care coverage under the Company’s employee benefit plans (including
medical, dental, vision and mental coverage) which the Executive had at the time
of the termination of employment (including coverage for the Executive’s
dependents to the extent such dependents were covered immediately prior to such
termination of employment) at the Company’s expense for the greater of (i) the
remainder of the Term of Employment then in effect or (ii) a period of two (2)
years commencing on the date of the Executive’s termination of employment. Such
health care continuation rights will be in addition to any rights the Executive
may have under ERISA Sections 600 and thereafter and Section 4980B of the
Internal Revenue Code (“COBRA coverage”).
d. Estate Planning. The Executive shall be entitled to reimbursement of the Executive’s
estate planning expenses (including attorneys’ fees) on the same basis, if any,
as to which the Executive was entitled to such reimbursements immediately prior
to such termination of employment for the greater of (i) the remainder of the
Term of Employment then in effect or (ii) a period of two (2) years commencing
on the date of termination of employment.
(xv) Change in Control Defined. A “Change in Control” shall be deemed to have occurred if:
(1) any person or group (within the meaning of Rule 13d-3 of the rules and
regulations promulgated under the Securities Exchange Act of 1934, as amended)
shall acquire during the twelve-month period ending on the date of the most
recent acquisition by such person or group, in one or a series of transactions,
whether through sale of stock or merger, ownership of stock of the Company that
constitutes 35% or more of the total voting power of the stock of the Company or
any successor to the Company; (2) a merger in which the Company is a party
pursuant to which any person or such group acquires ownership of stock of the
Company that, together with stock held by such person or group, constitutes more
than 50% of the total fair market value or total voting power of the stock of
the Company, or (3) the sale, exchange, or transfer of all or substantially all
of the Company’s assets (other than a sale, exchange, or transfer to one or more
corporations where the stockholders of the Company before and after such sale,
exchange, or transfer, directly or indirectly, are the beneficial owners of at
least a majority of the voting stock of the corporation(s) to which the assets
were transferred).
(xvi) Excise Tax Gross-Up. If the Executive becomes entitled to one or more payments (with a
“payment” for this purpose including the accelerated vesting of restricted
stock, stock options or other equity awards, or other non-cash benefits or
property), whether pursuant to the terms of this Agreement or any other plan or
agreement with the Company or any affiliated company (collectively,
“Change in Control
Payments”), which are
or become subject to the tax (the “Excise Tax”) imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”), the Company shall pay to the
Executive at the time specified below such amount (the “Gross-up Payment”) as may be necessary to place the
Executive in the same after-tax position as if no portion of the Change in
Control Payments and any amounts paid to the Executive pursuant to Section 8 had
been subject to the Excise Tax. The Gross-up Payment shall include, without
limitation, reimbursement for any penalties and interest that may accrue in
respect of such Excise Tax. For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed: (A) to pay federal income taxes
at the highest marginal rate of federal income taxation for the year in which
the Gross-up Payment is to be made; and (B) to pay any applicable state and
local income taxes at the highest marginal rate of taxation for the calendar
year in which the Gross-up Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
local taxes if paid in such year. If the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder at the time the Gross-up
Payment is made, the Executive shall repay to the Company at the time that the
amount such reduction in Excise Tax is finally determined (but, if previously
paid to the taxing authorities, not prior to the time the amount of such
reduction is refunded to the Executive or otherwise realized as a benefit by the
Executive) the portion of the Gross-up Payment that would not have been paid if
such Excise Tax had been used in initially calculating the Gross-up payment,
plus interest on the amount of such repayment at the rate provided in Section
1274 (b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time the Gross-up Payment
is made, the Company shall make an additional Gross-up Payment in respect of
such excess (plus any interest and penalties payable with respect to such
excess) at the time that the amount of such excess is finally determined.
(xvii) The Gross-up Payment provided for above shall be paid, subject to Section
22 [Compliance with Section 409A], on the 30th day (or such earlier date as the
Excise Tax becomes due and payable to the taxing authorities) after it has been
determined that the Change in Control Payments (or any portion thereof) are
subject to the Excise Tax; provided, however, that if the amount of such
Gross-up Payment or portion thereof cannot be finally determined on or before
such day, the Company shall pay to the Executive on such day an estimate, as
determined by counsel or auditors selected by the Company and reasonably
acceptable to the Executive, of the minimum amount of such payments. The Company
shall pay to the Executive the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
the Executive shall repay such amount on the fifth day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code). The Company shall have the right to control all proceedings with the
Internal Revenue Service that may arise in connection with the determination and
assessment of any Excise Tax and, at its sole option, the Company may pursue or
forego any and all administrative appeals, proceedings, hearings, and
conferences with any taxing authority in respect of such Excise Tax (including
any interest or penalties thereon); provided, however, that the Company’s
control over any such proceedings shall be limited to issues with respect to
which a Gross-up Payment would be payable hereunder, and the Executive shall be
entitled to settle or contest any other issue raised by the Internal Revenue
Service or any other taxing authority. The Executive shall cooperate with the
Company in any proceedings relating to the determination and assessment of any
Excise Tax and shall not take any position or action that would materially
increase the amount of any Gross-up Payment hereunder.
Timing of Payments. Any cash payments to
which the Executive is entitled under Sections 8(a), (c) and (d) shall be
payable in accordance with the Company’s payroll schedule and shall commence as
soon as practicable upon the period for revocation of the Release having expired
(and in any event on or prior to December 31 of the year in which Executive has
a Separation from Service); provided, however, that in the event that Executive
becomes entitled to such payments in connection with a Separation from Service
that occurs on or after November 1 of any calendar year, such payments shall
commence on the later of (i) the period for revocation of the Release having
expired or (ii) January 1 of the calendar year that immediately follows the year
in which the Executive has a Separation from Service.
Certain Employment
Obligations.
Employee Acknowledgement. The Company and the Executive
acknowledge that (i) the Company has a special interest in and derives
significant benefit from the unique skills and experience of the Executive; (ii)
as a result of the Executive’s service with the Company, the Executive will use
and have access to some of the Company’s proprietary and valuable Confidential
Information during the course of the Executive’s
employment; (iii) the Confidential Information has been developed and created by
the Company at substantial expense and constitutes valuable proprietary assets
of the Company, and the Company will suffer substantial damage and irreparable
harm which will be difficult to compute if, during the term of the Executive’s
employment or thereafter, the Executive should disclose or improperly use such
Confidential Information in violation of the provisions of this Agreement; (iv)
the Company will suffer substantial damage and irreparable harm which will be
difficult to compute if the Executive competes with the company in violation of
this Agreement; (v) the Company will suffer substantial damage which will be
difficult to compute if, the Executive solicits or interferes with the Company’s
employees, clients, or customers; (vi) the provisions of this Agreement are
reasonable and necessary for the protection of the business of the Company; and
(vii) the provisions of this Agreement will not preclude the Executive from
obtaining other gainful employment or service.
Non-Compete.
(xviii) During the Term of Employment and for a period of twenty-four (24) months
following the Executive's termination of employment with the Company, the
Executive shall not, directly or indirectly, own, manage, control, be employed
by, consult with, participate in, or be connected in any manner with the
ownership, management, operation, control of, or otherwise become involved with,
any Competing Business, nor shall the Executive undertake any planning to engage
in any such activity.
For purposes of this Agreement, a
Competing Business shall mean any of the following: (1) any business that is
listed as a peer retailer in the Compensation Discussion and Analysis section of
the Company’s most current Proxy Statement filed with the U.S. Securities and
Exchange Commission as of the date of Executive’s termination of employment with
the Company, (2) any off-price retailer or retailer of discount merchandise,
including without limitation, Burlington Coat Factory Warehouse Corporation,
Macy’s, Inc., TJX Companies Inc., Retail Ventures Inc., Kohl’s Corporation,
Stein Mart, Inc., Bed, Bath & Beyond, Inc., Tuesday Morning Corporation, and
(3) any affiliates, subsidiaries or successors of businesses identified above.
(xix) The foregoing restrictions in Section 9(b)(i) shall have no force or
effect in the event that: (i) the Executive’s employment with the Company is
terminated either by the Company pursuant to Section 6(d)[Without Cause] or by
the Executive pursuant to Section 6(e) [Termination by the Executive for Good
Reason]; or (ii) the Company fails to approve or grant an extension of this
Agreement in accordance with Section 1 hereof.
(xx) Section 9(b)(i) shall not prohibit the Executive from making any
investment of 1% or less of the equity securities of any publicly-traded
corporation which is considered to be a Competing Business.
Non-Solicitation of Employees. During the Term of Employment and for a
period of 24 months following the Executive’s termination of that employment
with the Company, the Executive shall not, without the written permission of the
Company or an affected affiliate, directly or indirectly (i) solicit, employ or
retain, or have or cause any other person or entity to solicit, employ or
retain, any person who is employed by the Company or was employed by the Company
during the 6-month period prior to such solicitation, employment, or retainer,
(ii) encourage any such person not to devote his or her full business time to
the Company, or (iii) agree to hire or employ any such person.
Non-Solicitation of Third Parties. During the Term of Employment and for a
period of 24 months following the Executive’s termination of employment with the
Company, the Executive shall not directly or indirectly solicit or otherwise
influence any entity with a business arrangement with the Company, including,
without limitation, suppliers, sales representatives, lenders, lessors, and
lessees, to discontinue, reduce, or otherwise materially or adversely affect
such relationship.
Non-Disparagement. The Executive acknowledges and agrees that the Executive will not defame
or criticize the services, business, integrity, veracity, or personal or
professional reputation of the Company or any of its directors, officers,
employees, affiliates, or agents of any of the foregoing in either a
professional or personal manner either during the term of the Executive’s
employment or thereafter.
Company Remedies for Executive’s
Breach of Certain Obligations.
The Executive acknowledges and agrees
that in the event that the Executive breaches or threatens to breach Sections 5
or 9 of this Agreement, all compensation and benefits otherwise payable pursuant
to this Agreement and the vesting and/or exercisability of all stock options,
restricted stock, performance shares and other forms of equity compensation
previously awarded to the Executive, notwithstanding the provisions of any
agreement evidencing any such award to the contrary, shall immediately cease.
The Company shall give prompt notice to
the Executive of its discovery of a breach by the Executive of Section 9 of this
Agreement. If it is determined by a vote of not less than two-thirds of the
members of the Board that the Executive has breached Section 9 of this Agreement
and has not cured such breach within ten (10) business days of such notice,
then:
the Executive shall forfeit to the
Company (A) all stock options, stock appreciation rights, performance shares and
other equity compensation awards (other than shares of restricted stock,
restricted stock units or similar awards) granted to the Executive by the
Company which remain outstanding and unexercised or unpaid as of the date of
such determination by the Board (the “Breach Determination
Date”) and (B) all
shares of restricted stock, restricted stock units and similar awards granted to
the Executive by the Company which continue to be held by the Executive as of
the Breach Determination Date to the extent that such awards vested during the
Forfeiture Period (as defined below); and
the Executive shall pay to the Company
all gains realized by the Executive upon (A) the exercise by or payment in
settlement to the Executive on and after the commencement of the Forfeiture
Period of stock options, stock appreciation rights, performance shares and other
equity compensation awards (other than shares of restricted stock, restricted
stock units or similar awards) granted to the Executive by the Company and (B)
the sale on and after the commencement of the Forfeiture Period of shares or
other property received by the Executive pursuant to awards of restricted stock,
restricted stock units or similar awards granted to the Executive by the Company
and which vested during the Forfeiture Period.
For purposes of this Section, the gain
realized by the Executive upon the exercise or payment in settlement of stock
options, stock appreciation rights, performance shares and other equity
compensation awards shall be equal to (A) the closing sale price on the date of
exercise or settlement (as reported on the stock exchange or market system
constituting the principal market for the shares subject to the applicable
award) of the number of vested shares issued to the Executive upon such exercise
or settlement, reduced by the purchase price, if any, paid by the Executive to
acquire such shares, or (B) if any such award was settled by payment in cash to
the Executive, the gain realized by the Executive shall be equal to the amount
of cash paid to the Executive. Further, for purposes of this Section, the gain
realized by the Executive upon the sale of shares or other property received by
the Executive pursuant to awards of restricted stock, restricted stock units or
similar awards shall be equal to the gross proceeds of such sale realized by the
Executive. Gains determined for purposes of this Section shall be determined
without regard to any subsequent increase or decrease in the market price of the
Company’s stock or taxes paid by or withheld from the Executive with respect to
such transactions.
For the purposes of this Section, the
“Forfeiture Period” shall be the period ending on the
Breach Determination Date and beginning on the earlier of (A) the date six
months prior to the Breach Determination Date or (B) the business day
immediately preceding the date of the Executive’s termination of employment with
the Company.
The Company shall have the right (but not
the obligation) to deduct from any amounts payable from time to time to the
Executive by the Company pursuant to this Agreement or otherwise (including
wages or other compensation, vacation pay or other benefits, and any other
amounts owed to the Executive by the Company) any and all amounts the Executive
is required to pay to the Company pursuant to this Section. The Executive agrees
to pay to the Company immediately upon the Breach Determination Date the amount
payable by the Executive to the Company pursuant to this Section which the
Company has not recovered by means of such deductions.
The Executive acknowledges that money
will not adequately compensate the Company for the substantial damages that will
arise upon the breach or threatened breach of Sections 5 or 9 of this Agreement
and that the Company will not have any adequate remedy at law. For this reason,
such breach or threatened breach will not be subject to the arbitration clause
in Section 19; rather, the Company will be entitled, in addition to other rights
and remedies, to specific performance, injunctive relief, and other equitable
relief to prevent or restrain such breach or threatened breach. The Company may
obtain such relief from (1) any court of competent jurisdiction, (2) an
arbitrator pursuant to Section 19 hereof, or (3) a combination of the two (e.g.,
by simultaneously seeking arbitration under Section 19 and a temporary
injunction from a court pending the outcome of the arbitration). It shall be the
Company’s sole and exclusive right to elect which approach to use to vindicate
its rights. The Executive further agrees that in the event of a breach or
threatened breach, the Company shall be entitled to obtain an immediate
injunction and restraining order to prevent such breach and/or threatened breach
and/or continued breach, without posting a bond or having to prove irreparable
harm or damages, and to obtain all costs and expenses, including reasonable
attorneys’ fees and costs. In addition, the existence of any claim or cause of
action by the Executive against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the restrictive covenants in this Agreement.
Exercise of Stock Options Following Termination. If the Executive's employment terminates,
Executive (or the Executive's estate) may exercise the Executive's right to
purchase any vested stock under the stock options granted to Executive by the
Company as provided in the applicable stock option agreement or Company plan.
All such purchases must be made by the Executive in accordance with the
applicable stock option plans and agreements between the parties.
Successors; Binding Agreement. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to the Executive hereunder, all
such amounts shall be paid in accordance with the terms of this Agreement and
applicable law to the Executive’s beneficiary pursuant to a written designation
of beneficiary, or, if there is no effective written
designation of beneficiary by the Executive, to the Executive’s estate.
Insurance and Indemnity. The Company shall, to the extent
permitted by law, include the Executive during the Term of Employment under any
directors and officers liability insurance policy maintained for its directors
and officers, with coverage at least as favorable to the Executive in amount and
each other material respect as the coverage of other officers covered thereby.
The Company’s obligation to provide insurance and indemnify the Executive shall
survive expiration or termination of this Agreement with respect to proceedings
or threatened proceedings based on acts or omissions of the Executive occurring
during the Executive’s employment with the Company. Such obligations shall be
binding upon the Company’s successors and assigns and shall inure to the benefit
of the Executive’s heirs and personal representatives.
Notice. For
the purposes of this Agreement, notices, demands and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or (unless otherwise specified) mailed by United
States registered mail, return receipt requested, postage prepaid, addressed as
follows:
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If to the Executive: |
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Lisa Panattoni |
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Ross Stores, Inc. |
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1372 Broadway, 8th Floor |
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New York, NY 10018 |
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If to the Company: |
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Ross Stores, Inc. |
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4440 Rosewood Drive |
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Pleasanton, CA 94588 |
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Attention: General Counsel |
or to such other
address as any party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.
Complete Agreement; Modification, Waiver; Entire
Agreement. This
Agreement, along with any stock option, restricted stock, performance share or
other equity compensation award agreements between the parties, and term sheet
referencing such specific awards, represents the complete agreement of the
parties with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, promises or representations of the parties, except
those relating to repayment of signing and related bonuses, or relocation
expense reimbursements. To the extent that the bonus payment provisions (i.e.,
post-termination bonus payments) provided in this Agreement differ from the
provisions of the Company’s incentive bonus plans (currently the Incentive
Compensation Plan) or any replacement plans, such bonus payments shall be paid
pursuant to the provisions of this Agreement except to the extent expressly
prohibited by law. Except as provided by Section 22 [Compliance with Section
409A], no provision of this Agreement may be amended or modified except in a
document signed by the Executive and the chairman of the Committee or such other
person as may be designated by the Board. No waiver by the Executive or the
Company of any breach of, or lack of compliance with, any condition or provision
of this Agreement by the other party shall be considered a waiver of any other
condition or provision or the same condition or provision at another time. To
the extent that this Agreement is in any way deemed to be inconsistent with any
prior or contemporaneous stock option, restricted stock, performance share or
other equity compensation award agreements between the parties, or term sheet
referencing such specific awards, the terms of this Agreement shall control. No
agreements or representations, oral or otherwise, with respect to the subject
matter hereof have been made by either party which are not set forth expressly
in this Agreement.
Governing Law - Severability. The validity, interpretation,
construction, performance, and enforcement of this Agreement shall be governed
by the laws of the state in which the Executive’s principle place of employment
described in Section 3 is located without reference to that state’s choice of
law rules. If any provision of this Agreement shall be held or deemed to be
invalid, illegal, or unenforceable in any jurisdiction, for any reason, the
invalidity of that provision shall not have the effect of rendering the
provision in question unenforceable in any other jurisdiction or in any other
case or of rendering any other provisions herein unenforceable, but the invalid
provision shall be substituted with a valid provision which most closely
approximates the intent and the economic effect of the invalid provision and
which would be enforceable to the maximum extent permitted in such jurisdiction
or in such case.
Mitigation Not Required. In the event the Executive’s employment
with the Company terminates for any reason, the Executive shall not be obligated
to seek other employment following such termination. However, any amounts due
the Executive under Sections 8(a)(i); 8(a)(ii); 8(d)(i)(2)(a),(b),(c) or (d);
and/or any additional salary provided under Section 8(d)(i)(1) of this Agreement
shall be offset by any cash remuneration, health care coverage and/or estate
planning reimbursements attributable to any subsequent employment that the
Executive may obtain during the period of payment of compensation under this
Agreement following the termination of the Executive’s employment with the
Company.
Withholding.
All payments required to be made by the Company hereunder to the Executive or
the Executive’s estate or beneficiaries shall be subject to the withholding of
such amounts as the Company may reasonably determine it should withhold pursuant
to any applicable law. To the extent permitted, the Executive may provide all or
any part of any necessary withholding by contributing Company stock with value,
determined on the date such withholding is due, equal to the number of shares
contributed multiplied by the closing price per share as reported on the
securities exchange constituting the primary market for the Company’s stock on
the date preceding the date the withholding is determined.
Arbitration.
In the event of any dispute or claim relating to or arising out of the parties’
employment relationship or this Agreement (including, but not limited to, any
claims of breach of contract, wrongful termination, or age, race, sex,
disability or other discrimination), all such disputes shall be fully, finally
and exclusively resolved by binding arbitration conducted by the American
Arbitration Association in the city in which the Executive’s principal place of
employment is located by an arbitrator mutually agreed upon by the parties
hereto or, in the absence of such agreement, by an arbitrator selected in
accordance with the Employment Arbitration Rules of the American Arbitration
Association, provided, however, that this arbitration provision shall not apply,
unless the Company elects otherwise, to any disputes or claims relating to or
arising out of the Executive’s breach of Sections 5 or 9 of this Agreement. If
either the Company or the Executive shall request, arbitration shall be
conducted by a panel of three arbitrators, one selected by the Company, one
selected by the Executive, and the third selected by agreement of the first two,
or, in the absence of such agreement, in accordance with such Rules. The Company
shall pay all costs of any arbitration; provided, however, that each party shall
pay its own attorney and advisor fees.
If there is termination of the
Executive’s employment with the Company followed by a dispute as to whether the
Executive is entitled to the benefits provided under this Agreement, then,
during the period of that dispute the Company shall pay the Executive fifty
percent (50%) of the amount specified in Section 8 hereof (except that the
Company shall pay one hundred percent (100%) of any insurance premiums provided
for in Section 8), if, and only if, the Executive agrees in writing that if the
dispute is resolved against the Executive, the Executive shall promptly refund
to the Company all such payments received by, or made by the Company on behalf
of, the Executive. If the dispute is resolved in the Executive’s favor, promptly
after resolution of the dispute the Company shall pay the Executive the sum that
was withheld during the period of the dispute plus interest at the rate provided
in Section 1274(d) of the Code, compounded quarterly.
Attorney’s Fees. Each party shall bear its own attorney’s fees and costs incurred in any
action or dispute arising out of this Agreement.
Miscellaneous.
No right or interest to, or in, any payments shall be assignable by the
Executive; provided, however, that the Executive shall not be precluded from
designating in writing one or more beneficiaries to receive any amount that may
be payable after the Executive’s death and the legal representative of the
Executive’s estate shall not be precluded from assigning any right hereunder to
the person or persons entitled thereto. This Agreement shall be binding upon and
shall inure to the benefit of the Executive, the Executive’s heirs and legal
representatives and, the Company and its successors.
Compliance with Section 409A. Notwithstanding any other provision of
this Agreement to the contrary, the provision, time and manner of payment or
distribution of all compensation and benefits provided by this Agreement that
constitute nonqualified deferred compensation subject to and not exempted from
the requirements of Code Section 409A (“Section 409A Deferred Compensation”) shall be subject to, limited by and
construed in accordance with the requirements of Code Section 409A and all
regulations and other guidance promulgated by the Secretary of the Treasury
pursuant to such Section (such Section, regulations and other guidance being
referred to herein as “Section 409A”), including the following:
Separation from Service. Payments and benefits constituting
Section 409A Deferred Compensation otherwise payable or provided pursuant to
Section 8 upon the Executive’s termination of employment shall be paid or
provided only at the time of a termination of the Executive’s employment which
constitutes a Separation from Service. For the purposes of this Agreement, a
“Separation from
Service” is a
separation from service within the meaning of Treasury Regulation Section
1.409A-1(h).
Six-Month Delay Applicable to Specified Employees. If, at the time of a Separation from
Service of the Executive, the Executive is a “specified employee” within the
meaning of Section 409A(a)(2)(B(i) (a “Specified Employee”), then any payments and benefits
constituting Section 409A Deferred Compensation to be paid or provided pursuant
to Section 8 upon the Separation from Service of the Executive shall be paid or
provided commencing on the later of (i) the date that is six (6) months after
the date of such Separation from Service or, if earlier, the date of death of
the Executive (in either case, the “Delayed Payment Date”), or (ii) the date or dates on which
such Section 409A Deferred Compensation would otherwise be paid or provided in
accordance with Section 8. All such amounts that would, but for this Section
22(b), become payable prior to the Delayed Payment Date shall be accumulated and
paid on the Delayed Payment Date.
Health Care and Estate Planning Benefits. In the event that all or any of the
health care or estate planning benefits to be provided pursuant to Sections
8(d)(i)(2)(c) or 8(d)(i)(2)(d) as a result of a Participant’s Separation from
Service constitute Section 409A Deferred Compensation, the Company shall provide
for such benefits constituting Section 409A Deferred Compensation in a manner
that complies with Section 409A. To the extent necessary to comply with Section
409A, the Company shall determine the health care premium cost necessary to
provide such benefits constituting Section 409A Deferred Compensation for the
applicable coverage period and shall pay such premium cost which becomes due and
payable during the applicable coverage period on the applicable due date for
such premiums; provided, however, that if the Executive is a Specified Employee,
the Company shall not pay any such premium cost until the Delayed Payment Date.
If the Company’s payment pursuant to the previous sentence is subject to a
Delayed Payment Date, the Executive shall pay the premium cost otherwise payable
by the Company prior to the Delayed Payment Date, and on the Delayed Payment
Date the Company shall reimburse the Executive for such Company premium cost
paid by the Executive and shall pay the balance of the Company’s premium cost
necessary to provide such benefit coverage for the remainder of the applicable
coverage period as and when it becomes due and payable over the applicable
period.
Stock-Based Awards. The vesting of any stock-based compensation awards which constitute
Section 409A Deferred Compensation and are held by the Executive, if the
Executive is a Specified Employee, shall be accelerated in accordance with this
Agreement to the extent applicable; provided, however, that the payment in
settlement of any such awards shall occur on the Delayed Payment Date. Any
stock-based compensation which vests and becomes payable upon a Change in
Control in accordance with Section 8(d)(i)(1) shall not be subject to this
Section 22(d).
Installments.
Executive’s right to receive any installment payments payable hereunder shall be
treated as a right to receive a series of separate payments and, accordingly,
each such installment payment shall at all times be considered a separate and
distinct payment for purposes of Section 409A.
Reimbursements. To the extent that any reimbursements payable to Executive pursuant to
this Agreement are subject to the provisions of Section 409A of the Code, such
reimbursements shall be paid to Executive no later than December 31 of the year
following the year in which the cost was incurred, the amount of expenses
reimbursed in one year shall not affect the amount eligible for reimbursement in
any subsequent year, and Executive’s right to reimbursement under this Agreement
will not be subject to liquidation or exchange for another benefit.
(g) Rights of the Company; Release of Liability. It is the mutual intention of the
Executive and the Company that the provision of all payments and benefits
pursuant to this Agreement be made in compliance with the requirements of
Section 409A. To the extent that the provision of any such payment or benefit
pursuant to the terms and conditions of this Agreement would fail to comply with
the applicable requirements of Section 409A, the Company may, in its sole and
absolute discretion and without the consent of the Executive, make such
modifications to the timing or manner of providing such payment and/or benefit
to the extent it determines necessary or advisable to comply with the
requirements of Section 409A; provided, however, that the Company shall not be
obligated to make any such modifications. Any such modifications made by the
Company shall, to the maximum extent permitted in compliance with the
requirements of Section 409A, preserve the aggregate monetary face value of such
payments and/or benefits provided by this Agreement in the absence of such
modification; provided, however, that the Company shall in no event be obligated
to pay any interest or other compensation in respect of any delay in the
provision of such payments or benefits in order to comply with the requirements
of Section 409A. The Executive acknowledges that (i) the provisions of this
Section 22 may result in a delay in the time at which payments would otherwise
be made pursuant to this Agreement and (ii) the Company is authorized to amend
the this Agreement, to void or amend any election made by the Executive under
this Agreement and/or to delay the payment of any monies and/or provision of any
benefits in such manner as may be determined by the Company, in its discretion,
to be necessary or appropriate to comply with Section 409A (including any
transition or grandfather rules thereunder) without prior notice to or consent
of the Executive. The Executive hereby releases and holds harmless the Company,
its directors, officers and stockholders from any and all claims that may arise
from or relate to any tax liability, penalties, interest, costs, fees or other
liability incurred by the Executive as a result of the application of Code
Section 409A.
Future Equity Compensation. The Executive understands and
acknowledges that all awards, if any, of stock options, restricted stock,
performance shares and other forms of equity compensation by the Company are
made at the sole discretion of the Board of Directors of the Company or a
committee thereof. The Executive further understands and acknowledges, however,
that unless the Executive has executed this Agreement and each successive
amendment extending the Initial Term or any subsequent Renewal Term of the
Agreement as may be agreed to by the Company and the Executive, it is the
intention of the Board of Directors and the Executive that, notwithstanding any
continued employment with the Company, (a) the Company shall have no obligation
to grant any award of stock options, restricted stock, performance shares or any
other form of equity compensation which might otherwise have been granted to the
Executive on or after the intended commencement of the Initial Term or such
successive Renewal Term for which the Executive has failed to sign the Agreement
or the applicable Term of Employment extension amendment and (b) any such award
which is nevertheless granted to the Executive after the intended commencement
of the Initial Term or Renewal Term for which the Executive has failed to sign
such Agreement or applicable extension amendment shall not vest unless and until
the Executive has executed the Agreement or applicable extension amendment,
notwithstanding the provisions of any agreement evidencing such award to the
contrary.
IN WITNESS WHEREOF, the parties have executed this
Executive Employment Agreement effective as of the date and year first above
written.
ROSS STORES, INC. |
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EXECUTIVE |
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/s/ Michael Balmuth |
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/s/ Lisa Panattoni |
By: Michael Balmuth |
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Lisa Panattoni |
Vice Chairman and Chief |
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Executive Officer |
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exhibit10-65.htm
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made effective December 4, 2009,
(the “Effective Date”) by and between Ross Stores, Inc. (the
“Company”), a Delaware corporation, and Barbara
Rentler (the “Executive”).
RECITALS
A. The Company wishes to employ the Executive, and the Executive is willing
to accept such employment, as President and Chief Merchandising, Ross Dress for
Less.
B. It is now the mutual desire of the Company and the Executive to enter
into a written employment agreement to govern the terms of the Executive’s
employment by the Company as of and following the Effective Date on the terms
and conditions set forth below.
TERMS AND CONDITIONS
In consideration for the promises of the
parties set forth below, the Company and the Executive hereby agree as follows:
Term. Subject
to the provisions of Section 6 of this Agreement, the term of employment of the
Executive by the Company under this Agreement (the “Term of Employment”) shall be as follows:
Initial Term. The initial Term of Employment of the
Executive by the Company under this Agreement shall begin on the Effective Date
and end on March 31, 2014 (the “Initial Term”), unless extended or terminated earlier
in accordance with this Agreement.
Renewal Term.
Upon the timely written request of the Executive to extend the Term of
Employment, the Compensation Committee (the “Committee”) of the Board of Directors (the
“Board”) of the Company shall consider
extending the Executive’s employment with the Company under this Agreement. To
be timely, such request must be delivered to the Company’s Chief Executive
Officer not earlier than twelve (12) months prior to the end of the then
effective Initial Term or Renewal Term and, in any case, while the Executive
remains an employee of the Company. Such request must contain no proposed
modification to the provisions of this Agreement other than an extension of the
Term of Employment as then in effect for an additional two (2) years. Within
thirty (30) days following the receipt of such notice, the Chief Executive
Officer will discuss such request with the Committee and advise the Executive,
in writing, within thirty (30) days following its consideration of the
Executive’s written request, of the approval or disapproval of such extension
request. The failure to provide such written advice shall constitute a denial of
the Executive’s request for extension. If the Executive’s request for an
extension is approved, the Term of Employment shall be extended for two (2)
additional years commencing on the date immediately following the date of
expiration of the Term of Employment in effect at the time of the Executive’s
written request. Such additional two-year period is referred to herein as a
“Renewal Term.”
Position and Duties. During the Term of Employment, the Executive shall serve as President
and Chief Merchandising Officer, Ross Dress for Less. As used in this Agreement,
the term “Company” includes Ross Stores, Inc. and each and any of its divisions,
affiliates or subsidiaries (except that, where the term relates to stock,
stockholders, stock options or other stock-based awards or the Board, it means
Ross Stores, Inc.). The Executive’s employment may be transferred, assigned, or
re-assigned to Ross Stores, Inc. or a division, affiliate or subsidiary of Ross
Stores, Inc., and such transfer, assignment, or re-assignment will not
constitute a termination of employment or “Good Reason” for the Executive’s
termination of employment under this Agreement. During the Term of Employment,
the Executive may engage in outside activities provided those activities
(including but not limited to membership on boards of directors of
not-for-profit and for-profit organizations) do not conflict with the
Executive’s duties and responsibilities hereunder, and provided further that the
Executive gives written notice to the Board of any significant outside business
activity in which the Executive plans to become involved, whether or not such
activity is pursued for profit.
Principal Place of Employment. The Executive shall be employed at the
Company’s offices in New York, except for required travel on the Company’s
business to an extent substantially consistent with present business travel
obligations of the Executive’s position.
Compensation and Related Matters.
Salary. During
the Term of Employment, the Company shall pay to the Executive a salary at a
rate of not less than Nine Hundred and Thirty Thousand Dollars ($930,000) per
annum. The Executive’s salary shall be payable in substantially equal
installments in accordance with the Company’s normal payroll practices
applicable to senior executives. Subject to the first sentence of this Section
4(a), the Executive’s salary may be adjusted from time to time by the Committee
in accordance with normal business practices of the Company.
Bonus. During
the Term of Employment, the Executive shall be eligible to receive an annual
bonus paid under the Company’s existing incentive bonus plan under which the
Executive is eligible (which is currently the Incentive Compensation Plan) or
any replacement plan that may subsequently be established and in effect during
the Term of Employment. The current target annual bonus the Executive is
eligible to earn upon achievement of 100% of all applicable performance targets
under such incentive bonus plan is 85% of the Executive’s then effective annual
salary rate. The Executive’s death, termination for Cause or Voluntary
Termination (as described in Sections 6(a), 6(c) and 6(f), respectively) prior
to the Company’s payment of the bonus for a fiscal year of the Company will
cause the Executive to be ineligible for any annual bonus for that fiscal year
or any pro-rata portion of such bonus.
Expenses. During the Term of Employment, the Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses incurred by the Executive in
performing services hereunder, including all reasonable expenses of travel and
living while away from home, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company.
Benefits.
During the Term of Employment, the Executive shall be entitled to participate in
all of the Company’s employee benefit plans and arrangements in which senior
executives of the Company are eligible to participate. The Company shall not
make any changes in such plans or arrangements which would adversely affect the
Executive’s rights or benefits thereunder, unless such change occurs pursuant to
a program applicable to all senior executives of the Company and does not result
in a proportionately greater reduction in the rights or benefits of the
Executive as compared with any other similarly situated senior executive of the
Company. The Executive shall be entitled to participate in, or receive benefits
under, any employee benefit plan or arrangement made available by the Company in
the future to its senior executives, subject to, and on a basis consistent with,
the terms, conditions and overall administration of such plans and arrangements.
Except as otherwise specifically provided herein, nothing paid to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be in lieu of the salary or bonus otherwise payable under this
Agreement.
Vacations.
During the Term of Employment, the Executive shall be entitled to twenty (20)
vacation days in each calendar year, and to compensation in respect of earned
but unused vacation days, determined in accordance with the Company’s vacation
plan. The Executive shall also be entitled to all paid holidays given by the
Company to its senior executives. Unused vacation days shall not be forfeited
once they have been earned and, if still unused at the time of the Executive’s
termination of employment with the Company, shall be promptly paid to the
Executive at their then-current value, based on the Executive’s daily salary
rate at the time of the Executive’s termination of employment.
Services Furnished. The Company shall furnish the Executive with office space and such
services as are suitable to the Executive’s position and adequate for the
performance of the Executive’s duties during the Term of Employment.
Confidential Information and
Intellectual Property.
Other than in the performance of the
Executive’s duties hereunder, the Executive agrees not to use in any manner or
disclose, distribute, publish, communicate or in any way cause to be used,
disclosed, distributed, published, or communicated in any way or at any time,
either while in the Company's employ or at any time thereafter, to any person
not employed by the Company, or not engaged to render services to the Company,
any Confidential Information (as defined below) obtained while in the employ of
the Company.
Confidential Information includes any
written or unwritten information which relates to and/or is used by the Company
or its subsidiaries, affiliates or divisions, including, without limitation (i)
the names, addresses, buying habits and other special information regarding
past, present and potential customers, employees and suppliers of the Company,
(ii) customer and supplier contracts and transactions or price lists of the
Company and suppliers, (iii) methods of distribution, (iv) all agreements,
files, books, logs, charts, records, studies, reports, processes, schedules and
statistical information, (v) data, figures, projections, estimates, pricing
data, customer lists, buying manuals or procedures, distribution manuals or
procedures, other policy and procedure manuals or handbooks, (vi) supplier
information, tax records, personnel histories and records, sales information,
and property information, (vii) information regarding the present or future
phases of business, (viii) ideas, inventions, trademarks, business information,
knowhow, processes, techniques, improvements, designs, redesigns, creations,
discoveries, trade secrets, and developments, (ix) all computer software
licensed or developed by the Company or its subsidiaries, affiliates or
divisions, computer programs, computer-based and web-based training programs,
and systems, and (x) finances and financial information, but Confidential
Information will not include information of the Company or its subsidiaries,
affiliates or divisions that (1) became or becomes a matter of public knowledge
through sources independent of the Executive, (2) has been or is disclosed by
the Company or its subsidiaries, affiliates or divisions without restriction on
its use, or (3) has been or is required or specifically permitted to be
disclosed by law or governmental order or regulation. The Executive also agrees
that, if there is any reasonable doubt whether an item is public knowledge, to
not regard the item as public knowledge until and unless the Company’s Chief
Executive Officer confirms to the Executive that the information is public
knowledge.
The provisions of this Section 5 shall
not preclude the Executive from disclosing such information to the Executive's
professional tax advisor or legal counsel solely to the extent necessary to the
rendering of their professional services to the Executive if such individuals
agree to keep such information confidential.
The Executive agrees that upon leaving
the Company’s employ the Executive will remain reasonably available to answer
questions from Company officers regarding the Executive’s former duties and
responsibilities and the knowledge the Executive obtained in connection
therewith.
The Executive agrees that upon leaving
the Company's employ the Executive will not communicate with, or give statements
to, any member of the media (including print, television, or radio media)
relating to any matter (including pending or threatening lawsuits or
administrative investigations) about which the Executive has knowledge or
information (other than knowledge or information that is not Confidential
Information) as a result of employment with the Company. The Executive further
agrees to notify the Chief Executive Officer or his or her designee immediately
after being contacted by any member of the media with respect to any matter
affected by this section.
The Executive agrees that all
information, inventions, and discoveries, whether or not patented or patentable,
made or conceived by the Executive, either alone or with others, at any time
while employed by the Company, which arises out of such employment or is
pertinent to any field of business or research in which, during such employment,
the Company, its subsidiaries, affiliates or divisions is engaged or (if such is
known to or ascertainable by the Executive) is considering engaging
(“Intellectual Property”) shall (i) be and remain the sole
property of the Company and the Executive shall not seek a patent with respect
to such Intellectual Property without the prior consent of an authorized
representative of the Company and (ii) be disclosed promptly to an authorized
representative of the Company along with all information the Executive possesses
with regard to possible applications and uses. Further, at the request of the
Company, and without expense or additional compensation to the Executive, the
Executive agrees to execute such documents and perform such other acts as the
Company deems necessary to obtain patents on such Intellectual Property in a
jurisdiction or jurisdictions designated by the Company, and to assign to the
Company or its designee such Intellectual Property and all patent applications
and patents relating thereto.
The Executive and the Company agree that
the Executive intends all original works of authorship within the purview of the
copyright laws of the United States authored or created by the Executive in the
course of the Executive’s employment with the Company will be works for hire
within the meaning of such copyright law.
Upon termination of the Executive’s
employment, or at any time upon request of the Company, the Executive will
return to the Company all Confidential Information and Intellectual Property, in
any form, including but not limited to letters, memoranda, reports, notes,
notebooks, books of account, drawings, prints, specifications, formulae, data
printouts, microfilms, magnetic tapes, disks, recordings, documents, and all
copies thereof.
Termination.
The Executive’s employment may be terminated during the Term of Employment only
as follows:
Death. The Executive’s employment shall
terminate upon the Executive’s death.
Disability.
If, as a result of the Executive’s Disability (as defined below), the Executive
shall have been absent from the Executive’s duties hereunder on a full-time
basis for the entire period of six consecutive months, and, within thirty days
after written notice of termination is given by the Company (which may occur
before or after the end of such six-month period), the Executive shall not have
returned to the performance of the Executive’s duties hereunder on full-time
basis, the Executive’s employment shall terminate. For purposes of this
Agreement, the term “Disability” shall mean a physical or mental
illness, impairment or condition reasonably determined by the Board that
prevents the Executive from performing the duties of the Executive’s position
under this Agreement.
For Cause. The
Company may terminate the Executive’s employment for Cause. For this purpose,
“Cause” means the occurrence of any of the
following (i) the Executive’s continuous failure to substantially perform the
Executive’s duties hereunder (unless such failure is a result of a Disability as
defined in Section 6(b)), (ii) the Executive’s theft, dishonesty, breach of
fiduciary duty for personal profit or falsification of any documents of the
Company, (iii) the Executive’s material failure to abide by the applicable
code(s) of conduct or other policies (including, without limitation, policies
relating to confidentiality and reasonable workplace conduct) of the Company,
(iv) knowing or intentional misconduct by the Executive as a result of which the
Company is required to prepare an accounting restatement, (v) the Executive’s
unauthorized use, misappropriation, destruction or diversion of any tangible or
intangible asset or corporate opportunity of the Company (including, without
limitation, the Executive’s improper use or disclosure of confidential or
proprietary information of the Company), (vi) any intentional misconduct or
illegal or grossly negligent conduct by the Executive which is materially
injurious to the Company monetarily or otherwise, (vii) any material breach by
the Executive of the provisions of Section 9 [Certain Employment Obligations] of
this Agreement, or (viii) the Executive’s conviction (including any plea of
guilty or nolo contendere) of any criminal act involving fraud, dishonesty,
misappropriation or moral turpitude, or which materially impairs the Executive’s
ability to perform his or her duties with the Company. A termination for Cause
shall not take effect unless: (1) the Executive is given written notice by the
Company of its intention to terminate the Executive for Cause; (2) the notice
specifically identifies the particular act or acts or failure or failures to act
which are the basis for such termination; (3) where practicable, the notice is
given within sixty (60) days of the Company’s learning of such act or acts or
failure or failures to act; and (4) only in the case of clause (i), (iii), (v),
(vi) or (vii) of the second sentence of this Section 6(c), the Executive fails
to substantially cure such breach, to the extent such cure is possible, within
sixty (60) days after the date that such written notice is given to the
Executive.
Without Cause. The Company may terminate the Executive’s employment at any time Without
Cause. A termination “Without Cause” is a termination by the Company of the
Executive’s employment with the Company for any reasons other than the death or
Disability of the Executive or the termination by the Company of the Executive
for Cause as described in Section 6(c).
Termination by the Executive for Good Reason. The Executive may terminate the
Executive’s employment with the Company for “Good Reason,” which shall be deemed to occur if the
Executive terminates the Executive’s employment with the Company within sixty
(60) days after written notice to the Company by the Executive of the occurrence
of one or more of the following conditions, which condition(s) have not been
cured within thirty (30) business
days after the Company’s receipt of such written notice: (1) a failure by the
Company to comply with any material provision of this Agreement (including but
not limited to the reduction of the Executive’s salary or the target annual
bonus opportunity set forth in Section 4(b), (2) a significant diminishment in
the nature or scope of the authority, power, function or duty attached to the
position which the Executive currently maintains without the express written
consent of the Executive, or (3) the relocation of the Executive’s Principal
Place of Employment as described in Section 3 to a location that increases the
regular one-way commute distance between the Executive’s residence and Principal
Place of Employment by more than 25 miles without the Executive’s prior written
consent. In order to constitute a termination of employment
for Good Reason, such termination must occur within two (2) years following the initial
existence of any of the conditions set forth in this Section 6(e), the Executive
must provide written notice to the Company of the existence of the condition
giving rise to the Good Reason termination within sixty (60) days of the initial
existence of the condition, and the Company shall have thirty (30) days during
which it may remedy the condition and in the event such condition is timely
remedied, the termination shall not constitute a termination for Good
Reason.
Voluntary Termination. The Executive may voluntarily resign from the Executive’s employment
with the Company at any time (a “Voluntary
Termination”). A voluntary resignation from employment by the Executive
for Good Reason pursuant to Section 6(e) shall not be deemed a Voluntary
Termination.
Non-Renewal Termination. If the Executive fails to request an
extension of the Term of Employment in accordance with Section 1(b) or if the
Committee fails to approve such request, this Agreement shall automatically
expire at the end of the then current Term of Employment (a “Non-Renewal
Termination”).
Notice and Effective Date of
Termination
Notice. Any
termination of the Executive’s employment by the Company or by the Executive
during the Term of Employment (other than as a result of the death of the
Executive or a Non-Renewal Termination described in Section 6(g)) shall be
communicated by written notice of termination to the other party hereto. Such
notice shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive’s employment under
that provision.
Date of
Termination. The date
of termination of the Executive’s employment shall be:
(i) if the Executive’s employment is terminated by the Executive’s death, the
date of the Executive’s death;
(ii) if the Executive’s employment is terminated due to Disability pursuant to
Section 6(b), the date of termination shall be the last to occur of the 31st day
following delivery of the notice of termination to the Executive by the Company
or the end of the consecutive six-month period referred to in Section 6(b).
(iii) if the Executive’s employment is terminated for any other reason by
either party, the date on which a notice of termination is delivered to the
other party; and
(iv) if the Agreement expires pursuant to a Non-Renewal Termination described
in Section 6(g), the parties’ employment relationship shall terminate on the
last day of the then current Term of Employment without any notice.
Compensation and Benefits Upon
Termination.
Termination Due To Disability, Without Cause or For Good
Reason. If the
Executive’s employment terminates pursuant to Section 6(b) [Disability], Section
6(d) [Without Cause], or Section 6(e) [Termination by Executive for Good
Reason], then, subject to Section 22 [Compliance with Section 409A], in addition
to all salary, annual bonuses, expense reimbursements, benefits and accrued
vacation days earned by the Executive pursuant to Section 4 through the date of
the Executive’s termination of employment, the Executive shall be entitled to
the following, provided that within sixty (60) days following the Executive’s
termination of employment the Executive executes a general release of claims
against the Company and its subsidiaries, affiliates, stockholders, directors,
officers, employees, agents, successors and assigns in the current form approved
by the Company and attached as Exhibit A (subject to any amendments required by
law or regulation)(the “Release”) and the period for revocation, if any,
of such Release has expired without the Release having been revoked:
(v) Salary. The
Company shall continue to pay to the Executive the Executive’s salary, at the
rate in effect immediately prior to such termination of employment, through the
remainder of the Term of Employment then in effect.
(vi) Bonus. The
Company shall continue to pay to the Executive an annual bonus through the
remainder of the Term of Employment then in effect; provided, however, that the
amount of the annual bonus determined in accordance with this Section 8(a)(ii)
for the fiscal year of the Company in which such Term of Employment ends shall
be prorated on the basis of the number of days of such Term of Employment
occurring within such fiscal year. The amount of each annual bonus payable
pursuant to this Section 8(a)(ii), prior to any proration, shall be equal to the
annual bonus that the Executive would have earned had no such termination under
Section 8(a)(i) occurred, contingent on the relevant annual bonus plan
performance goals for the respective year having been obtained. However, in no
case shall any such post-termination annual bonus exceed 100% of the Executive's
target bonus for the fiscal year of the Company in which the Executive's
termination of employment occurs. Such bonuses shall not be paid until due under
the applicable Company bonus plan.
(vii) Stock Options.
Stock options granted to the Executive by the Company and which remain
outstanding immediately prior to the date of termination of the Executive’s
employment, as provided in Section 7(b), shall immediately become vested in full
upon such termination of employment.
(viii) Restricted Stock. Shares of restricted stock granted to the Executive by the Company which
have not become vested as of the date of termination of the Executive’s
employment, as provided in Section 7(b), shall immediately become vested on a
pro rata basis. The number of such additional shares of restricted stock that
shall become vested as of the date of the Executive’s termination of employment
shall be that number of additional shares that would have become vested through
the date of such termination of employment at the rate(s) determined under the
vesting schedule applicable to such shares had such vesting schedule provided
for the accrual of vesting on a daily basis (based on a 365 day year). The pro
rata amount of shares vesting through the date of termination/non-renewal shall
be calculated by multiplying the number of unvested shares scheduled to vest in
each respective vesting year by the ratio of the number of days from the date of
grant through the date of termination/non-renewal, and the number of days from
the date of grant through the original vesting date of the respective vesting
tranche. Any shares of restricted stock remaining unvested after such pro rata
acceleration of vesting shall automatically be reacquired by the Company in
accordance with the provisions of the applicable restricted stock agreement, and
the Executive shall have no further rights in such unvested portion of the
restricted stock. In addition, the Company shall waive any reacquisition or
repayment rights for dividends paid on restricted stock prior to Executive’s
termination of employment.
(ix) Other Equity Awards. Except as set forth in Sections 8(a)(iii) and 8(a)(iv), performance
share awards and all other equity awards granted to the Executive by the Company
which remain outstanding immediately prior to the date of termination of the
Executive’s employment, as provided in Section 7(b), shall vest and be settled
in accordance with their terms.
The Company shall have no further
obligations to the Executive as a result of termination of employment described
in this Section 8(a) except as set forth in Section 12.
Death, Termination for Cause or Voluntary Termination. If the Executive’s employment
terminates pursuant to Section 6(a) [Death], Section 6(c) [For Cause] or Section
6(f) [Voluntary Termination], the Executive (or the Executive’s designee or the
Executive’s estate) shall be entitled to receive only the salary, annual
bonuses, expense reimbursements, benefits and accrued vacation days earned by
the Executive pursuant to Section 4 through the date of the Executive’s
termination of employment. The Executive shall not be entitled to any bonus not
paid prior to the date of the Executive’s termination of employment, and the
Executive shall not be entitled to any prorated bonus payment for the year in
which the Executive’s employment terminates. Any stock options granted to the
Executive by the Company shall continue to vest only through the date on which
the Executive’s employment terminates, and unless otherwise provided by their
terms, any restricted stock, performance share awards or other equity awards
that were granted to the Executive by the Company that remain unvested as of the
date on which the Executive’s employment terminates shall automatically be
forfeited and the Executive shall have no further rights with respect to such
awards. The Company shall have no further obligations to the Executive as a
result of termination of employment described in this Section 8(b) except as set
forth in Section 12. In addition, provided the Executive terminates pursuant to
Death, the Company shall waive any reacquisition or repayment rights for
dividends paid on restricted stock prior to Executive’s termination of
employment.
Non-Renewal Termination. If the Agreement expires as set forth
in Section 6(g) [Non-Renewal Termination], then, subject to Section 22
[Compliance with Section 409A], in addition to all salary, annual bonuses,
expense reimbursements, benefits and accrued vacation days earned by the
Executive pursuant to Section 4 through the date of the Executive’s termination
of employment, the Executive shall be entitled to the following, provided that
within sixty (60) days following the Executive’s termination of employment the
Executive executes the Release and the period for revocation, if any, of such
Release has expired without the Release having been revoked:
(x) Bonus. The
Company shall pay the Executive an annual bonus for the fiscal year of the
Company in which the date of the Executive’s termination of employment occurs,
which shall be prorated for the portion of such fiscal year that the Executive
is employed by the Company. The amount of such annual bonus, prior to proration,
shall be equal to the annual bonus that the Executive would have earned under
the Company’s bonus plan for the fiscal year of the Company in which the
Executive’s termination of employment occurs had the Executive remained in its
employment, contingent on the relevant annual bonus plan performance goals for
the year in which Executive terminates having been obtained. However, in no case
shall any such post-termination annual bonus exceed 100% of the Executive's
target bonus for the fiscal year of the Company in which the Executive's
termination of employment occurs. Such bonus shall not be paid until due under
the applicable Company bonus plan.
(xi) Stock Options.
Stock options granted to the Executive by the Company and which remain
outstanding immediately prior to the date of termination of the Executive’s
employment, as provided in Section 7(b), shall be vested and exercisable in
accordance with their terms.
(xii) Restricted Stock. Shares of restricted stock granted to the Executive by the Company which
have not become vested as of the date of termination of the Executive’s
employment, as provided in Section 7(b), shall immediately become vested on a
pro rata basis. The number of such additional shares of restricted stock that
shall become vested as of the date of the Executive’s termination of employment
shall be that number of additional shares that would have become vested through
the date of such termination of employment at the rate(s) determined under the
vesting schedule applicable to such shares had such vesting schedule provided
for the accrual of vesting on a daily basis (based on a 365 day year). The pro
rata amount of shares vesting through the date of termination/non-renewal shall
be calculated by multiplying the number of unvested shares scheduled to vest in
each respective vesting year by the ratio of the number of days from the date of
grant through the date of termination/non-renewal, and the number of days from
the date of grant through the original vesting date of the respective vesting
tranche. Any shares of restricted stock remaining unvested after such pro rata
acceleration of vesting shall automatically be reacquired by the Company in
accordance with the provisions of the applicable restricted stock agreement, and
the Executive shall have no further rights in such unvested portion of the
restricted stock. In addition, the Company shall waive any reacquisition or
repayment rights for dividends paid on restricted stock prior to Executive’s
termination of employment.
(xiii) Other Equity Awards. Except as set forth in Sections 8(c)(ii) and 8(c)(iii), performance share
awards and all other equity awards granted to the Executive by the Company which
remain outstanding immediately prior to the date of termination of the
Executive’s employment, as provided in Section 7(b), shall vest and be settled
in accordance with their terms.
The Company shall have no further
obligations to the Executive as a result of termination of employment described
in this Section 8(c) except as set forth in Section 12.
Special Change in Control
Provisions.
(xiv) Change in Control Benefits.
(1) Without Regard to Termination of Employment. In the event of a Change in Control (as
defined below), all shares of restricted stock granted to the Executive by the
Company shall become vested in full immediately prior to the consummation of
such Change in Control, and, subject to Section 22 [Compliance with Section
409A], the Executive shall be entitled to receive an additional salary equal to
Sixty-Two Thousand and Five Hundred ($62,500) per month for a period of two (2)
years following the Change in Control provided the Executive does not Terminate
employment as defined in Sections 6(a) – 6(g). Except as set forth in this
Section 8(d)(i)(1) or Section 8(d)(i)(2) below, the treatment of stock options,
performance share awards and all other equity awards granted to the Executive by
the Company which remain outstanding immediately prior to the date of such
Change in Control shall be determined in accordance with their terms.
(2) Upon Certain Termination of Employment. In addition to the payments and benefits
provided by Section 8(d)(i)(1) above, if the Executive’s employment is
terminated either by the Company Without Cause (as defined in Section 6(d)) or
by the Executive for Good Reason (as defined in Section 6(e)), in either case
within a period commencing one (1) month prior to and ending twelve (12) months
following a Change in Control, then, subject to Section 22 [Compliance with
Section 409A], the Executive shall be entitled to the following (in addition to
any other payments or benefits provided under this Agreement), provided that
within sixty (60) days following the Executive’s termination of employment the
Executive executes the Release and the period for revocation, if any, of such
Release has expired without the Release having been revoked:
a. Salary. The
Executive shall be entitled to a cash payment equal to 2.99 times the
Executive’s then-current annual base salary. Such payment shall be payable in
full to Executive within 30 days following such termination of employment. The
payment under this Section 8(d)(i)(2)(a) shall take the place of any payment
under Section 8(a)(i) and the Executive shall not be entitled to receive a
payment under Section 8(a)(i) if the Executive is entitled to a payment under
this Section 8(d)(i)(2)(a).
b. Bonus. The
Executive shall be entitled to a cash payment equal to 2.99 times the
Executive’s target annual bonus for the Company’s fiscal year then in effect on
the date termination of employment occurs. Such payment shall be payable in full
to Executive within 30 days following such termination of employment. The
payment under this Section 8(d)(i)(2)(b) shall take the place of any payment
under Section 8(a)(ii) and the Executive shall not be entitled to receive a
payment under Section 8(a)(ii) if the Executive is entitled to a payment under
this Section 8(d)(i)(2)(b).
c. Health Care Coverage. The Executive shall be entitled to the continuation of the Executive’s
health care coverage under the Company’s employee benefit plans (including
medical, dental, vision and mental coverage) which the Executive had at the time
of the termination of employment (including coverage for the Executive’s
dependents to the extent such dependents were covered immediately prior to such
termination of employment) at the Company’s expense for the greater of (i) the
remainder of the Term of Employment then in effect or (ii) a period of two (2)
years commencing on the date of the Executive’s termination of employment. Such
health care continuation rights will be in addition to any rights the Executive
may have under ERISA Sections 600 and thereafter and Section 4980B of the
Internal Revenue Code (“COBRA coverage”).
d. Estate Planning. The Executive shall be entitled to reimbursement of the Executive’s
estate planning expenses (including attorneys’ fees) on the same basis, if any,
as to which the Executive was entitled to such reimbursements immediately prior
to such termination of employment for the greater of (i) the remainder of the
Term of Employment then in effect or (ii) a period of two (2) years commencing
on the date of termination of employment.
(xv) Change in Control Defined. A “Change in Control” shall be deemed to have occurred if:
(1) any person or group (within the meaning of Rule 13d-3 of the rules and
regulations promulgated under the Securities Exchange Act of 1934, as amended)
shall acquire during the twelve-month period ending on the date of the most
recent acquisition by such person or group, in one or a series of transactions,
whether through sale of stock or merger, ownership of stock of the Company that
constitutes 35% or more of the total voting power of the stock of the Company or
any successor to the Company; (2) a merger in which the Company is a party
pursuant to which any person or such group acquires ownership of stock of the
Company that, together with stock held by such person or group, constitutes more
than 50% of the total fair market value or total voting power of the stock of
the Company, or (3) the sale, exchange, or transfer of all or substantially all
of the Company’s assets (other than a sale, exchange, or transfer to one or more
corporations where the stockholders of the Company before and after such sale,
exchange, or transfer, directly or indirectly, are the beneficial owners of at
least a majority of the voting stock of the corporation(s) to which the assets
were transferred).
(xvi) Excise Tax Gross-Up. If the Executive becomes entitled to one or more payments (with a
“payment” for this purpose including the accelerated vesting of restricted
stock, stock options or other equity awards, or other non-cash benefits or
property), whether pursuant to the terms of this Agreement or any other plan or
agreement with the Company or any affiliated company (collectively,
“Change in Control
Payments”), which are
or become subject to the tax (the “Excise Tax”) imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”), the Company shall pay to the
Executive at the time specified below such amount (the “Gross-up Payment”) as may be necessary to place the
Executive in the same after-tax position as if no portion of the Change in
Control Payments and any amounts paid to the Executive pursuant to Section 8 had
been subject to the Excise Tax. The Gross-up Payment shall include, without
limitation, reimbursement for any penalties and interest that may accrue in
respect of such Excise Tax. For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed: (A) to pay federal income taxes
at the highest marginal rate of federal income taxation for the year in which
the Gross-up Payment is to be made; and (B) to pay any applicable state and
local income taxes at the highest marginal rate of taxation for the calendar
year in which the Gross-up Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
local taxes if paid in such year. If the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder at the time the Gross-up
Payment is made, the Executive shall repay to the Company at the time that the
amount such reduction in Excise Tax is finally determined (but, if previously
paid to the taxing authorities, not prior to the time the amount of such
reduction is refunded to the Executive or otherwise realized as a benefit by the
Executive) the portion of the Gross-up Payment that would not have been paid if
such Excise Tax had been used in initially calculating the Gross-up payment,
plus interest on the amount of such repayment at the rate provided in Section
1274 (b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time the Gross-up Payment
is made, the Company shall make an additional Gross-up Payment in respect of
such excess (plus any interest and penalties payable with respect to such
excess) at the time that the amount of such excess is finally determined.
(xvii) The Gross-up Payment provided for above shall be paid, subject to Section
22 [Compliance with Section 409A], on the 30th day (or such earlier date as the
Excise Tax becomes due and payable to the taxing authorities) after it has been
determined that the Change in Control Payments (or any portion thereof) are
subject to the Excise Tax; provided, however, that if the amount of such
Gross-up Payment or portion thereof cannot be finally determined on or before
such day, the Company shall pay to the Executive on such day an estimate, as
determined by counsel or auditors selected by the Company and reasonably
acceptable to the Executive, of the minimum amount of such payments. The Company
shall pay to the Executive the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
the Executive shall repay such amount on the fifth day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code). The Company shall have the right to control all proceedings with the
Internal Revenue Service that may arise in connection with the determination and
assessment of any Excise Tax and, at its sole option, the Company may pursue or
forego any and all administrative appeals, proceedings, hearings, and
conferences with any taxing authority in respect of such Excise Tax (including
any interest or penalties thereon); provided, however, that the Company’s
control over any such proceedings shall be limited to issues with respect to
which a Gross-up Payment would be payable hereunder, and the Executive shall be
entitled to settle or contest any other issue raised by the Internal Revenue
Service or any other taxing authority. The Executive shall cooperate with the
Company in any proceedings relating to the determination and assessment of any
Excise Tax and shall not take any position or action that would materially
increase the amount of any Gross-up Payment hereunder.
Timing of Payments. Any cash payments to
which the Executive is entitled under Sections 8(a), (c) and (d) shall be
payable in accordance with the Company’s payroll schedule and shall commence as
soon as practicable upon the period for revocation of the Release having expired
(and in any event on or prior to December 31 of the year in which Executive has
a Separation from Service); provided, however, that in the event that Executive
becomes entitled to such payments in connection with a Separation from Service
that occurs on or after November 1 of any calendar year, such payments shall
commence on the later of (i) the period for revocation of the Release having
expired or (ii) January 1 of the calendar year that immediately follows the year
in which the Executive has a Separation from Service.
Certain Employment
Obligations.
Employee Acknowledgement. The Company and the Executive
acknowledge that (i) the Company has a special interest in and derives
significant benefit from the unique skills and experience of the Executive; (ii)
as a result of the Executive’s service with the Company, the Executive will use
and have access to some of the Company’s proprietary and valuable Confidential
Information during the course of the Executive’s
employment; (iii) the Confidential Information has been developed and created by
the Company at substantial expense and constitutes valuable proprietary assets
of the Company, and the Company will suffer substantial damage and irreparable
harm which will be difficult to compute if, during the term of the Executive’s
employment or thereafter, the Executive should disclose or improperly use such
Confidential Information in violation of the provisions of this Agreement; (iv)
the Company will suffer substantial damage and irreparable harm which will be
difficult to compute if the Executive competes with the company in violation of
this Agreement; (v) the Company will suffer substantial damage which will be
difficult to compute if, the Executive solicits or interferes with the Company’s
employees, clients, or customers; (vi) the provisions of this Agreement are
reasonable and necessary for the protection of the business of the Company; and
(vii) the provisions of this Agreement will not preclude the Executive from
obtaining other gainful employment or service.
Non-Compete.
(xviii) During the Term of Employment and for a period of twenty-four (24) months
following the Executive's termination of employment with the Company, the
Executive shall not, directly or indirectly, own, manage, control, be employed
by, consult with, participate in, or be connected in any manner with the
ownership, management, operation, control of, or otherwise become involved with,
any Competing Business, nor shall the Executive undertake any planning to engage
in any such activity.
For purposes of this Agreement, a
Competing Business shall mean any of the following: (1) any business that is
listed as a peer retailer in the Compensation Discussion and Analysis section of
the Company’s most current Proxy Statement filed with the U.S. Securities and
Exchange Commission as of the date of Executive’s termination of employment with
the Company, (2) any off-price retailer or retailer of discount merchandise,
including without limitation, Burlington Coat Factory Warehouse Corporation,
Macy’s, Inc., TJX Companies Inc., Retail Ventures Inc., Kohl’s Corporation,
Stein Mart, Inc., and (3) any affiliates, subsidiaries or successors of
businesses identified above.
(xix) The foregoing restrictions in Section 9(b)(i) shall have no force or
effect in the event that: (i) the Executive’s employment with the Company is
terminated either by the Company pursuant to Section 6(d)[Without Cause] or by
the Executive pursuant to Section 6(e) [Termination by the Executive for Good
Reason]; or (ii) the Company fails to approve or grant an extension of this
Agreement in accordance with Section 1 hereof.
(xx) Section 9(b)(i) shall not prohibit the Executive from making any
investment of 1% or less of the equity securities of any publicly-traded
corporation which is considered to be a Competing Business.
Non-Solicitation of Employees. During the Term of Employment and for a
period of 24 months following the Executive’s termination of that employment
with the Company, the Executive shall not, without the written permission of the
Company or an affected affiliate, directly or indirectly (i) solicit, employ or
retain, or have or cause any other person or entity to solicit, employ or
retain, any person who is employed by the Company or was employed by the Company
during the 6-month period prior to such solicitation, employment, or retainer,
(ii) encourage any such person not to devote his or her full business time to
the Company, or (iii) agree to hire or employ any such person.
Non-Solicitation of Third Parties. During the Term of Employment and for a
period of 24 months following the Executive’s termination of employment with the
Company, the Executive shall not directly or indirectly solicit or otherwise
influence any entity with a business arrangement with the Company, including,
without limitation, suppliers, sales representatives, lenders, lessors, and
lessees, to discontinue, reduce, or otherwise materially or adversely affect
such relationship.
Non-Disparagement. The Executive acknowledges and agrees that the Executive will not defame
or criticize the services, business, integrity, veracity, or personal or
professional reputation of the Company or any of its directors, officers,
employees, affiliates, or agents of any of the foregoing in either a
professional or personal manner either during the term of the Executive’s
employment or thereafter.
Company Remedies for Executive’s
Breach of Certain Obligations.
The Executive acknowledges and agrees
that in the event that the Executive breaches or threatens to breach Sections 5
or 9 of this Agreement, all compensation and benefits otherwise payable pursuant
to this Agreement and the vesting and/or exercisability of all stock options,
restricted stock, performance shares and other forms of equity compensation
previously awarded to the Executive, notwithstanding the provisions of any
agreement evidencing any such award to the contrary, shall immediately cease.
The Company shall give prompt notice to
the Executive of its discovery of a breach by the Executive of Section 9 of this
Agreement. If it is determined by a vote of not less than two-thirds of the
members of the Board that the Executive has breached Section 9 of this Agreement
and has not cured such breach within ten (10) business days of such notice,
then:
the Executive shall forfeit to the
Company (A) all stock options, stock appreciation rights, performance shares and
other equity compensation awards (other than shares of restricted stock,
restricted stock units or similar awards) granted to the Executive by the
Company which remain outstanding and unexercised or unpaid as of the date of
such determination by the Board (the “Breach Determination
Date”) and (B) all
shares of restricted stock, restricted stock units and similar awards granted to
the Executive by the Company which continue to be held by the Executive as of
the Breach Determination Date to the extent that such awards vested during the
Forfeiture Period (as defined below); and
the Executive shall pay to the Company
all gains realized by the Executive upon (A) the exercise by or payment in
settlement to the Executive on and after the commencement of the Forfeiture
Period of stock options, stock appreciation rights, performance shares and other
equity compensation awards (other than shares of restricted stock, restricted
stock units or similar awards) granted to the Executive by the Company and (B)
the sale on and after the commencement of the Forfeiture Period of shares or
other property received by the Executive pursuant to awards of restricted stock,
restricted stock units or similar awards granted to the Executive by the Company
and which vested during the Forfeiture Period.
For purposes of this Section, the gain
realized by the Executive upon the exercise or payment in settlement of stock
options, stock appreciation rights, performance shares and other equity
compensation awards shall be equal to (A) the closing sale price on the date of
exercise or settlement (as reported on the stock exchange or market system
constituting the principal market for the shares subject to the applicable
award) of the number of vested shares issued to the Executive upon such exercise
or settlement, reduced by the purchase price, if any, paid by the Executive to
acquire such shares, or (B) if any such award was settled by payment in cash to
the Executive, the gain realized by the Executive shall be equal to the amount
of cash paid to the Executive. Further, for purposes of this Section, the gain
realized by the Executive upon the sale of shares or other property received by
the Executive pursuant to awards of restricted stock, restricted stock units or
similar awards shall be equal to the gross proceeds of such sale realized by the
Executive. Gains determined for purposes of this Section shall be determined
without regard to any subsequent increase or decrease in the market price of the
Company’s stock or taxes paid by or withheld from the Executive with respect to
such transactions.
For the purposes of this Section, the
“Forfeiture Period” shall be the period ending on the
Breach Determination Date and beginning on the earlier of (A) the date six
months prior to the Breach Determination Date or (B) the business day
immediately preceding the date of the Executive’s termination of employment with
the Company.
The Company shall have the right (but not
the obligation) to deduct from any amounts payable from time to time to the
Executive by the Company pursuant to this Agreement or otherwise (including
wages or other compensation, vacation pay or other benefits, and any other
amounts owed to the Executive by the Company) any and all amounts the Executive
is required to pay to the Company pursuant to this Section. The Executive agrees
to pay to the Company immediately upon the Breach Determination Date the amount
payable by the Executive to the Company pursuant to this Section which the
Company has not recovered by means of such deductions.
The Executive acknowledges that money
will not adequately compensate the Company for the substantial damages that will
arise upon the breach or threatened breach of Sections 5 or 9 of this Agreement
and that the Company will not have any adequate remedy at law. For this reason,
such breach or threatened breach will not be subject to the arbitration clause
in Section 19; rather, the Company will be entitled, in addition to other rights
and remedies, to specific performance, injunctive relief, and other equitable
relief to prevent or restrain such breach or threatened breach. The Company may
obtain such relief from (1) any court of competent jurisdiction, (2) an
arbitrator pursuant to Section 19 hereof, or (3) a combination of the two (e.g.,
by simultaneously seeking arbitration under Section 19 and a temporary
injunction from a court pending the outcome of the arbitration). It shall be the
Company’s sole and exclusive right to elect which approach to use to vindicate
its rights. The Executive further agrees that in the event of a breach or
threatened breach, the Company shall be entitled to obtain an immediate
injunction and restraining order to prevent such breach and/or threatened breach
and/or continued breach, without posting a bond or having to prove irreparable
harm or damages, and to obtain all costs and expenses, including reasonable
attorneys’ fees and costs. In addition, the existence of any claim or cause of
action by the Executive against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the restrictive covenants in this Agreement.
Exercise of Stock Options Following Termination. If the Executive's employment terminates,
Executive (or the Executive's estate) may exercise the Executive's right to
purchase any vested stock under the stock options granted to Executive by the
Company as provided in the applicable stock option agreement or Company plan.
All such purchases must be made by the Executive in accordance with the
applicable stock option plans and agreements between the parties.
Successors; Binding Agreement. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to the Executive hereunder, all
such amounts shall be paid in accordance with the terms of this Agreement and
applicable law to the Executive’s beneficiary pursuant to a written designation
of beneficiary, or, if there is no effective written
designation of beneficiary by the Executive, to the Executive’s estate.
Insurance and Indemnity. The Company shall, to the extent
permitted by law, include the Executive during the Term of Employment under any
directors and officers liability insurance policy maintained for its directors
and officers, with coverage at least as favorable to the Executive in amount and
each other material respect as the coverage of other officers covered thereby.
The Company’s obligation to provide insurance and indemnify the Executive shall
survive expiration or termination of this Agreement with respect to proceedings
or threatened proceedings based on acts or omissions of the Executive occurring
during the Executive’s employment with the Company. Such obligations shall be
binding upon the Company’s successors and assigns and shall inure to the benefit
of the Executive’s heirs and personal representatives.
Notice. For
the purposes of this Agreement, notices, demands and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or (unless otherwise specified) mailed by United
States registered mail, return receipt requested, postage prepaid, addressed as
follows:
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If to the Executive: |
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Barbara Rentler |
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Ross Stores, Inc. |
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1372 Broadway, 8th Floor |
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New York, NY 10018 |
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If to the Company: |
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Ross Stores, Inc. |
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4440 Rosewood Drive |
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Pleasanton, CA 94588 |
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Attention: General Counsel |
or to such other
address as any party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.
Complete Agreement; Modification, Waiver; Entire
Agreement. This
Agreement, along with any stock option, restricted stock, performance share or
other equity compensation award agreements between the parties, and term sheet
referencing such specific awards, represents the complete agreement of the
parties with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, promises or representations of the parties, except
those relating to repayment of signing and related bonuses, or relocation
expense reimbursements. To the extent that the bonus payment provisions (i.e.,
post-termination bonus payments) provided in this Agreement differ from the
provisions of the Company’s incentive bonus plans (currently the Incentive
Compensation Plan) or any replacement plans, such bonus payments shall be paid
pursuant to the provisions of this Agreement except to the extent expressly
prohibited by law. Except as provided by Section 22 [Compliance with Section
409A], no provision of this Agreement may be amended or modified except in a
document signed by the Executive and the chairman of the Committee or such other
person as may be designated by the Board. No waiver by the Executive or the
Company of any breach of, or lack of compliance with, any condition or provision
of this Agreement by the other party shall be considered a waiver of any other
condition or provision or the same condition or provision at another time. To
the extent that this Agreement is in any way deemed to be inconsistent with any
prior or contemporaneous stock option, restricted stock, performance share or
other equity compensation award agreements between the parties, or term sheet
referencing such specific awards, the terms of this Agreement shall control. No
agreements or representations, oral or otherwise, with respect to the subject
matter hereof have been made by either party which are not set forth expressly
in this Agreement.
Governing Law - Severability. The validity, interpretation,
construction, performance, and enforcement of this Agreement shall be governed
by the laws of the state in which the Executive’s principle place of employment
described in Section 3 is located without reference to that state’s choice of
law rules. If any provision of this Agreement shall be held or deemed to be
invalid, illegal, or unenforceable in any jurisdiction, for any reason, the
invalidity of that provision shall not have the effect of rendering the
provision in question unenforceable in any other jurisdiction or in any other
case or of rendering any other provisions herein unenforceable, but the invalid
provision shall be substituted with a valid provision which most closely
approximates the intent and the economic effect of the invalid provision and
which would be enforceable to the maximum extent permitted in such jurisdiction
or in such case.
Mitigation Not Required. In the event the Executive’s employment
with the Company terminates for any reason, the Executive shall not be obligated
to seek other employment following such termination. However, any amounts due
the Executive under Sections 8(a)(i); 8(a)(ii); 8(d)(i)(2)(a),(b),(c) or (d);
and/or any additional salary provided under Section 8(d)(i)(1) of this Agreement
shall be offset by any cash remuneration, health care coverage and/or estate
planning reimbursements attributable to any subsequent employment that the
Executive may obtain during the period of payment of compensation under this
Agreement following the termination of the Executive’s employment with the
Company.
Withholding.
All payments required to be made by the Company hereunder to the Executive or
the Executive’s estate or beneficiaries shall be subject to the withholding of
such amounts as the Company may reasonably determine it should withhold pursuant
to any applicable law. To the extent permitted, the Executive may provide all or
any part of any necessary withholding by contributing Company stock with value,
determined on the date such withholding is due, equal to the number of shares
contributed multiplied by the closing price per share as reported on the
securities exchange constituting the primary market for the Company’s stock on
the date preceding the date the withholding is determined.
Arbitration.
In the event of any dispute or claim relating to or arising out of the parties’
employment relationship or this Agreement (including, but not limited to, any
claims of breach of contract, wrongful termination, or age, race, sex,
disability or other discrimination), all such disputes shall be fully, finally
and exclusively resolved by binding arbitration conducted by the American
Arbitration Association in the city in which the Executive’s principal place of
employment is located by an arbitrator mutually agreed upon by the parties
hereto or, in the absence of such agreement, by an arbitrator selected in
accordance with the Employment Arbitration Rules of the American Arbitration
Association, provided, however, that this arbitration provision shall not apply,
unless the Company elects otherwise, to any disputes or claims relating to or
arising out of the Executive’s breach of Sections 5 or 9 of this Agreement. If
either the Company or the Executive shall request, arbitration shall be
conducted by a panel of three arbitrators, one selected by the Company, one
selected by the Executive, and the third selected by agreement of the first two,
or, in the absence of such agreement, in accordance with such Rules. The Company
shall pay all costs of any arbitration; provided, however, that each party shall
pay its own attorney and advisor fees.
If there is termination of the
Executive’s employment with the Company followed by a dispute as to whether the
Executive is entitled to the benefits provided under this Agreement, then,
during the period of that dispute the Company shall pay the Executive fifty
percent (50%) of the amount specified in Section 8 hereof (except that the
Company shall pay one hundred percent (100%) of any insurance premiums provided
for in Section 8), if, and only if, the Executive agrees in writing that if the
dispute is resolved against the Executive, the Executive shall promptly refund
to the Company all such payments received by, or made by the Company on behalf
of, the Executive. If the dispute is resolved in the Executive’s favor, promptly
after resolution of the dispute the Company shall pay the Executive the sum that
was withheld during the period of the dispute plus interest at the rate provided
in Section 1274(d) of the Code, compounded quarterly.
Attorney’s Fees. Each party shall bear its own attorney’s fees and costs incurred in any
action or dispute arising out of this Agreement.
Miscellaneous.
No right or interest to, or in, any payments shall be assignable by the
Executive; provided, however, that the Executive shall not be precluded from
designating in writing one or more beneficiaries to receive any amount that may
be payable after the Executive’s death and the legal representative of the
Executive’s estate shall not be precluded from assigning any right hereunder to
the person or persons entitled thereto. This Agreement shall be binding upon and
shall inure to the benefit of the Executive, the Executive’s heirs and legal
representatives and, the Company and its successors.
Compliance with Section 409A. Notwithstanding any other provision of
this Agreement to the contrary, the provision, time and manner of payment or
distribution of all compensation and benefits provided by this Agreement that
constitute nonqualified deferred compensation subject to and not exempted from
the requirements of Code Section 409A (“Section 409A Deferred Compensation”) shall be subject to, limited by and
construed in accordance with the requirements of Code Section 409A and all
regulations and other guidance promulgated by the Secretary of the Treasury
pursuant to such Section (such Section, regulations and other guidance being
referred to herein as “Section 409A”), including the following:
Separation from Service. Payments and benefits constituting
Section 409A Deferred Compensation otherwise payable or provided pursuant to
Section 8 upon the Executive’s termination of employment shall be paid or
provided only at the time of a termination of the Executive’s employment which
constitutes a Separation from Service. For the purposes of this Agreement, a
“Separation from
Service” is a
separation from service within the meaning of Treasury Regulation Section
1.409A-1(h).
Six-Month Delay Applicable to Specified Employees. If, at the time of a Separation from
Service of the Executive, the Executive is a “specified employee” within the
meaning of Section 409A(a)(2)(B(i) (a “Specified Employee”), then any payments and benefits
constituting Section 409A Deferred Compensation to be paid or provided pursuant
to Section 8 upon the Separation from Service of the Executive shall be paid or
provided commencing on the later of (i) the date that is six (6) months after
the date of such Separation from Service or, if earlier, the date of death of
the Executive (in either case, the “Delayed Payment Date”), or (ii) the date or dates on which
such Section 409A Deferred Compensation would otherwise be paid or provided in
accordance with Section 8. All such amounts that would, but for this Section
22(b), become payable prior to the Delayed Payment Date shall be accumulated and
paid on the Delayed Payment Date.
Health Care and Estate Planning Benefits. In the event that all or any of the
health care or estate planning benefits to be provided pursuant to Sections
8(d)(i)(2)(c) or 8(d)(i)(2)(d) as a result of a Participant’s Separation from
Service constitute Section 409A Deferred Compensation, the Company shall provide
for such benefits constituting Section 409A Deferred Compensation in a manner
that complies with Section 409A. To the extent necessary to comply with Section
409A, the Company shall determine the health care premium cost necessary to
provide such benefits constituting Section 409A Deferred Compensation for the
applicable coverage period and shall pay such premium cost which becomes due and
payable during the applicable coverage period on the applicable due date for
such premiums; provided, however, that if the Executive is a Specified Employee,
the Company shall not pay any such premium cost until the Delayed Payment Date.
If the Company’s payment pursuant to the previous sentence is subject to a
Delayed Payment Date, the Executive shall pay the premium cost otherwise payable
by the Company prior to the Delayed Payment Date, and on the Delayed Payment
Date the Company shall reimburse the Executive for such Company premium cost
paid by the Executive and shall pay the balance of the Company’s premium cost
necessary to provide such benefit coverage for the remainder of the applicable
coverage period as and when it becomes due and payable over the applicable
period.
Stock-Based Awards. The vesting of any stock-based compensation awards which constitute
Section 409A Deferred Compensation and are held by the Executive, if the
Executive is a Specified Employee, shall be accelerated in accordance with this
Agreement to the extent applicable; provided, however, that the payment in
settlement of any such awards shall occur on the Delayed Payment Date. Any
stock-based compensation which vests and becomes payable upon a Change in
Control in accordance with Section 8(d)(i)(1) shall not be subject to this
Section 22(d).
Installments.
Executive’s right to receive any installment payments payable hereunder shall be
treated as a right to receive a series of separate payments and, accordingly,
each such installment payment shall at all times be considered a separate and
distinct payment for purposes of Section 409A.
Reimbursements. To the extent that any reimbursements payable to Executive pursuant to
this Agreement are subject to the provisions of Section 409A of the Code, such
reimbursements shall be paid to Executive no later than December 31 of the year
following the year in which the cost was incurred, the amount of expenses
reimbursed in one year shall not affect the amount eligible for reimbursement in
any subsequent year, and Executive’s right to reimbursement under this Agreement
will not be subject to liquidation or exchange for another benefit.
(g) Rights of the Company; Release of Liability. It is the mutual intention of the
Executive and the Company that the provision of all payments and benefits
pursuant to this Agreement be made in compliance with the requirements of
Section 409A. To the extent that the provision of any such payment or benefit
pursuant to the terms and conditions of this Agreement would fail to comply with
the applicable requirements of Section 409A, the Company may, in its sole and
absolute discretion and without the consent of the Executive, make such
modifications to the timing or manner of providing such payment and/or benefit
to the extent it determines necessary or advisable to comply with the
requirements of Section 409A; provided, however, that the Company shall not be
obligated to make any such modifications. Any such modifications made by the
Company shall, to the maximum extent permitted in compliance with the
requirements of Section 409A, preserve the aggregate monetary face value of such
payments and/or benefits provided by this Agreement in the absence of such
modification; provided, however, that the Company shall in no event be obligated
to pay any interest or other compensation in respect of any delay in the
provision of such payments or benefits in order to comply with the requirements
of Section 409A. The Executive acknowledges that (i) the provisions of this
Section 22 may result in a delay in the time at which payments would otherwise
be made pursuant to this Agreement and (ii) the Company is authorized to amend
the this Agreement, to void or amend any election made by the Executive under
this Agreement and/or to delay the payment of any monies and/or provision of any
benefits in such manner as may be determined by the Company, in its discretion,
to be necessary or appropriate to comply with Section 409A (including any
transition or grandfather rules thereunder) without prior notice to or consent
of the Executive. The Executive hereby releases and holds harmless the Company,
its directors, officers and stockholders from any and all claims that may arise
from or relate to any tax liability, penalties, interest, costs, fees or other
liability incurred by the Executive as a result of the application of Code
Section 409A.
Future Equity Compensation. The Executive understands and
acknowledges that all awards, if any, of stock options, restricted stock,
performance shares and other forms of equity compensation by the Company are
made at the sole discretion of the Board of Directors of the Company or a
committee thereof. The Executive further understands and acknowledges, however,
that unless the Executive has executed this Agreement and each successive
amendment extending the Initial Term or any subsequent Renewal Term of the
Agreement as may be agreed to by the Company and the Executive, it is the
intention of the Board of Directors and the Executive that, notwithstanding any
continued employment with the Company, (a) the Company shall have no obligation
to grant any award of stock options, restricted stock, performance shares or any
other form of equity compensation which might otherwise have been granted to the
Executive on or after the intended commencement of the Initial Term or such
successive Renewal Term for which the Executive has failed to sign the Agreement
or the applicable Term of Employment extension amendment and (b) any such award
which is nevertheless granted to the Executive after the intended commencement
of the Initial Term or Renewal Term for which the Executive has failed to sign
such Agreement or applicable extension amendment shall not vest unless and until
the Executive has executed the Agreement or applicable extension amendment,
notwithstanding the provisions of any agreement evidencing such award to the
contrary.
IN WITNESS WHEREOF, the parties have executed this
Executive Employment Agreement effective as of the date and year first above
written.
ROSS STORES, INC. |
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EXECUTIVE |
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/s/ Michael Balmuth |
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/s/ Barbara Rentler |
By: Michael Balmuth |
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Barbara Rentler |
Vice Chairman and Chief |
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Executive Officer |
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exhibit10-72.htm
EXECUTIVE EMPLOYMENT
AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made effective December 4, 2009,
(the “Effective Date”) by and between Ross Stores, Inc. (the
“Company”), a Delaware corporation, and Michael
O’Sullivan (the “Executive”).
RECITALS
A. The Company wishes to employ the
Executive, and the Executive is willing to accept such employment, as President
and Chief Operating Officer.
B. It is now the mutual desire of the
Company and the Executive to enter into a written employment agreement to govern
the terms of the Executive’s employment by the Company as of and following the
Effective Date on the terms and conditions set forth below.
TERMS AND CONDITIONS
In consideration for the promises of the
parties set forth below, the Company and the Executive hereby agree as follows:
1. Term. Subject
to the provisions of Section 6 of this Agreement, the term of employment of the
Executive by the Company under this Agreement (the “Term of Employment”)
shall be as follows:
(a)
Initial Term. The initial Term of Employment of the
Executive by the Company under this Agreement shall begin on the Effective Date
and end on March 31, 2014 (the “Initial Term”), unless extended or terminated earlier
in accordance with this Agreement.
(b) Renewal Term.
Upon the timely written request of the Executive to extend the Term of
Employment, the Compensation Committee (the “Committee”) of the Board of Directors (the
“Board”) of the Company shall consider
extending the Executive’s employment with the Company under this Agreement. To
be timely, such request must be delivered to the Company’s Chief Executive
Officer not earlier than twelve (12) months prior to the end of the then
effective Initial Term or Renewal Term and, in any case, while the Executive
remains an employee of the Company. Such request must contain no proposed
modification to the provisions of this Agreement other than an extension of the
Term of Employment as then in effect for an additional two (2) years. Within
thirty (30) days following the receipt of such notice, the Chief Executive
Officer will discuss such request with the Committee and advise the Executive,
in writing, within thirty (30) days following its consideration of the
Executive’s written request, of the approval or disapproval of such extension
request. The failure to provide such written advice shall constitute a denial of
the Executive’s request for extension. If the Executive’s request for an
extension is approved, the Term of Employment shall be extended for two (2)
additional years commencing on the date immediately following the date of
expiration of the Term of Employment in effect at the time of the Executive’s
written request. Such additional two-year period is referred to herein as a
“Renewal Term.”
2. Position and Duties. During the Term of Employment, the Executive shall serve as President
and Chief Operating Officer. As used in this Agreement, the term “Company”
includes Ross Stores, Inc. and each and any of its divisions, affiliates or
subsidiaries (except that, where the term relates to stock, stockholders, stock
options or other stock-based awards or the Board, it means Ross Stores, Inc.).
The Executive’s employment may be transferred, assigned, or re-assigned to Ross
Stores, Inc. or a division, affiliate or subsidiary of Ross Stores, Inc., and
such transfer, assignment, or re-assignment will not constitute a termination of
employment or “Good Reason” for the Executive’s termination of employment under
this Agreement. During the Term of Employment, the Executive may engage in
outside activities provided those activities (including but not limited to
membership on boards of directors of not-for-profit and for-profit
organizations) do not conflict with the Executive’s duties and responsibilities
hereunder, and provided further that the Executive gives written notice to the
Board of any significant outside business activity in which the Executive plans
to become involved, whether or not such activity is pursued for profit.
3. Principal Place of Employment. The Executive shall be employed at the
Company’s offices in
Pleasanton, California, except for required travel on the Company’s business to
an extent substantially consistent with present business travel obligations of
the Executive’s position.
4. Compensation and Related Matters.
(a) Salary. During
the Term of Employment, the Company shall pay to the Executive a salary at a
rate of not less than Eight Hundred and Thirty Thousand Dollars
($830,000) per annum. The Executive’s salary shall be payable in
substantially equal installments in accordance with the Company’s normal payroll
practices applicable to senior executives. Subject to the first sentence of this
Section 4(a), the Executive’s salary may be adjusted from time to time by the
Committee in accordance with normal business practices of the Company.
(b) Bonus. During
the Term of Employment, the Executive shall be eligible to receive an annual
bonus paid under the Company’s existing incentive bonus plan under which the
Executive is eligible (which is currently the Incentive Compensation Plan) or
any replacement plan that may subsequently be established and in effect during
the Term of Employment. The current target annual bonus the Executive is
eligible to earn upon achievement of 100% of all applicable performance targets
under such incentive bonus plan is 85% of the Executive’s then effective annual
salary rate. The Executive’s death, termination for Cause or Voluntary
Termination (as described in Sections 6(a), 6(c) and 6(f), respectively) prior
to the Company’s payment of the bonus for a fiscal year of the Company will
cause the Executive to be ineligible for any annual bonus for that fiscal year
or any pro-rata portion of such bonus.
(c) Expenses.
During the Term of Employment, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in
performing services hereunder, including all reasonable expenses of travel and
living while away from home, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company.
(d) Benefits.
During the Term of Employment, the Executive shall be entitled to participate in
all of the Company’s employee benefit plans and arrangements in which senior
executives of the Company are eligible to participate. The Company shall not
make any changes in such plans or arrangements which would adversely affect the
Executive’s rights or benefits thereunder, unless such change occurs pursuant to
a program applicable to all senior executives of the Company and does not result
in a proportionately greater reduction in the rights or benefits of the
Executive as compared with any other similarly situated senior executive of the
Company. The Executive shall be entitled to participate in, or receive benefits
under, any employee benefit plan or arrangement made available by the Company in
the future to its senior executives, subject to, and on a basis consistent with,
the terms, conditions and overall administration of such plans and arrangements.
Except as otherwise specifically provided herein, nothing paid to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be in lieu of the salary or bonus otherwise payable under this
Agreement.
(e) Vacations.
During the Term of Employment, the Executive shall be entitled to twenty (20)
vacation days in each calendar year, and to compensation in respect of earned
but unused vacation days, determined in accordance with the Company’s vacation
plan. The Executive shall also be entitled to all paid holidays given by the
Company to its senior executives. Unused vacation days shall not be forfeited
once they have been earned and, if still unused at the time of the Executive’s
termination of employment with the Company, shall be promptly paid to the
Executive at their then-current value, based on the Executive’s daily salary
rate at the time of the Executive’s termination of employment.
(f) Services Furnished. The Company shall furnish the Executive with office space and such
services as are suitable to the Executive’s position and adequate for the
performance of the Executive’s duties during the Term of Employment.
5. Confidential Information and Intellectual Property.
(a) Other than in the performance of the
Executive’s duties hereunder, the Executive agrees not to use in any manner or
disclose, distribute, publish, communicate or in any way cause to be used,
disclosed, distributed, published, or communicated in any way or at any time,
either while in the Company's employ or at any time thereafter, to any person
not employed by the Company, or not engaged to render services to the Company,
any Confidential Information (as defined below) obtained while in the employ of
the Company.
(b) Confidential Information includes any
written or unwritten information which relates to and/or is used by the Company
or its subsidiaries, affiliates or divisions, including, without limitation (i)
the names, addresses, buying habits and other special information regarding
past, present and potential customers, employees and suppliers of the Company,
(ii) customer and supplier contracts and transactions or price lists of the
Company and suppliers, (iii) methods of distribution, (iv) all agreements,
files, books, logs, charts, records, studies, reports, processes, schedules and
statistical information, (v) data, figures, projections, estimates, pricing
data, customer lists, buying manuals or procedures, distribution manuals or
procedures, other policy and procedure manuals or handbooks, (vi) supplier
information, tax records, personnel histories and records, sales information,
and property information, (vii) information regarding the present or future
phases of business, (viii) ideas, inventions, trademarks, business information,
know-how, processes, techniques, improvements, designs, redesigns, creations,
discoveries, trade secrets, and developments, (ix) all computer software
licensed or developed by the Company or its subsidiaries, affiliates or
divisions, computer programs, computer-based and web-based training programs,
and systems, and (x) finances and financial information, but Confidential
Information will not include information of the Company or its subsidiaries,
affiliates or divisions that (1) became or becomes a matter of public knowledge
through sources independent of the Executive, (2) has been or is disclosed by
the Company or its subsidiaries, affiliates or divisions without restriction on
its use, or (3) has been or is required or specifically permitted to be
disclosed by law or governmental order or regulation. The Executive also agrees
that, if there is any reasonable doubt whether an item is public knowledge, to
not regard the item as public knowledge until and unless the Company’s Chief
Executive Officer confirms to the Executive that the information is public
knowledge.
(c) The provisions of this Section 5 shall
not preclude the Executive from disclosing such information to the Executive's
professional tax advisor or legal counsel solely to the extent necessary to the
rendering of their professional services to the Executive if such individuals
agree to keep such information confidential.
(d) The Executive agrees that upon leaving
the Company’s employ the Executive will remain reasonably available to answer
questions from Company officers regarding the Executive’s former duties and
responsibilities and the knowledge the Executive obtained in connection
therewith.
(e) The Executive agrees that upon leaving
the Company's employ the Executive will not communicate with, or give statements
to, any member of the media (including print, television, or radio media)
relating to any matter (including pending or threatening lawsuits or
administrative investigations) about which the Executive has knowledge or
information (other than knowledge or information that is not Confidential
Information) as a result of employment with the Company. The Executive further
agrees to notify the Chief Executive Officer or his or her designee immediately
after being contacted by any member of the media with respect to any matter
affected by this section.
(f) The Executive agrees that all
information, inventions, and discoveries, whether or not patented or patentable,
made or conceived by the Executive, either alone or with others, at any time
while employed by the Company, which arises out of such employment or is
pertinent to any field of business or research in which, during such employment,
the Company, its subsidiaries, affiliates or divisions is engaged or (if such is
known to or ascertainable by the Executive) is considering engaging
(“Intellectual Property”) shall (i) be and remain the sole
property of the Company and the Executive shall not seek a patent with respect
to such Intellectual Property without the prior consent of an authorized
representative of the Company and (ii) be disclosed promptly to an authorized
representative of the Company along with all information the Executive possesses
with regard to possible applications and uses. Further, at the request of the
Company, and without expense or additional compensation to the Executive, the
Executive agrees to execute such documents and perform such other acts as the
Company deems necessary to obtain patents on such Intellectual Property in a
jurisdiction or jurisdictions designated by the Company, and to assign to the
Company or its designee such Intellectual Property and all patent applications
and patents relating thereto.
(g) The Executive and the Company agree that
the Executive intends all original works of authorship within the purview of the
copyright laws of the United States authored or created by the Executive in the
course of the Executive’s employment with the Company will be works for hire
within the meaning of such copyright law.
(h) Upon termination of the Executive’s
employment, or at any time upon request of the Company, the Executive will
return to the Company all Confidential Information and Intellectual Property, in
any form, including but not limited to letters, memoranda, reports, notes,
notebooks, books of account, drawings, prints, specifications, formulae, data
printouts, microfilms, magnetic tapes, disks, recordings, documents, and all
copies thereof.
6. Termination.
The Executive’s employment may be terminated during the Term of Employment only
as follows:
(a) Death. The
Executive’s employment shall terminate upon the Executive’s death.
(b) Disability.
If, as a result of the Executive’s Disability (as defined below), the Executive
shall have been absent from the Executive’s duties hereunder on a full-time
basis for the entire period of six consecutive months, and, within thirty days
after written notice of termination is given by the Company (which may occur
before or after the end of such six-month period), the Executive shall not have
returned to the performance of the Executive’s duties hereunder on full-time
basis, the Executive’s employment shall terminate. For purposes of this
Agreement, the term “Disability” shall mean a physical or mental
illness, impairment or condition reasonably determined by the Board that
prevents the Executive from performing the duties of the Executive’s position
under this Agreement.
(c) For Cause. The
Company may terminate the Executive’s employment for Cause. For this purpose,
“Cause” means the occurrence of any of the
following (i) the Executive’s continuous failure to substantially perform the
Executive’s duties hereunder (unless such failure is a result of a Disability as
defined in Section 6(b)), (ii) the Executive’s theft, dishonesty, breach of
fiduciary duty for personal profit or falsification of any documents of the
Company, (iii) the Executive’s material failure to abide by the applicable
code(s) of conduct or other policies (including, without limitation, policies
relating to confidentiality and reasonable workplace conduct) of the Company,
(iv) knowing or intentional misconduct by the Executive as a result of which the
Company is required to prepare an accounting restatement, (v) the Executive’s
unauthorized use, misappropriation, destruction or diversion of any tangible or
intangible asset or corporate opportunity of the Company (including, without
limitation, the Executive’s improper use or disclosure of confidential or
proprietary information of the Company), (vi) any intentional misconduct or
illegal or grossly negligent conduct by the Executive which is materially
injurious to the Company monetarily or otherwise, (vii) any material breach by
the Executive of the provisions of Section 9 [Certain Employment Obligations] of
this Agreement, or (viii) the Executive’s conviction (including any plea of
guilty or nolo contendere) of any criminal act involving fraud, dishonesty,
misappropriation or moral turpitude, or which materially impairs the Executive’s
ability to perform his or her duties with the Company. A termination for Cause
shall not take effect unless: (1) the Executive is given written notice by the
Company of its intention to terminate the Executive for Cause; (2) the notice
specifically identifies the particular act or acts or failure or failures to act
which are the basis for such termination; (3) where practicable, the notice is
given within sixty (60) days of the Company’s learning of such act or acts or
failure or failures to act; and (4) only in the case of clause (i), (iii), (v),
(vi) or (vii) of the second sentence of this Section 6(c), the Executive fails
to substantially cure such breach, to the extent such cure is possible, within
sixty (60) days after the date that such written notice is given to the
Executive.
(d) Without Cause.
The Company may terminate the Executive’s employment at any time Without Cause.
A termination “Without Cause” is a termination by the Company of the
Executive’s employment with the Company for any reasons other than the death or
Disability of the Executive or the termination by the Company of the Executive
for Cause as described in Section 6(c).
(e) Termination by the Executive for Good Reason. The Executive may terminate the
Executive’s employment with the Company for “Good Reason,” which shall be deemed to occur if the
Executive terminates the Executive’s employment with the Company within sixty
(60) days after written notice to the Company by the Executive of the occurrence
of one or more of the following conditions, which condition(s) have not been
cured within thirty (30) business
days after the Company’s receipt of such written notice: (1) a failure by the
Company to comply with any material provision of this Agreement (including but
not limited to the reduction of the Executive’s salary or the target annual
bonus opportunity set forth in Section 4(b), (2) a significant diminishment in
the nature or scope of the authority, power, function or duty attached to the
position which the Executive currently maintains without the express written
consent of the Executive, or (3) the relocation of the Executive’s Principal
Place of Employment as described in Section 3 to a location that increases the
regular one-way commute distance between the Executive’s residence and Principal
Place of Employment by more than 25 miles without the Executive’s prior written
consent. In order to constitute a termination of employment for Good Reason, such
termination must occur
within two (2) years following the initial
existence of any of the conditions set forth in this Section 6(e), the Executive
must provide written notice to the Company of the existence of the condition
giving rise to the Good Reason termination within sixty (60) days of the initial
existence of the condition, and the Company shall have thirty (30) days during
which it may remedy the condition and in the event such condition is timely
remedied, the termination shall not constitute a termination for Good
Reason.
(f) Voluntary Termination. The Executive may voluntarily resign from the Executive’s employment
with the Company at any time (a “Voluntary Termination”). A voluntary resignation from
employment by the Executive for Good Reason pursuant to Section 6(e) shall not
be deemed a Voluntary Termination.
(g) Non-Renewal Termination. If the Executive fails to request an
extension of the Term of Employment in accordance with Section 1(b) or if the
Committee fails to approve such request, this Agreement shall automatically
expire at the end of the then current Term of Employment (a “Non-Renewal
Termination”).
7. Notice and Effective Date of Termination
(a) Notice. Any
termination of the Executive’s employment by the Company or by the Executive
during the Term of Employment (other than as a result of the death of the
Executive or a Non-Renewal Termination described in Section 6(g)) shall be
communicated by written notice of termination to the other party hereto. Such
notice shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive’s employment under
that provision.
(b) Date of Termination. The date of termination of the Executive’s employment shall be:
(i) if the Executive’s employment is
terminated by the Executive’s death, the date of the Executive’s death;
(ii) if the Executive’s employment is
terminated due to Disability pursuant to Section 6(b), the date of termination
shall be the last to occur of the 31st day following delivery of the notice of
termination to the Executive by the Company or the end of the consecutive
six-month period referred to in Section 6(b).
(iii) if the Executive’s employment is
terminated for any other reason by either party, the date on which a notice of
termination is delivered to the other party; and
(iv) if the Agreement expires pursuant to a
Non-Renewal Termination described in Section 6(g), the parties’ employment
relationship shall terminate on the last day of the then current Term of
Employment without any notice.
8. Compensation and Benefits Upon Termination.
(a) Termination Due To Disability, Without Cause or For Good
Reason. If the
Executive’s employment terminates pursuant to Section 6(b) [Disability], Section
6(d) [Without Cause], or Section 6(e) [Termination by Executive for Good
Reason], then, subject to Section 22 [Compliance with Section 409A], in addition
to all salary, annual bonuses, expense reimbursements, benefits and accrued
vacation days earned by the Executive pursuant to Section 4 through the date of
the Executive’s termination of employment, the Executive shall be entitled to
the following, provided that within sixty (60) days following the Executive’s
termination of employment the Executive executes a general release of claims
against the Company and its subsidiaries, affiliates, stockholders, directors,
officers, employees, agents, successors and assigns in the current form approved
by the Company and attached as Exhibit A (subject to any amendments required by
law or regulation)(the “Release”) and the period for revocation, if any,
of such Release has expired without the Release having been revoked:
(i) Salary. The
Company shall continue to pay to the Executive the Executive’s salary, at the
rate in effect immediately prior to such termination of employment, through the
remainder of the Term of Employment then in effect.
(ii) Bonus. The
Company shall continue to pay to the Executive an annual bonus through the
remainder of the Term of Employment then in effect; provided, however, that the
amount of the annual bonus determined in accordance with this Section 8(a)(ii)
for the fiscal year of the Company in which such Term of Employment ends shall
be prorated on the basis of the number of days of such Term of Employment
occurring within such fiscal year. The amount of each annual bonus payable
pursuant to this Section 8(a)(ii), prior to any proration, shall be equal to the
annual bonus that the Executive would have earned had no such termination under
Section 8(a)(i) occurred, contingent on the relevant annual bonus plan
performance goals for the respective year having been obtained. However, in no
case shall any such post-termination annual bonus exceed 100% of the Executive's
target bonus for the fiscal year of the Company in which the Executive's
termination of employment occurs. Such bonuses shall not be paid until due under
the applicable Company bonus plan.
(iii) Stock Options.
Stock options granted to the Executive by the Company and which remain
outstanding immediately prior to the date of termination of the Executive’s
employment, as provided in Section 7(b), shall immediately become vested in full
upon such termination of employment.
(iv) Restricted Stock. Shares of restricted stock granted to the Executive by the Company which
have not become vested as of the date of termination of the Executive’s
employment, as provided in Section 7(b), shall immediately become vested on a
pro rata basis. The number of such additional shares of restricted stock that
shall become vested as of the date of the Executive’s termination of employment
shall be that number of additional shares that would have become vested through
the date of such termination of employment at the rate(s) determined under the
vesting schedule applicable to such shares had such vesting schedule provided
for the accrual of vesting on a daily basis (based on a 365 day year). The pro
rata amount of shares vesting through the date of termination/non-renewal shall
be calculated by multiplying the number of unvested shares scheduled to vest in
each respective vesting year by the ratio of the number of days from the date of
grant through the date of termination/non-renewal, and the number of days from
the date of grant through the original vesting date of the respective vesting
tranche. Any shares of restricted stock remaining unvested after such pro rata
acceleration of vesting shall automatically be reacquired by the Company in
accordance with the provisions of the applicable restricted stock agreement, and
the Executive shall have no further rights in such unvested portion of the
restricted stock. In addition, the Company shall waive any reacquisition or
repayment rights for dividends paid on restricted stock prior to Executive’s
termination of employment.
(v) Other Equity Awards. Except as set forth in Sections 8(a)(iii) and 8(a)(iv), performance
share awards and all other equity awards granted to the Executive by the Company
which remain outstanding immediately prior to the date of termination of the
Executive’s employment, as provided in Section 7(b), shall vest and be settled
in accordance with their terms.
The Company shall have no further
obligations to the Executive as a result of termination of employment described
in this Section 8(a) except as set forth in Section 12.
(b) Death, Termination for Cause or Voluntary Termination. If the Executive’s employment
terminates pursuant to Section 6(a) [Death], Section 6(c) [For Cause] or Section
6(f) [Voluntary Termination], the Executive (or the Executive’s designee or the
Executive’s estate) shall be entitled to receive only the salary, annual
bonuses, expense reimbursements, benefits and accrued vacation days earned by
the Executive pursuant to Section 4 through the date of the Executive’s
termination of employment. The Executive shall not be entitled to any bonus not
paid prior to the date of the Executive’s termination of employment, and the
Executive shall not be entitled to any prorated bonus payment for the year in
which the Executive’s employment terminates. Any stock options granted to the
Executive by the Company shall continue to vest only through the date on which
the Executive’s employment terminates, and unless otherwise provided by their
terms, any restricted stock, performance share awards or other equity awards
that were granted to the Executive by the Company that remain unvested as of the
date on which the Executive’s employment terminates shall automatically be
forfeited and the Executive shall have no further rights with respect to such
awards. The Company shall have no further obligations to the Executive as a
result of termination of employment described in this Section 8(b) except as set
forth in Section 12. In addition, provided the Executive terminates pursuant to
Death, the Company shall waive any reacquisition or repayment rights for
dividends paid on restricted stock prior to Executive’s termination of
employment.
(c) Non-Renewal Termination. If the Agreement expires as set forth
in Section 6(g) [Non-Renewal Termination], then, subject to Section 22
[Compliance with Section 409A], in addition to all salary, annual bonuses,
expense reimbursements, benefits and accrued vacation days earned by the
Executive pursuant to Section 4 through the date of the Executive’s termination
of employment, the Executive shall be entitled to the following, provided that
within sixty (60) days following the Executive’s termination of employment the
Executive executes the Release and the period for revocation, if any, of such
Release has expired without the Release having been revoked:
(i) Bonus. The
Company shall pay the Executive an annual bonus for the fiscal year of the
Company in which the date of the Executive’s termination of employment occurs,
which shall be prorated for the portion of such fiscal year that the Executive
is employed by the Company. The amount of such annual bonus, prior to proration,
shall be equal to the annual bonus that the Executive would have earned under
the Company’s bonus plan for the fiscal year of the Company in which the
Executive’s termination of employment occurs had the Executive remained in its
employment, contingent on the relevant annual bonus plan performance goals for
the year in which Executive terminates having been obtained. However, in no case
shall any such post-termination annual bonus exceed 100% of the Executive's
target bonus for the fiscal year of the Company in which the Executive's
termination of employment occurs. Such bonus shall not be paid until due under
the applicable Company bonus plan.
(ii) Stock Options.
Stock options granted to the Executive by the Company and which remain
outstanding immediately prior to the date of termination of the Executive’s
employment, as provided in Section 7(b), shall be vested and exercisable in
accordance with their terms.
(iii) Restricted Stock. Shares of restricted stock granted to the Executive by the Company which
have not become vested as of the date of termination of the Executive’s
employment, as provided in Section 7(b), shall immediately become vested on a
pro rata basis. The number of such additional shares of restricted stock that
shall become vested as of the date of the Executive’s termination of employment
shall be that number of additional shares that would have become vested through
the date of such termination of employment at the rate(s) determined under the
vesting schedule applicable to such shares had such vesting schedule provided
for the accrual of vesting on a daily basis (based on a 365 day year). The pro
rata amount of shares vesting through the date of termination/non-renewal shall
be calculated by multiplying the number of unvested shares scheduled to vest in
each respective vesting year by the ratio of the number of days from the date of
grant through the date of termination/non-renewal, and the number of days from
the date of grant through the original vesting date of the respective vesting
tranche. Any shares of restricted stock remaining unvested after such pro rata
acceleration of vesting shall automatically be reacquired by the Company in
accordance with the provisions of the applicable restricted stock agreement, and
the Executive shall have no further rights in such unvested portion of the
restricted stock. In addition, the Company shall waive any reacquisition or
repayment rights for dividends paid on restricted stock prior to Executive’s
termination of employment.
(iv) Other Equity Awards. Except as set forth in Sections 8(c)(ii) and 8(c)(iii), performance share
awards and all other equity awards granted to the Executive by the Company which
remain outstanding immediately prior to the date of termination of the
Executive’s employment, as provided in Section 7(b), shall vest and be settled
in accordance with their terms.
The Company shall have no further
obligations to the Executive as a result of termination of employment described
in this Section 8(c) except as set forth in Section 12.
(d) Special Change in Control Provisions.
(i) Change in Control Benefits.
(1) Without Regard to Termination of Employment. In the event of a Change in Control (as
defined below), all shares of restricted stock granted to the Executive by the
Company shall become vested in full immediately prior to the consummation of
such Change in Control, and, subject to Section 22 [Compliance with Section
409A], the Executive shall be entitled to receive an additional salary equal to
Sixty-Two Thousand and Five Hundred ($62,500) per month for a period of two (2) years
following the Change in Control provided the Executive does not Terminate
employment as defined in Sections 6(a) – 6(g). Except as set forth in this
Section 8(d)(i)(1) or Section 8(d)(i)(2) below, the treatment of stock options,
performance share awards and all other equity awards granted to the Executive by
the Company which remain outstanding immediately prior to the date of such
Change in Control shall be determined in accordance with their
terms.
(2) Upon Certain Termination of Employment. In addition to the payments and benefits
provided by Section 8(d)(i)(1) above, if the Executive’s employment is
terminated either by the Company Without Cause (as defined in Section 6(d)) or
by the Executive for Good Reason (as defined in Section 6(e)), in either case
within a period commencing one (1) month prior to and ending twelve (12) months
following a Change in Control, then, subject to Section 22 [Compliance with
Section 409A], the Executive shall be entitled to the following (in addition to
any other payments or benefits provided under this Agreement), provided that
within sixty (60) days following the Executive’s termination of employment the
Executive executes the Release and the period for revocation, if any, of such
Release has expired without the Release having been revoked:
a. Salary. The
Executive shall be entitled to a cash payment equal to 2.99 times the
Executive’s then-current annual base salary. Such payment shall be payable in
full to Executive within 30 days following such termination of employment. The
payment under this Section 8(d)(i)(2)(a) shall take the place of any payment
under Section 8(a)(i) and the Executive shall not be entitled to receive a
payment under Section 8(a)(i) if the Executive is entitled to a payment under
this Section 8(d)(i)(2)(a).
b. Bonus. The
Executive shall be entitled to a cash payment equal to 2.99 times the
Executive’s target annual bonus for the Company’s fiscal year then in effect on
the date termination of employment occurs. Such payment shall be payable in full
to Executive within 30 days following such termination of employment. The
payment under this Section 8(d)(i)(2)(b) shall take the place of any payment
under Section 8(a)(ii) and the Executive shall not be entitled to receive a
payment under Section 8(a)(ii) if the Executive is entitled to a payment under
this Section 8(d)(i)(2)(b).
c. Health Care Coverage. The Executive shall be entitled to the continuation of the Executive’s
health care coverage under the Company’s employee benefit plans (including
medical, dental, vision and mental coverage) which the Executive had at the time
of the termination of employment (including coverage for the Executive’s
dependents to the extent such dependents were covered immediately prior to such
termination of employment) at the Company’s expense for the greater of (i) the
remainder of the Term of Employment then in effect or (ii) a period of two (2)
years commencing on the date of the Executive’s termination of employment. Such
health care continuation rights will be in addition to any rights the Executive
may have under ERISA Sections 600 and thereafter and Section 4980B of the
Internal Revenue Code (“COBRA coverage”).
d. Estate Planning. The Executive shall be entitled to reimbursement of the Executive’s
estate planning expenses (including attorneys’ fees) on the same basis, if any,
as to which the Executive was entitled to such reimbursements immediately prior
to such termination of employment for the greater of (i) the remainder of the
Term of Employment then in effect or (ii) a period of two (2) years commencing
on the date of termination of employment.
(ii) Change in Control Defined. A “Change in Control” shall be deemed to have occurred if:
(1) any person or group (within the meaning of Rule 13d-3 of the rules and
regulations promulgated under the Securities Exchange Act of 1934, as amended)
shall acquire during the twelve-month period ending on the date of the most
recent acquisition by such person or group, in one or a series of transactions,
whether through sale of stock or merger, ownership of stock of the Company that
constitutes 35% or more of the total voting power of the stock of the Company or
any successor to the Company; (2) a merger in which the Company is a party
pursuant to which any person or such group acquires ownership of stock of the
Company that, together with stock held by such person or group, constitutes more
than 50% of the total fair market value or total voting power of the stock of
the Company, or (3) the sale, exchange, or transfer of all or substantially all
of the Company’s assets (other than a sale, exchange, or transfer to one or more
corporations where the stockholders of the Company before and after such sale,
exchange, or transfer, directly or indirectly, are the beneficial owners of at
least a majority of the voting stock of the corporation(s) to which the assets
were transferred).
(iii) Excise Tax Gross-Up. If the Executive becomes entitled to one or more payments (with a
“payment” for this purpose including the accelerated vesting of restricted
stock, stock options or other equity awards, or other non-cash benefits or
property), whether pursuant to the terms of this Agreement or any other plan or
agreement with the Company or any affiliated company (collectively,
“Change in Control
Payments”), which are
or become subject to the tax (the “Excise Tax”) imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”), the Company shall pay to the
Executive at the time specified below such amount (the “Gross-up Payment”) as may be necessary to place the
Executive in the same after-tax position as if no portion of the Change in
Control Payments and any amounts paid to the Executive pursuant to Section 8 had
been subject to the Excise Tax. The Gross-up Payment shall include, without
limitation, reimbursement for any penalties and interest that may accrue in
respect of such Excise Tax. For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed: (A) to pay federal income taxes
at the highest marginal rate of federal income taxation for the year in which
the Gross-up Payment is to be made; and (B) to pay any applicable state and
local income taxes at the highest marginal rate of taxation for the calendar
year in which the Gross-up Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
local taxes if paid in such year. If the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder at the time the Gross-up
Payment is made, the Executive shall repay to the Company at the time that the
amount such reduction in Excise Tax is finally determined (but, if previously
paid to the taxing authorities, not prior to the time the amount of such
reduction is refunded to the Executive or otherwise realized as a benefit by the
Executive) the portion of the Gross-up Payment that would not have been paid if
such Excise Tax had been used in initially calculating the Gross-up payment,
plus interest on the amount of such repayment at the rate provided in Section
1274 (b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time the Gross-up Payment
is made, the Company shall make an additional Gross-up Payment in respect of
such excess (plus any interest and penalties payable with respect to such
excess) at the time that the amount of such excess is finally determined.
(iv) The Gross-up Payment provided for above
shall be paid, subject to Section 22 [Compliance with Section 409A], on the 30th
day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Change in Control
Payments (or any portion thereof) are subject to the Excise Tax; provided,
however, that if the amount of such Gross-up Payment or portion thereof cannot
be finally determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined by counsel or auditors selected
by the Company and reasonably acceptable to the Executive, of the minimum amount
of such payments. The Company shall pay to the Executive the remainder of such
payments (together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code) as soon as the amount thereof can be determined. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, the Executive shall repay such amount on the fifth day after
demand by the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code). The Company shall have the right to control all
proceedings with the Internal Revenue Service that may arise in connection with
the determination and assessment of any Excise Tax and, at its sole option, the
Company may pursue or forego any and all administrative appeals, proceedings,
hearings, and conferences with any taxing authority in respect of such Excise
Tax (including any interest or penalties thereon); provided, however, that the
Company’s control over any such proceedings shall be limited to issues with
respect to which a Gross-up Payment would be payable hereunder, and the
Executive shall be entitled to settle or contest any other issue raised by the
Internal Revenue Service or any other taxing authority. The Executive shall
cooperate with the Company in any proceedings relating to the determination and
assessment of any Excise Tax and shall not take any position or action that
would materially increase the amount of any Gross-up Payment hereunder.
(e) Timing of Payments. Any cash payments to
which the Executive is entitled under Sections 8(a), (c) and (d) shall be
payable in accordance with the Company’s payroll schedule and shall commence as
soon as practicable upon the period for revocation of the Release having expired
(and in any event on or prior to December 31 of the year in which Executive has
a Separation from Service); provided, however, that in the event that Executive
becomes entitled to such payments in connection with a Separation from Service
that occurs on or after November 1 of any calendar year, such payments shall
commence on the later of (i) the period for revocation of the Release having
expired or (ii) January 1 of the calendar year that immediately follows the year
in which the Executive has a Separation from Service.
9. Certain Employment Obligations.
(a) Employee Acknowledgement. The Company and the Executive
acknowledge that (i) the Company has a special interest in and derives
significant benefit from the unique skills and experience of the Executive; (ii)
as a result of the Executive’s service with the Company, the Executive will use
and have access to some of the Company’s proprietary and valuable Confidential
Information during the course of the Executive’s employment; (iii) the
Confidential Information has been developed and created by the Company at
substantial expense and constitutes valuable proprietary assets of the Company,
and the Company will suffer substantial damage and irreparable harm which will
be difficult to compute if, during the term of the Executive’s employment or
thereafter, the Executive should disclose or improperly use such Confidential
Information in violation of the provisions of this Agreement; (iv) the Company
will suffer substantial damage and irreparable harm which will be difficult to
compute if the Executive competes with the company in violation of this
Agreement; (v) the Company will suffer substantial damage which will be
difficult to compute if, the Executive solicits or interferes with the Company’s
employees, clients, or customers; (vi) the provisions of this Agreement are
reasonable and necessary for the protection of the business of the Company; and
(vii) the provisions of this Agreement will not preclude the Executive from
obtaining other gainful employment or service.
(b) Non-Compete.
(i) During the Term of Employment and for a
period of twenty-four (24) months following the Executive's termination of
employment with the Company, the Executive shall not, directly or indirectly,
own, manage, control, be employed by, consult with, participate in, or be
connected in any manner with the ownership, management, operation, control of,
or otherwise become involved with, any Competing Business, nor shall the
Executive undertake any planning to engage in any such activity.
For purposes of this Agreement, a
Competing Business shall mean any of the following: (1) any business that is
listed as a peer retailer in the Compensation Discussion and Analysis section of
the Company’s most current Proxy Statement filed with the U.S. Securities and
Exchange Commission as of the date of Executive’s termination of employment with
the Company, (2) any off-price retailer or retailer of discount merchandise,
including without limitation, Burlington Coat Factory Warehouse Corporation,
Macy’s, Inc., TJX Companies Inc., Retail Ventures Inc., Kohl’s Corporation,
Stein Mart, Inc., and (3) any affiliates, subsidiaries or successors of
businesses identified above.
(ii) The foregoing restrictions in Section
9(b)(i) shall have no force or effect in the event that: (i) the Executive’s
employment with the Company is terminated either by the Company pursuant to
Section 6(d)[Without Cause] or by the Executive pursuant to Section 6(e)
[Termination by the Executive for Good Reason]; or (ii) the Company fails to
approve or grant an extension of this Agreement in accordance with Section 1
hereof.
(iii) Section 9(b)(i) shall not prohibit the
Executive from making any investment of 1% or less of the equity securities of
any publicly-traded corporation which is considered to be a Competing Business.
(c) Non-Solicitation of Employees. During the Term of Employment and for a
period of 24 months following the Executive’s termination of that employment
with the Company, the Executive shall not, without the written permission of the
Company or an affected affiliate, directly or indirectly (i) solicit, employ or
retain, or have or cause any other person or entity to solicit, employ or
retain, any person who is employed by the Company or was employed by the Company
during the 6-month period prior to such solicitation, employment, or retainer,
(ii) encourage any such person not to devote his or her full business time to
the Company, or (iii) agree to hire or employ any such person.
(d) Non-Solicitation of Third Parties. During the Term of Employment and for a
period of 24 months following the Executive’s termination of employment with the
Company, the Executive shall not directly or indirectly solicit or otherwise
influence any entity with a business arrangement with the Company, including,
without limitation, suppliers, sales representatives, lenders, lessors, and
lessees, to discontinue, reduce, or otherwise materially or adversely affect
such relationship.
(e) Non-Disparagement. The Executive acknowledges and agrees that the Executive will not defame
or criticize the services, business, integrity, veracity, or personal or
professional reputation of the Company or any of its directors, officers,
employees, affiliates, or agents of any of the foregoing in either a
professional or personal manner either during the term of the Executive’s
employment or thereafter.
10. Company Remedies for Executive’s Breach of Certain Obligations.
(a) The Executive acknowledges and agrees
that in the event that the Executive breaches or threatens to breach Sections 5
or 9 of this Agreement, all compensation and benefits otherwise payable pursuant
to this Agreement and the vesting and/or exercisability of all stock options,
restricted stock, performance shares and other forms of equity compensation
previously awarded to the Executive, notwithstanding the provisions of any
agreement evidencing any such award to the contrary, shall immediately cease.
(b) The Company shall give prompt notice to
the Executive of its discovery of a breach by the Executive of Section 9 of this
Agreement. If it is determined by a vote of not less than two-thirds of the
members of the Board that the Executive has breached Section 9 of this Agreement
and has not cured such breach within ten (10) business days of such notice,
then:
(i) the Executive shall forfeit to the
Company (A) all stock options, stock appreciation rights, performance shares and
other equity compensation awards (other than shares of restricted stock,
restricted stock units or similar awards) granted to the Executive by the
Company which remain outstanding and unexercised or unpaid as of the date of
such determination by the Board (the “Breach Determination
Date”) and (B) all
shares of restricted stock, restricted stock units and similar awards granted to
the Executive by the Company which continue to be held by the Executive as of
the Breach Determination Date to the extent that such awards vested during the
Forfeiture Period (as defined below); and
(ii) the Executive shall pay to the Company
all gains realized by the Executive upon (A) the exercise by or payment in
settlement to the Executive on and after the commencement of the Forfeiture
Period of stock options, stock appreciation rights, performance shares and other
equity compensation awards (other than shares of restricted stock, restricted
stock units or similar awards) granted to the Executive by the Company and (B)
the sale on and after the commencement of the Forfeiture Period of shares or
other property received by the Executive pursuant to awards of restricted stock,
restricted stock units or similar awards granted to the Executive by the Company
and which vested during the Forfeiture Period.
(c) For purposes of this Section, the gain
realized by the Executive upon the exercise or payment in settlement of stock
options, stock appreciation rights, performance shares and other equity
compensation awards shall be equal to (A) the closing sale price on the date of
exercise or settlement (as reported on the stock exchange or market system
constituting the principal market for the shares subject to the applicable
award) of the number of vested shares issued to the Executive upon such exercise
or settlement, reduced by the purchase price, if any, paid by the Executive to
acquire such shares, or (B) if any such award was settled by payment in cash to
the Executive, the gain realized by the Executive shall be equal to the amount
of cash paid to the Executive. Further, for purposes of this Section, the gain
realized by the Executive upon the sale of shares or other property received by
the Executive pursuant to awards of restricted stock, restricted stock units or
similar awards shall be equal to the gross proceeds of such sale realized by the
Executive. Gains determined for purposes of this Section shall be determined
without regard to any subsequent increase or decrease in the market price of the
Company’s stock or taxes paid by or withheld from the Executive with respect to
such transactions.
(d) For the purposes of this Section, the
“Forfeiture Period” shall be the
period ending on the Breach Determination Date and beginning on the earlier of
(A) the date six months prior to the Breach Determination Date or (B) the
business day immediately preceding the date of the Executive’s termination of
employment with the Company.
(e) The Company shall have the right (but not
the obligation) to deduct from any amounts payable from time to time to the
Executive by the Company pursuant to this Agreement or otherwise (including
wages or other compensation, vacation pay or other benefits, and any other
amounts owed to the Executive by the Company) any and all amounts the Executive
is required to pay to the Company pursuant to this Section. The Executive agrees
to pay to the Company immediately upon the Breach Determination Date the amount
payable by the Executive to the Company pursuant to this Section which the
Company has not recovered by means of such deductions.
(f) The Executive acknowledges that money
will not adequately compensate the Company for the substantial damages that will
arise upon the breach or threatened breach of Sections 5 or 9 of this Agreement
and that the Company will not have any adequate remedy at law. For this reason,
such breach or threatened breach will not be subject to the arbitration clause
in Section 19; rather, the Company will be entitled, in addition to other rights
and remedies, to specific performance, injunctive relief, and other equitable
relief to prevent or restrain such breach or threatened breach. The Company may
obtain such relief from (1) any court of competent jurisdiction, (2) an
arbitrator pursuant to Section 19 hereof, or (3) a combination of the two (e.g.,
by simultaneously seeking arbitration under Section 19 and a temporary
injunction from a court pending the outcome of the arbitration). It shall be the
Company’s sole and exclusive right to elect which approach to use to vindicate
its rights. The Executive further agrees that in the event of a breach or
threatened breach, the Company shall be entitled to obtain an immediate
injunction and restraining order to prevent such breach and/or threatened breach
and/or continued breach, without posting a bond or having to prove irreparable
harm or damages, and to obtain all costs and expenses, including reasonable
attorneys’ fees and costs. In addition, the existence of any claim or cause of
action by the Executive against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the restrictive covenants in this Agreement.
11. Exercise of Stock Options Following Termination. If the Executive's employment terminates,
Executive (or the Executive's estate) may exercise the Executive's right to
purchase any vested stock under the stock options granted to Executive by the
Company as provided in the applicable stock option agreement or Company plan.
All such purchases must be made by the Executive in accordance with the
applicable stock option plans and agreements between the parties.
12. Successors; Binding Agreement. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to the Executive hereunder, all
such amounts shall be paid in accordance with the terms of this Agreement and
applicable law to the Executive’s beneficiary pursuant to a written designation
of beneficiary, or, if there is no effective written
designation of beneficiary by the Executive, to the Executive’s estate.
13. Insurance and Indemnity. The Company shall, to the extent
permitted by law, include the Executive during the Term of Employment under any
directors and officers liability insurance policy maintained for its directors
and officers, with coverage at least as favorable to the Executive in amount and
each other material respect as the coverage of other officers covered thereby.
The Company’s obligation to provide insurance and indemnify the Executive shall
survive expiration or termination of this Agreement with respect to proceedings
or threatened proceedings based on acts or omissions of the Executive occurring
during the Executive’s employment with the Company. Such obligations shall be
binding upon the Company’s successors and assigns and shall inure to the benefit
of the Executive’s heirs and personal representatives.
14. Notice. For
the purposes of this Agreement, notices, demands and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or (unless otherwise specified) mailed by United
States registered mail, return receipt requested, postage prepaid, addressed as
follows:
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If to the Executive: |
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Michael
O’Sullivan |
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Ross
Stores, Inc. |
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4440
Rosewood Drive |
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Pleasanton, CA 94588 |
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If to the Company: |
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Ross Stores, Inc. |
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4440 Rosewood Drive |
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Pleasanton, CA 94588 |
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Attention: General Counsel |
or to such other
address as any party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.
15. Complete Agreement; Modification, Waiver; Entire
Agreement. This
Agreement, along with any stock option, restricted stock, performance share or
other equity compensation award agreements between the parties, and term sheet
referencing such specific awards, represents the complete agreement of the
parties with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, promises or representations of the parties, except
those relating to repayment of signing and related bonuses, or relocation
expense reimbursements. To the extent that the bonus payment provisions (i.e.,
post-termination bonus payments) provided in this Agreement differ from the
provisions of the Company’s incentive bonus plans (currently the Incentive
Compensation Plan) or any replacement plans, such bonus payments shall be paid
pursuant to the provisions of this Agreement except to the extent expressly
prohibited by law. Except as provided by Section 22 [Compliance with Section
409A], no provision of this Agreement may be amended or modified except in a
document signed by the Executive and the chairman of the Committee or such other
person as may be designated by the Board. No waiver by the Executive or the
Company of any breach of, or lack of compliance with, any condition or provision
of this Agreement by the other party shall be considered a waiver of any other
condition or provision or the same condition or provision at another time. To
the extent that this Agreement is in any way deemed to be inconsistent with any
prior or contemporaneous stock option, restricted stock, performance share or
other equity compensation award agreements between the parties, or term sheet
referencing such specific awards, the terms of this Agreement shall control. No
agreements or representations, oral or otherwise, with respect to the subject
matter hereof have been made by either party which are not set forth expressly
in this Agreement.
16. Governing Law - Severability. The validity, interpretation,
construction, performance, and enforcement of this Agreement shall be governed
by the laws of the state in which the Executive’s principle place of employment
described in Section 3 is located without reference to that state’s choice of
law rules. If any provision of this Agreement shall be held or deemed to be
invalid, illegal, or unenforceable in any jurisdiction, for any reason, the
invalidity of that provision shall not have the effect of rendering the
provision in question unenforceable in any other jurisdiction or in any other
case or of rendering any other provisions herein unenforceable, but the invalid
provision shall be substituted with a valid provision which most closely
approximates the intent and the economic effect of the invalid provision and
which would be enforceable to the maximum extent permitted in such jurisdiction
or in such case.
17. Mitigation Not Required. In the event the Executive’s employment
with the Company terminates for any reason, the Executive shall not be obligated
to seek other employment following such termination. However, any amounts due
the Executive under Sections 8(a)(i); 8(a)(ii); 8(d)(i)(2)(a),(b),(c) or (d);
and/or any additional salary provided under Section 8(d)(i)(1) of this Agreement
shall be offset by any cash remuneration, health care coverage and/or estate
planning reimbursements attributable to any subsequent employment that the
Executive may obtain during the period of payment of compensation under this
Agreement following the termination of the Executive’s employment with the
Company.
18. Withholding. All payments required to be made by the Company hereunder to the
Executive or the Executive’s estate or beneficiaries shall be subject to the
withholding of such amounts as the Company may reasonably determine it should
withhold pursuant to any applicable law. To the extent permitted, the Executive
may provide all or any part of any necessary withholding by contributing Company
stock with value, determined on the date such withholding is due, equal to the
number of shares contributed multiplied by the closing price per share as
reported on the securities exchange constituting the primary market for the
Company’s stock on the date preceding the date the withholding is
determined.
19. Arbitration.
In the event of any dispute or claim relating to or arising out of the parties’
employment relationship or this Agreement (including, but not limited to, any
claims of breach of contract, wrongful termination, or age, race, sex,
disability or other discrimination), all such disputes shall be fully, finally
and exclusively resolved by binding arbitration conducted by the American
Arbitration Association in the city in which the Executive’s principal place of
employment is located by an arbitrator mutually agreed upon by the parties
hereto or, in the absence of such agreement, by an arbitrator selected in
accordance with the Employment Arbitration Rules of the American Arbitration
Association, provided, however, that this arbitration provision shall not apply,
unless the Company elects otherwise, to any disputes or claims relating to or
arising out of the Executive’s breach of Sections 5 or 9 of this Agreement. If
either the Company or the Executive shall request, arbitration shall be
conducted by a panel of three arbitrators, one selected by the Company, one
selected by the Executive, and the third selected by agreement of the first two,
or, in the absence of such agreement, in accordance with such Rules. The Company
shall pay all costs of any arbitration; provided, however, that each party shall
pay its own attorney and advisor fees.
If there is termination of the
Executive’s employment with the Company followed by a dispute as to whether the
Executive is entitled to the benefits provided under this Agreement, then,
during the period of that dispute the Company shall pay the Executive fifty
percent (50%) of the amount specified in Section 8 hereof (except that the
Company shall pay one hundred percent (100%) of any insurance premiums provided
for in Section 8), if, and only if, the Executive agrees in writing that if the
dispute is resolved against the Executive, the Executive shall promptly refund
to the Company all such payments received by, or made by the Company on behalf
of, the Executive. If the dispute is resolved in the Executive’s favor, promptly
after resolution of the dispute the Company shall pay the Executive the sum that
was withheld during the period of the dispute plus interest at the rate provided
in Section 1274(d) of the Code, compounded quarterly.
20. Attorney’s Fees. Each party shall bear its own attorney’s fees and costs incurred in any
action or dispute arising out of this Agreement.
21. Miscellaneous.
No right or interest to, or in, any payments shall be assignable by the
Executive; provided, however, that the Executive shall not be precluded from
designating in writing one or more beneficiaries to receive any amount that may
be payable after the Executive’s death and the legal representative of the
Executive’s estate shall not be precluded from assigning any right hereunder to
the person or persons entitled thereto. This Agreement shall be binding upon and
shall inure to the benefit of the Executive, the Executive’s heirs and legal
representatives and, the Company and its successors.
22. Compliance with Section 409A. Notwithstanding any other provision of
this Agreement to the contrary, the provision, time and manner of payment or
distribution of all compensation and benefits provided by this Agreement that
constitute nonqualified deferred compensation subject to and not exempted from
the requirements of Code Section 409A (“Section 409A Deferred
Compensation”) shall
be subject to, limited by and construed in accordance with the requirements of
Code Section 409A and all regulations and other guidance promulgated by the
Secretary of the Treasury pursuant to such Section (such Section, regulations
and other guidance being referred to herein as “Section 409A”), including the following:
(a) Separation from Service. Payments and benefits constituting
Section 409A Deferred Compensation otherwise payable or provided pursuant to
Section 8 upon the Executive’s termination of employment shall be paid or
provided only at the time of a termination of the Executive’s employment which
constitutes a Separation from Service. For the purposes of this Agreement, a
“Separation from
Service” is a
separation from service within the meaning of Treasury Regulation Section
1.409A-1(h).
(b) Six-Month Delay Applicable to Specified Employees. If, at the time of a Separation from
Service of the Executive, the Executive is a “specified employee” within the
meaning of Section 409A(a)(2)(B(i) (a “Specified Employee”), then any payments and benefits
constituting Section 409A Deferred Compensation to be paid or provided pursuant
to Section 8 upon the Separation from Service of the Executive shall be paid or
provided commencing on the later of (i) the date that is six (6) months after
the date of such Separation from Service or, if earlier, the date of death of
the Executive (in either case, the “Delayed Payment Date”), or (ii) the
date or dates on which such Section 409A Deferred Compensation would otherwise
be paid or provided in accordance with Section 8. All such amounts that would,
but for this Section 22(b), become payable prior to the Delayed Payment Date
shall be accumulated and paid on the Delayed Payment Date.
(c) Health Care and Estate Planning Benefits. In the event that all or any of the
health care or estate planning benefits to be provided pursuant to Sections
8(d)(i)(2)(c) or 8(d)(i)(2)(d) as a result of a Participant’s Separation from
Service constitute Section 409A Deferred Compensation, the Company shall provide
for such benefits constituting Section 409A Deferred Compensation in a manner
that complies with Section 409A. To the extent necessary to comply with Section
409A, the Company shall determine the health care premium cost necessary to
provide such benefits constituting Section 409A Deferred Compensation for the
applicable coverage period and shall pay such premium cost which becomes due and
payable during the applicable coverage period on the applicable due date for
such premiums; provided, however, that if the Executive is a Specified Employee,
the Company shall not pay any such premium cost until the Delayed Payment Date.
If the Company’s payment pursuant to the previous sentence is subject to a
Delayed Payment Date, the Executive shall pay the premium cost otherwise payable
by the Company prior to the Delayed Payment Date, and on the Delayed Payment
Date the Company shall reimburse the Executive for such Company premium cost
paid by the Executive and shall pay the balance of the Company’s premium cost
necessary to provide such benefit coverage for the remainder of the applicable
coverage period as and when it becomes due and payable over the applicable
period.
(d) Stock-Based Awards. The vesting of any stock-based compensation awards which constitute
Section 409A Deferred Compensation and are held by the Executive, if the
Executive is a Specified Employee, shall be accelerated in accordance with this
Agreement to the extent applicable; provided, however, that the payment in
settlement of any such awards shall occur on the Delayed Payment Date. Any
stock-based compensation which vests and becomes payable upon a Change in
Control in accordance with Section 8(d)(i)(1) shall not be subject to this
Section 22(d).
(e) Installments.
Executive’s right to receive any installment payments payable hereunder shall be
treated as a right to receive a series of separate payments and, accordingly,
each such installment payment shall at all times be considered a separate and
distinct payment for purposes of Section 409A.
(f) Reimbursements. To the extent that any reimbursements payable to Executive pursuant to
this Agreement are subject to the provisions of Section 409A of the Code, such
reimbursements shall be paid to Executive no later than December 31 of the year
following the year in which the cost was incurred, the amount of expenses
reimbursed in one year shall not affect the amount eligible for reimbursement in
any subsequent year, and Executive’s right to reimbursement under this Agreement
will not be subject to liquidation or exchange for another benefit.
(g) Rights of the Company; Release of Liability. It is the mutual intention of the
Executive and the Company that the provision of all payments and benefits
pursuant to this Agreement be made in compliance with the requirements of
Section 409A. To the extent that the provision of any such payment or benefit
pursuant to the terms and conditions of this Agreement would fail to comply with
the applicable requirements of Section 409A, the Company may, in its sole and
absolute discretion and without the consent of the Executive, make such
modifications to the timing or manner of providing such payment and/or benefit
to the extent it determines necessary or advisable to comply with the
requirements of Section 409A; provided, however, that the Company shall not be
obligated to make any such modifications. Any such modifications made by the
Company shall, to the maximum extent permitted in compliance with the
requirements of Section 409A, preserve the aggregate monetary face value of such
payments and/or benefits provided by this Agreement in the absence of such
modification; provided, however, that the Company shall in no event be obligated
to pay any interest or other compensation in respect of any delay in the
provision of such payments or benefits in order to comply with the requirements
of Section 409A. The Executive acknowledges that (i) the provisions of this
Section 22 may result in a delay in the time at which payments would otherwise
be made pursuant to this Agreement and (ii) the Company is authorized to amend
the this Agreement, to void or amend any election made by the Executive under
this Agreement and/or to delay the payment of any monies and/or provision of any
benefits in such manner as may be determined by the Company, in its discretion,
to be necessary or appropriate to comply with Section 409A (including any
transition or grandfather rules thereunder) without prior notice to or consent
of the Executive. The Executive hereby releases and holds harmless the Company,
its directors, officers and stockholders from any and all claims that may arise
from or relate to any tax liability, penalties, interest, costs, fees or other
liability incurred by the Executive as a result of the application of Code
Section 409A.
23. Future Equity Compensation. The Executive understands and
acknowledges that all awards, if any, of stock options, restricted stock,
performance shares and other forms of equity compensation by the Company are
made at the sole discretion of the Board of Directors of the Company or a
committee thereof. The Executive further understands and acknowledges, however,
that unless the Executive has executed this Agreement and each successive
amendment extending the Initial Term or any subsequent Renewal Term of the
Agreement as may be agreed to by the Company and the Executive, it is the
intention of the Board of Directors and the Executive that, notwithstanding any
continued employment with the Company, (a) the Company shall have no obligation
to grant any award of stock options, restricted stock, performance shares or any
other form of equity compensation which might otherwise have been granted to the
Executive on or after the intended commencement of the Initial Term or such
successive Renewal Term for which the Executive has failed to sign the Agreement
or the applicable Term of Employment extension amendment and (b) any such award
which is nevertheless granted to the Executive after the intended commencement
of the Initial Term or Renewal Term for which the Executive has failed to sign
such Agreement or applicable extension amendment shall not vest unless and until
the Executive has executed the Agreement or applicable extension amendment,
notwithstanding the provisions of any agreement evidencing such award to the
contrary.
IN WITNESS WHEREOF, the parties have executed this
Executive Employment Agreement effective as of the date and year first above
written.
ROSS STORES, INC. |
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EXECUTIVE |
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/s/ Michael Balmuth |
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/s/ Michael O’Sullivan |
By: Michael Balmuth |
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Michael O’Sullivan |
Vice Chairman and Chief |
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Executive Officer |
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exhibit21.htm
EXHIBIT 21
SUBSIDIARIES
Subsidiary Name |
Domiciled |
|
Date of
Incorporation |
Ross Procurement, Inc. |
Delaware |
|
November 22, 2004 |
Ross Merchandising, Inc. |
Delaware |
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January 12, 2004 |
Ross Dress for Less, Inc. |
Virginia |
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January 14, 2004 |
Retail Assurance Group, Ltd. |
Bermuda |
|
October 15, 1991 |
exhibit23.htm
EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
We
consent to the incorporation by reference in Registration Statements No.
333-151116, No. 33-61373, No. 33-51916, No. 33-51896, No. 33-51898, No.
33-41415, No. 33-41413, No. 33-29600, No. 333-56831, No. 333-06119, No.
333-34988, No. 333-51478, and No. 333-115836 on Form S-8 of our report dated
March 25, 2010, relating to the consolidated financial statements of Ross
Stores, Inc. and subsidiaries (the “Company”), and the effectiveness of the
Company’s internal control over financial reporting, appearing in this Annual
Report on Form 10-K of the Company for the year ended January 30, 2010.
/s/DELOITTE
& TOUCHE LLP
San Francisco,
California
March 25, 2010
exhibit31-1.htm
EXHIBIT 31.1
Ross Stores,
Inc.
Certification of
Chief Executive Officer
Pursuant to Sarbanes-Oxley Act Section 302(a)
I, Michael
Balmuth, certify that:
1. |
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I have reviewed
this annual report on Form 10-K of Ross Stores, Inc.;
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2. |
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Based on my
knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
report;
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3. |
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Based on my
knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
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4. |
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The
registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
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(a) Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared; (b) Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; (c) Evaluated the effectiveness of the
registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based
on such evaluation; and (d) Disclosed in this report any change in the
registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
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5. |
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The
registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
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(a) All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and (b) Any fraud,
whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over
financial reporting.
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Date: |
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March 30, 2010 |
/s/Michael
Balmuth |
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Michael Balmuth |
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Vice Chairman and Chief Executive Officer |
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exhibit31-2.htm
EXHIBIT 31.2
Ross Stores,
Inc.
Certification of
Chief Financial Officer
Pursuant to Sarbanes-Oxley Act Section 302(a)
I, John G. Call,
certify that:
1. |
|
I have reviewed
this annual report on Form 10-K of Ross Stores, Inc.;
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2. |
|
Based on my
knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
report;
|
3. |
|
Based on my
knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4. |
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The
registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
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(a) Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared; (b) Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; (c) Evaluated the effectiveness of the
registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based
on such evaluation; and (d) Disclosed in this report any change in the
registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
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5. |
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The
registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
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(a) All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and (b) Any fraud,
whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over
financial reporting.
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Date: |
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March 30, 2010 |
/s/J.
Call |
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John G. Call |
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Senior Vice President, Chief Financial Officer and |
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Principal Accounting Officer |
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exhibit32-1.htm
EXHIBIT 32.1
Certification of
Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection
with the Annual Report of Ross Stores, Inc. (the “Company”) on Form 10-K for the
year ended January 30, 2010 as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), I, Michael Balmuth, as Chief Executive
Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section
906”), that, to the best of my knowledge:
(1) The Report fully complies with the
requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78m); and
(2) The information contained in the Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: |
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March 30, 2010 |
/s/Michael
Balmuth |
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Michael Balmuth |
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Vice Chairman and Chief Executive Officer |
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A signed
original of this written statement required by Section 906 has been provided to
the Company and will be retained by the Company and furnished to the Securities
and Exchange Commission or its staff upon request.
exhibit32-2.htm
EXHIBIT 32.2
Certification of
Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection
with the Annual Report of Ross Stores, Inc. (the “Company”) on Form 10-K for the
year ended January 30, 2010 as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), I, John G. Call, as Chief Financial Officer
of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that,
to the best of my knowledge:
(1) The Report fully complies with the
requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78m); and
(2) The information contained in the Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: |
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March 30, 2010 |
/s/J.
Call |
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John G. Call |
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Senior Vice President, Chief Financial Officer and |
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Principal Accounting Officer |
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A signed
original of this written statement required by Section 906 has been provided to
the Company and will be retained by the Company and furnished to the Securities
and Exchange Commission or its staff upon request.