SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec.240.14a-11(c) or Sec. 240.14a-12
ROSS STORES, INC.
________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-
6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies
__________________________________________________________
2) Aggregate number of securities to which transaction
applies:
__________________________________________________________
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act rule
0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________
5) Total fee paid:
________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No:
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3) Filing Party:
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4) Date Filed:
__________________________________________________________
April 24, 1996
Dear Stockholder:
Enclosed with this letter are the proxy materials for the
upcoming Annual Meeting. Among the items on the Agenda are
proposals to approve amendments to the company's Restricted
Stock Plan and Outside Directors Stock Option Plan, along with
a proposal requesting approval of the company's Incentive
Compensation Plan. On behalf of the Compensation Committee of
the Board of Directors, which unanimously recommends a "YES"
vote for each of these proposals, I would like to take this
opportunity to explain the Committee's compensation philosophy
and how these equity and incentive plans fit into our goal
of protecting and increasing the value of the
stockholders' investment.
COMPENSATION PHILOSOPHY
The cornerstone of our philosophy is the alignment of
the Board of Directors' and management's financial
interests with those of the stockholders. A meaningful
amount of total compensation for our executives is at risk
in the form of equity-based grants and the potential for
incentive bonuses based on the achievement of certain targets
for pre-tax earnings. We believe this compensation
structure focuses management's attention on developing and
implementing strategies that will positively affect the value
of the stock over the long-term. Further, these programs are
primarily directed to those employees who can have a meaningful
effect on the company's performance.
RECORD 1995 EARNINGS RESULTS
The company's results in 1995 indicate that this strategy
is working. During the year, same store sales increased 2% and
earnings per share rose almost 40% to $1.73, compared to
$1.24 in 1994 before one-time insurance proceeds of about
$.25 per share. We are proud of this performance,
especially considering that Ross Stores was the only publicly-
traded off-price retailer in 1995 to deliver a second
consecutive year of both comparable store sales and earnings
growth. We believe that our ability to attract -- and more
importantly retain -- what we consider to be the best talent
available in the off-price industry is the number one reason
for our strong financial results in 1995.
RESTRICTED STOCK PLAN
The company's Restricted Stock Plan is an important
component of our compensation program that has enabled Ross
to attract, motivate and retain those employees, particularly
in the merchandising organization, necessary to compete in
an increasingly tough environment for off-price apparel
retailers. A key management focus over the past few years
has been the expansion and strengthening of the company's
merchandising staff through the addition of talented
merchants at every level of the organization -management,
buyers and assistant buyers. The proposal in the Proxy
Statement requests stockholder approval to increase this plan's
reserve by one million shares.
2
Ross Stockholder
April 24, 1996
Page 2
OUTSIDE DIRECTORS STOCK OPTION PLAN
The company has in place an Outside Directors Stock Option
Plan that, as part of the directors compensation program,
enables the company to attract and retain experienced and
qualified individuals to serve on the company's Board of Directors.
The Plan also serves to align the financial interests of the Board
members with those of the company's stockholders. The proposal in the
Proxy Statement requests stockholder approval to increase this
plan's reserve by 50,000 shares.
INCENTIVE COMPENSATION PLAN
The Incentive Compensation Plan has been in place since 1987.
Its purpose is to provide management and certain key
employees with financial incentives to meet or exceed pre-
determined financial goals of the company. Exceeding the
profit performance goal -- as the company did in 1995 -
results in a larger incentive award. Conversely, failure to
achieve profit performance goals will reduce or eliminate the
incentive payments under the Plan. The Incentive Compensation
Plan as submitted in the enclosed Proxy Statement is
intended to qualify payments made thereunder as deductible
performance-based compensation in accordance with Section
162(m) of the Internal Revenue Code.
STOCK REPURCHASE PROGRAM
The total proposed increase in the share reserves for the two
equity plans discussed above amounts to just over one million
shares, or about 4% of total common stock outstanding.
Dilution from the equity compensation plans has been offset in
recent years by the company's stock repurchase programs. Since
1993, the company has announced stock repurchase programs
totaling five million shares, of which approximately 3.4
million shares had been purchased through the end of March
1996.
Because enhancing stockholder value remains a top priority for
your Board of Directors and management, we shall continue to
evaluate how our dividend and repurchase programs can return
value to stockholders.
Please feel free to call either John Vuko, Senior Vice
President and Controller, or Katie Loughnot, Director of
Investor Relations and Assistant Secretary, at 1-510-505-4509,
with any questions you may have.
Respectfully,
/s/G. Orban
George P. Orban
Ross Stores, Inc.
Board of Directors Compensation Committee
April 24, 1996
Dear Stockholder:
You are cordially invited to attend the 1996 Ross Stores'
Annual Meeting of Stockholders which will be held at 11:00 a.m.
on Thursday, May 30, 1996 at the corporate headquarters
located at 8333 Central Avenue, Newark, California. If
you will need special assistance at the meeting, please
contact Ms. Catherine C. Brady, Manager, Legal Affairs, Ross
Stores, Inc., 8333 Central Avenue, Newark, CA 94560-3433 at
least 10 days before the meeting.
Please complete the enclosed proxy card and return it in
the envelope provided for that purpose as soon as possible so
that your shares will be represented and voted at the
meeting.
Thank you for your commitment to Ross Stores and for your
cooperation in returning your proxy without delay.
Sincerely,
ROSS STORES, INC.
/s/Norman A. Ferber
Norman A. Ferber
Chairman of the Board and
Chief Executive Officer
PRINTED ON RECYCLED PAPER
ROSS STORES, INC.
Notice of Annual Meeting of Stockholders
To Be Held May 30, 1996
To the Stockholders:
Please take notice that the Annual Meeting of the
Stockholders of Ross Stores, Inc., a Delaware corporation
(the "company"), will be held on Thursday, May 30, 1996
at 11:00 a.m. PDT, at the company's corporate headquarters
located at 8333 Central Avenue, Newark, California for the
following purposes:
1. To elect three Class I directors for a three-year term.
2. To approve an amendment to the 1988 Restricted
Stock Plan to increase the share reserve by 1,000,000
shares.
3. To approve an amendment to the 1991 Outside Directors
Stock Option Plan to increase the share reserve by
50,000 shares.
4. To approve the company's Incentive Compensation Plan.
5. To ratify the appointment of Deloitte & Touche
LLP as the company's independent certified public
accountants for the fiscal year ending February 1, 1997.
6. To transact such other business as may properly come
before the Annual Meeting or any adjournments or
postponements thereof.
Stockholders of record at the close of business on April 10, 1996
are entitled to notice of and to vote at the
Annual Meeting and any adjournments or postponements
thereof. For ten days prior to the Annual Meeting, a
complete list of stockholders entitled to vote at the Annual
Meeting will be available for examination by any
stockholder for any purpose related to the Annual Meeting
during ordinary business hours at the principal office of the
company located at 8333 Central Avenue, Newark, California.
By order of the Board of Directors,
Kathleen B. Loughnot, Assistant Secretary
Dated: April 24, 1996
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND MAIL PROMPTLY
THE ENCLOSED PROXY IN THE POST-PAID ENVELOPE PROVIDED
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN
PERSON IF YOU WISH TO DO SO, EVEN THOUGH YOU HAVE SENT IN
YOUR PROXY.
TABLE OF CONTENTS
Page
PROXY SOLICITATION 1
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 2
INFORMATION REGARDING NOMINEES AND INCUMBENT DIRECTORS 4
COMPENSATION AND OTHER TRANSACTIONS WITH OFFICERS AND
DIRECTORS 7
Summary Compensation Table 7
Option Grants in Last Fiscal Year 9
Aggregated Option Exercises and Year-End Value Table 11
Compensation Committee Report 12
Stockholder Return Performance Graph 15
Compensation of Directors 16
Compensation Committee Interlocks and Insider Participation 16
Employment Contracts, Termination of Employment and
Change-In-Control Arrangements 16
Certain Transactions 18
Compliance with Section 16(a) of the Exchange Act 18
PROPOSAL 1 - ELECTION OF CLASS I DIRECTORS 19
PROPOSAL 2 - 1988 RESTRICTED STOCK PLAN
APPROVAL OF AN AMENDMENT TO INCREASE THE
SHARE RESERVE BY 1,000,000 SHARES 19
PROPOSAL 3 - 1991 OUTSIDE DIRECTORS STOCK OPTION PLAN
APPROVAL OF AN AMENDMENT TO INCREASE THE
SHARE RESERVE BY 50,000 SHARES 23
PROPOSAL 4 - APPROVAL OF INCENTIVE COMPENSATION PLAN 25
PROPOSAL 5 - RATIFICATION OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 28
PROXY SOLICITATION 28
TRANSACTION OF OTHER BUSINESS 28
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING 29
1
PROXY STATEMENT
1996 Annual Stockholders Meeting
ROSS STORES, INC.
8333 Central Avenue
Newark, California 94560
(510) 505-4400
PROXY SOLICITATION
The accompanying Proxy is solicited by the management of Ross
Stores, Inc., a Delaware corporation (the "company"), for use at the
Annual Meeting of Stockholders to be held on Thursday, May 30, 1996,
at 11:00 a.m. PDT, or any adjournment thereof, at which stockholders
of record at the close of business on April 10, 1996, shall be
entitled to vote. The meeting will be held at the company's
corporate offices, 8333 Central Avenue, Newark, California.
The date of this Proxy Statement is April 24, 1996, the
approximate date on which this Proxy Statement and the accompanying
Proxy were first sent or given to stockholders. The Annual Report
to Stockholders for the fiscal year ended February 3, 1996,
including financial statements, is enclosed with this Proxy
Statement.
The purpose of this Proxy Statement is to provide the company's
stockholders with certain information regarding the company
and its management and to provide summaries of the matters to be
voted upon at the Annual Meeting of Stockholders. The
stockholders will be asked to (i) elect three Class I directors
to serve a three-year term, (ii) approve increases in the share
reserves of the company's 1988 Restricted Stock Plan and 1991
Outside Directors Stock Option Plan; (iii) approve the company's
Incentive Compensation Plan in order for that plan to comply with
Section 162(m) of the Internal Revenue Code and (iv) ratify the
appointment of Deloitte & Touche LLP as the company's
independent certified public accountants.
The company had outstanding, on April 10, 1996, 25,188,142
shares of common stock, par value $0.01, all of which are
entitled to vote with respect to all matters to be acted upon at
the meeting. Each stockholder is entitled to one vote for each
share of stock held by him or her. The company's Bylaws provide that a
majority of all shares entitled to vote, whether present, in person or
by proxy, will constitute a quorum for the transaction of business at
the Annual Meeting. For ten days prior to the Annual Meeting,
the company's stockholder list is available for viewing by the
stockholders for any purpose related to the Annual Meeting
during ordinary business hours at the company's principal
place of business located at 8333 Central Avenue, Newark, California.
Any Proxy given pursuant to this solicitation may be revoked
by the person giving it at any time before it is exercised by
filing with the Assistant Secretary of the company an instrument
revoking it, by presenting at the meeting a duly executed Proxy
bearing a later date or by attending the meeting and voting in
person.
2
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information as of April 4, 1996
(except for the institutional investors as noted in footnote (2))
regarding the ownership of the common stock of the company by (i)
all persons who, to the knowledge of the company, were the beneficial
owners of 5% or more of the outstanding shares of common stock of
the company, (ii) each director and each of the executive officers
named in the Summary Compensation Table, and (iii) all executive officers
and directors of the company as a group. Common stock is the only
issued and outstanding equity security of the company.
Name of Beneficial Owner and Amount and Nature of Percent of
Common the Directors and Executive Beneficial Ownership Stock Outstanding
Officers
First Pacific Advisors 2,169,600 8.9%
11400 W. Olympic Blvd., Ste. 1200
Los Angeles, CA 90064
BZW Barclays Global Investors, N.A. 1,326,421 5.4%
45 Fremont Street
San Francisco, CA 94105
FMR Corp. 1,280,200 5.3%
82 Devonshire Street
Boston, MA 02109
John Hancock Subsidiaries, Inc. 1,239,810 5.1%
P.O. Box 111
Boston, MA 02117
Stuart G. Moldaw 572,691 2.3%
Norman A. Ferber 259,000 1.0%
Maynard Jenkins 0 *
George P. Orban 189,352 *
Philip Schlein 13,600 *
Donald H. Seiler 134,210 *
Donna L. Weaver 16,000 *
Melvin A. Wilmore 192,113 *
Michael Balmuth 158,945 *
Barbara Levy 87,298 *
Barry S. Gluck 113,623 *
All executive officers and 2,159,637 8.4%
directors as a group (18 persons,
including the executive officers
and directors named above)
__________
*Less than 1%
[FN]
To the knowledge of the company, the persons named in the table
have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them,
subject to community property laws where applicable and
the information contained in the footnotes to this table.
Information is as of December 31, 1995, pursuant to the Form 13G
filed with the SEC, a copy of which was sent to the company.
John Hancock Subsidiaries, Inc. Information is as of December 31,
1995, pursuant to the Form 13G filed with the SEC, a copy of
which was sent to the company. John Hancock Subsidiaries,
Inc. holds 1,176,710 shares through its indirect, wholly-
owned subsidiary, NM Capital Management, Inc., 55,000
shares through its indirect, wholly-owned subsidiary,
John Hancock Advisers, Inc. and 8,100 shares through
its indirect, wholly-owned subsidiary, Tucker Anthony
Incorporated.
Mr. Moldaw. Includes 467,112 shares held in the name of The SGM
and PIM Trust dated December 22, 1981; 48,579 shares held
by the Moldaw Family Foundation and 40,000 shares held
by the Moldaw Family Supporting Foundation. Mr. Moldaw,
a director of the company, is a trustee of the Trust,
and president of the Moldaw Family Foundation and
president and a director of the Moldaw Family Supporting
Foundation. Also includes options to purchase 17,000
shares of the company's common stock exercisable within 60
days of April 4, 1996.
Mr. Ferber. Includes immediately exercisable options to purchase
159,000 shares of the company's common stock. Also
includes 100,000 shares of the company's common stock that
were granted under the company's 1988 Restricted Stock Plan
and remain subject to vesting.
Mr. Jenkins. None of Mr. Jenkins' stock options to purchase the
company's common stock are exercisable within 60 days of
April 4, 1996.
Mr. Orban. Includes 169,352 shares held in the name of Orban
Partners and 3,000 shares held indirectly by Mr. Orban
for his minor children. Mr. Orban, a director of the
company, is a general partner and managing partner of
Orban Partners. Also includes options to purchase 17,000
shares of the company's common stock exercisable within 60
days of April 4, 1996.
Mr. Schlein. Includes options to purchase 12,000 shares of the
company's common stock exercisable within 60 days of
April 4, 1996.
Mr. Seiler. Includes options to purchase 17,000 shares of the
company's common stock exercisable within 60 days of
April 4, 1996. Excludes 323,698 shares of common stock held by the
1976 Moldaw Family Trust. Mr. Seiler, a director of the company,
is a co-trustee of the 1976 Moldaw Family Trust and
disclaims beneficial ownership of the shares held by this trust.
Ms. Weaver. Includes options to purchase 13,000 shares of the
company's common stock exercisable within 60 days of
April 4, 1996.
Mr. Wilmore. Includes immediately exercisable options to purchase
88,613 shares of the company's common stock. Also
includes 103,500 shares of the company's common stock that
were granted under the company's 1988 Restricted Stock Plan
and remain subject to vesting.
Mr. Balmuth. Includes immediately exercisable options to purchase
73,945 shares of the company's common stock. Also includes
85,000 shares of the company's common stock that were
granted under the company's 1988 Restricted Stock Plan
and remain subject to vesting.
Ms. Levy. Includes immediately exercisable options to purchase
37,335 shares of the company's common stock. Also includes
49,000 shares of the company's common stock that were
granted under the company's 1988 Restricted Stock Plan
and remain subject to vesting.
Mr. Gluck. Includes immediately exercisable options to purchase
73,019 shares of the company's common stock. Also includes
39,000 shares of the company's common stock that were
granted under the company's 1988 Restricted Stock Plan
and remain subject to vesting.
Includes 793,128 shares subject to outstanding options held by
directors and executive officers which were exercisable at
April 4, 1996 or within 60 days thereof. Also includes
496,500 shares of the company's common stock granted to
executive officers under the company's Restricted Stock
Plan, all of which remain subject to vesting.
[/FN]
________________
INFORMATION REGARDING NOMINEES AND INCUMBENT DIRECTORS
The Certificate of Incorporation and the Bylaws of the company
provide that the number of members of the Board of Directors of the
company (the "Board") may be fixed from time to time exclusively by
the Board and that the directors shall be divided into three classes
as nearly equal in number as possible. The term of office of each
class of directors is three years and the terms of office of the
three classes overlap. The Board of Directors presently consists
of nine members with the Class II directors having one vacant seat
which the Board intends to fill. The three Class I directors to be
elected at the 1996 Annual Meeting are being elected to hold office
until the 1999 Annual Meeting and until their successors shall have
been elected and qualified. Proxies cannot be voted for more than
three nominees.
The following table indicates the name, age, business
experience, principal occupation and term of office of each
nominee and of each director of the company whose term of office
as a director will continue after the Annual Meeting.
Principal Position
During Last Five Years Director
Age Since
Nominees for Election as Class I Directors For Terms
Expiring in 1999
Stuart G. Moldaw Chairman Emeritus of the company since 69 1982
March 1993. From August 1982 until
March 1993, Chairman of the Board
and, from February 1987 until
January 1988, Chief Executive
Officer of the company. Until
February 1990, general partner of
U.S. Venture Partners. Consultant
to the company. Chairman of the
Board of Gymboree Corporation and
Director of Natural Wonders, Inc.
George P. Orban Managing partner of Orban Partners, a 50 1982
private investment company, since May
1984. Director of Egghead, Inc.
Donald H. Seiler Founder and senior partner of Seiler and 67 1982
Company, Certified Public Accountants.
Mr. Seiler is a Certified Public
Accountant. Director of Mid-
Peninsula Bancorp.
5
Principal Position
During Last Five Years Director
Age Since
Incumbent Class II Directors With Terms Expiring in 1997
Donna L. Weaver Chairman of Weaver, Field & London, 52 1986
Inc., an investor relations and
corporate communications firm. Director of
Crown Vantage, Inc. and Hancock Fabrics, Inc.
Maynard Jenkins President, Chief Executive Officer and 54 1996
Director of Orchard Supply Hardware, a
home improvement retailer.
Incumbent Class III Directors With Terms Expiring in 1998
Philip Schlein General partner of U.S. Venture Partners 61 1987
and USVP-Schlein Marketing Fund since
April 1985. From January 1974 to January
1985, Mr. Schlein was Chief Executive Officer
of Macy's California. Director of ReSound
Corp.
Norman A. Ferber Chairman of the Board and Chief 47 1987
Executive Officer of the company since
March 1993; President and Chief
Executive Officer from January 1988 to
March 1993; President and Chief Operating
Officer from February 1987 to January 1988.
Prior to February 1987, Mr. Ferber was
Executive Vice President, Merchandising,
Marketing, and Distribution of the company.
Melvin A. Wilmore President and Chief Operating Officer of 50 1993
the company since March 1993; from
December 1991 to March 1993, Executive
Vice President and Chief Operating Officer.
From October 1989 to December 1991, President
and Chief Operating Officer of Live Specialty
Retail, a division of LIVE Entertainment, Inc.
From March 1988 to June 1989, President and
General Partner of Albert's Hosiery and Bodywear.
Director of Hechinger Company.
During fiscal 1995, the Board of Directors held five meetings.
Each member of the Board of Directors attended 100% of the total
number of Board and applicable Committee meetings held during the
year. The company has an Audit Committee, a Compensation Committee
and a Nominating Committee.
Audit Committee. During fiscal 1995, Messrs. Seiler and Orban
and Ms. Weaver served as members of the Audit Committee, which held two
meetings. Mr. Seiler is chairman of the Audit Committee. The
functions of the Audit Committee include recommending the
independent accountants to the Board of Directors; reviewing and
approving the planned scop of the annual audit, proposed fee
arrangements and the results of the annual audit;
reviewing the adequacy of accounting and financial
controls; and reviewing the independence of the independent
accountants.
Compensation Committee. During fiscal 1995, Messrs. Donald G.
Fisher, Orban and Schlein served as members of the Compensation
Committee, which held one meeting in March. After the company's
Annual Stockholder meeting in May 1995, Mr. Fisher resigned from
the Board of Directors and its committees. Mr. Orban currently is
chairman of the Compensation Committee. The Compensation Committee is
responsible for establishing and administering the policies that govern the
compensation of all executive officers of the company, including the Chief
Executive Officer. The
6
Committee evaluates the performance of the executive officers and
makes recommendations concerning their cash and equity compensation levels.
The Committee also administers the company's Incentive Compensation
Plan and determines the performance goals under that Plan. All decisions
by the Compensation Committee relating to the compensation of the
company's executive officers are reviewed and ratified by the
full Board of Directors.
Nominating Committee. During fiscal 1995, Messrs. Fisher
(until his resignation from the Board), Orban, Schlein and Seiler and
Ms. Weaver served as members of the Nominating Committee. The Nominating
Committee is primarily responsible for evaluating the qualifications of
and making recommendations concerning potential new director nominees to the
company's Board of Directors. Stockholders who wish to submit
names of prospective nominees for consideration by the Nominating
Committee should do so in writing to the office of the Secretary of the
company in accordance with the Bylaws of the company. The last
day for submissions for next year's meeting will be December 30, 1996.
The Nominating Committee held one meeting during fiscal 1995.
Information concerning the executive officers of the company is set
forth in the company's Annual Report on Form 10-K for the fiscal year
ended February 3, 1996.
7
COMPENSATION AND OTHER TRANSACTIONS
WITH OFFICERS AND DIRECTORS
SUMMARY COMPENSATION TABLE
The following table provides certain summary information
concerning compensation paid or accrued by the company to or on behalf of the
company's Chief Executive Officer and each of the four other most highly
compensated executive officers of the company for the 1995, 1994 and
1993 fiscal years.
Annual Compensation Long-Term
Compensation
Awards
_____________________________________________________ _____________________________
Securities
Other Restricted Under- All Other
Annual Stock lying Compen-
Name and Salary Bonus Compensation Awards Options sation
Principal Position Year ($) ($) ($) ($) (#) ($)
Norman A. Ferber 1995 $544,333 $546,000 $2,305 $0 45,000 $7,173
Chairman of the Board & 1994 $513,750 $204,198 $0 $1,587,500 150,000 $4,538
Chief Executive Officer 1993 $497,917 $0 $5,071 $0 15,000 $7,138
Melvin A. Wilmore 1995 $477,333 $489,000 $1,441 $847,500 30,000 $4,625
President & 1994 $423,750 $142,588 $1,790 $158,750 25,000 $4,538
Chief Operating Officer 1993 $407,083 $0 $19,358 $197,500 25,000 $29,559
Michael Balmuth 1995 $427,333 $404,100 $7,980 $788,750 20,000 $7,033
Executive Vice President, 1994 $359,167 $87,840 $6,050 $396,875 40,000 $7,015
Merchandising 1993 $332,083 $0 $25,479 $138,250 12,000 $34,867
Barbara Levy 1995 $288,167 $191,400 $466 $146,875 20,000 $4,512
Senior Vice President & 1994 $267,333 $75,774 $4,474 $0 8,000 $4,690
General Merchandising 1993 $195,000 $25,000 $0 $340,625 50,000 $0
Manager
Barry S. Gluck 1995 $288,167 $191,400 $2,895 $70,500 10,000 $6,356
Senior Vice President & 1994 $266,500 $45,774 $2,597 $317,500 20,000 $5,973
General Merchandising 1993 $230,000 $0 $845 $98,750 8,000 $7,278
Manager
8
Includes all payments of salary and deferred compensation
consisting of employee contributions to the Ross Stores,
Inc. Employees' Profit Sharing Retirement Plan, a qualified
plan under Sections 401(a) and 401(k) of the Internal
Revenue Code of 1986, as amended (the "401(k) Plan") and
the Ross Stores, Inc. Non-Qualified Deferred Compensation
Plan (the "Deferred Compensation Plan"), described in
footnote 4 below. Ms. Levy joined Ross in May 1993.
Includes all payments made to those executive officers listed in
the above Table under the company's Incentive Compensation
Plan as described in the Compensation Committee Report
below. For Ms. Levy the amount paid in 1994 includes part
of her sign-on bonus ($30,000) and the amount paid to Ms.
Levy in 1993 was part of her sign-on bonus.
Under the terms of his Restricted Stock Grant Agreement, dated
March 15, 1994, Mr. Ferber was granted 100,000 shares of
common stock that vest on February 3, 1997. Under the
terms of his Restricted Stock Grant Agreement, dated
March 16, 1995, Mr. Wilmore was granted 20,000 shares of
common stock, that vest as follows: 10,000 shares each
on March 16th of 1997 and 1998. Under the terms of
his Restricted Stock Grant Agreement, dated July 28,
1995, Mr. Wilmore was granted 50,000 shares of common
stock, that vest as follows: 15,000 shares on February 1,
1996, 10,000 shares on February 1, 1997 and 25,000 shares
on February 1, 1998. Under the terms of his Restricted Stock
agreement dated March 16, 1995, Mr. Balmuth was granted 15,000
shares of common stock that vest as follows: 5,000 shares
on March 16, 1997 and 10,000 shares on March 16, 1998.
Under the terms of his Restricted Stock Agreement,
dated July 28, 1995, Mr. Balmuth was granted 50,000
shares of common stock, that vest as follows: 25,000
shares on February 1, 1996, 10,000 shares on February 1,
1997 and 15,000 shares on February 1, 1998. Under the
terms of her Restricted Stock Agreement, dated May 26,
1993, Ms. Levy was granted 25,000 shares of common stock
that vest as follows:
5,000 shares on each May 3rd of 1995, 1996, and 1997 and 10,000
shares on May 3, 1998. Under the terms of her Restricted
Stock Agreement, dated March 16, 1995, Ms. Levy was granted
12,500 shares of common stock that vest as follows:
10,000 shares on March 16, 1997 and 2,500 shares on
March 16, 1998. Under the terms of his Restricted Stock Agreement,
dated March 15, 1994, Mr. Gluck was granted 20,000 shares that
vest as follows:
5,000 shares on March 15, 1996 and 15,000 shares on March 15, 1997.
Under the terms of his Restricted Stock Agreement, dated March
16, 1995, Mr. Gluck was granted 6,000 shares of common
stock that vest on March 16, 1997. At February 3, 1996,
unvested shares of restricted stock were held by Mr. Ferber
in the amount of 100,000 shares with a market value of
$2,012,500; by Mr. Wilmore in the amount of 87,500 shares
with a market value of $1,760,938; by Mr. Balmuth in the
amount of 99,000 shares with a market value of $1,992,375;
by Ms. Levy in the amount of 32,500 shares with a market
value of $654,063; and by Mr. Gluck in the amount of
38,000 shares with a market value of $764,750.
Dividends are payable to all holders of restricted stock
at the same rate as paid to all stockholders.
The company's 401(k) Plan provides that eligible employees
generally may contribute by authorizing a pre-tax payroll
deduction of a minimum of 1% and a maximum of 15% of their
yearly compensation. For every dollar that an
eligible employee contributes through payroll withholding,
up to a maximum of 3% of compensation, the company also
contributes $1.00. The Deferred Compensation Plan, in
addition to the 401(k) Plan, allows eligible
employees to contribute by authorizing a pre-tax
payroll deduction of a percentage of their salary -- up to 100%.
If an employee elects to defer 100% of his/her salary, and,
therefor is unable to participate in the 401(k) Plan,
then for every dollar that an eligible employee
contributes through payroll withholding, up to a maximum of 3% of
compensation, the company also contributes $1.00. The amounts listed
for 1995, 1994 and 1993 for Messrs. Ferber and Gluck and Ms.
Levy consist of company contributions made for the account of
executive officers under the company's 401(k) Plan. The amount listed
listed for Mr. Wilmore (i) in 1995 consists of the company
contribution under the 401(k) Plan and the Deferred Compensation
Plan; (ii) in 1994 consists of the company contribution under
the 401(k) Plan; and (iii) in 1993 consists of $22,396
for reimbursement of moving expenses and $7,163 for
company contributions under the 401(k) Plan.
The amounts listed for Mr. Balmuth (i) in 1995 and 1994
consist of the company contribution under the 401(k) Plan;
and (ii) in 1993 consists of $25,617 for reimbursement
of moving expenses and $9,250 for company contributions
under the 401(k) Plan.
9
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information with respect to the named
executive officers concerning the grant of stock options
under the company's 1992 Stock Option Plan during fiscal 1995.
There are no provisions under the terms of this Plan for the
granting of Stock Appreciation Rights (SARs).
Individual Grants
% of Total
Number of Options Potential Realizable
Securities Granted to Exercise Value at Assumed Annual
Underlying Employees or Base Rates of Stock Price Appreciation
Options in Fiscal Price Expiration for Option Term
Name and Granted Year ($/Sh) Date
Principal Position 0% 5% 10%
Norman A. Ferber 45,000 5.99% $11.75 03/16/05 $0 $332,528 $842,691
Chairman of the Board &
Chief Executive Officer
Melvin A. Wilmore 30,000 3.99% $11.75 03/16/05 $0 $221,685 $561,794
President &
Chief Operating Officer
Michael Balmuth 20,000 2.66% $11.75 03/16/05 $0 $147,790 $374,529
Executive Vice President,
Merchandising
Barbara Levy 20,000 2.66% $11.75 03/16/05 $0 $147,790 $374,529
Senior Vice President & General
Merchandising Manager
Barry S. Gluck 10,000 1.33% $11.75 03/16/05 $0 $73,895 $187,265
Senior Vice President & General
Merchandising Manager
All Stockholders N/A N/A N/A N/A $0 $170,696,392 $430,805,180
Named executive officers' gain as N/A N/A N/A N/A 0% .54% .54%
a percent of all stockholders'gain
10
All options listed in the above table were granted on March 16,
1995, with an exercise price equal to the fair market value of
the company's common stock as determined by the closing
price on the date of grant. The stock option grants
made in fiscal 1995 to those executive officers listed
above vest monthly in increments that increase annually
over a three year period from the date of grant. The
Board of Directors has the ability to change the terms
of outstanding options. See "Employment Contracts,
Termination of Employment and Change-In-Control
Arrangements".
A total of 751,000 shares were granted in the form of non-
qualified stock options during fiscal 1995 to all
participants in the 1992 Stock Option Plan. No incentive
stock options were granted during 1995.
All non-qualified stock option grants made under the 1992 Stock
Option Plan are made for a term of ten years from the
date of grant.
The dollar amounts under these columns are the result of
calculations at 0% and at the assumed 5% and 10% rates
mandated by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future
appreciation, if any, of the company's stock price. The company
did not use an alternative formula for a grant date valuation,
as the company is not aware of any formula which
will determine with reasonable accuracy a present
value based on future unknown or volatile factors. No
gain to the optionees is possible without an increase in
stock price, which will benefit all stockholders
commensurably. A zero percent gain in stock price will
result in zero dollars for the optionee. Appreciation
in stockholder value is based on the same rates of
appreciation as shown for those options granted to
executive officers and assumes each outstanding share
at March 31, 1995, the last trading day of the fiscal
month, was valued at $11.00, the closing price of Ross
Stores, Inc.'s common stock.
11
AGGREGATED OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table provides information with respect to the
named executive officers concerning the exercise of stock options
during the last fiscal year and unexercised options held as of the end
of last fiscal year.
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
Number of
Securities
Underlying
Unexercised Value of Unexercised
Options at In-the-Money
Fiscal Year-End Options at
(#) Fiscal Year-End
Number of Exercisable/ ($)
Name and Shares Acquired Unexercisable Exercisable/
Principal Position on Exercise Value Realized Unexercisable
Norman A. Ferber 0 $0 240,000/0 $1,053,750/0
Chairman of the Board &
Chief Executive Officer
Melvin A. Wilmore 54,165 $216,090 225,835/0 $1,011,209/0
President &
Chief Operating Officer
Michael Balmuth 7,324 $54,081 89,500/0 $343,563/0
Executive Vice President,
Merchandising
Barbara Levy 0 $0 78,000/0 $407,750/0
Senior Vice President & General
Merchandising Manager
Barry S. Gluck 2,000 $22,250 71,019/0 $395,844/0
Senior Vice President & General
Merchandising Manager
The value realized on exercise of the stock option is the
difference between the exercise price of the shares
exercised and the fair market value of the shares on the
date of exercise.
All options granted under the terms of the company's 1992 Stock
Option Plan are exercisable in full as of the date of
grant, but any shares acquired are subject to certain
vesting restrictions. Under the terms of the stock option
agreements, the company has the right to repurchase all
unvested shares at the optionee's
cost. A portion of the exercisable shares shown in the Table
above are unvested and subject to the right of repurchase
by the company.
The value of unexercised in-the-money options at the end of the
fiscal year is calculated by multiplying the number of
exercisable in-the-money shares by the difference between
the closing price ($20.125) of Ross Stores common stock
on February 2, 1996 (the last trading date of the fiscal
year) and the exercise price per share of the shares. A
portion of the shares subject to these options are
unvested and subject to repurchase provisions as
described in footnote (2) above.
12
BOARD OF DIRECTORS COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Committee"), which consists of two independent outside directors,
establishes and administers the policies that govern the
compensation of all executive officers of the company. The
Committee considers the performance of the executive officers and
makes recommendations concerning their compensation levels. All
decisions by the Committee relating to the compensation of the
company's executive officers are reviewed and approved by the full
Board of Directors. The Board of Directors did not revise or make
any modifications to the Committee's recommendations concerning
executive officer compensation during the last fiscal year.
Compensation Philosophy
The company's compensation policies aim to align the
financial interests of the company's management with those of its
stockholders. The company's executive compensation philosophy
is also to integrate executive pay with the long-term strategic objectives
of the company, recognize individual initiative and
achievements and assist the company in attracting, motivating
and retaining a group of high-performing executives.
Compensation for the company's executive officers, including
those individuals named in the foregoing Tables, consists of
the following elements: base salary, annual incentive bonus,
restricted stock granted under the 1988 Restricted Stock Plan,
stock options granted under the 1992 Stock Option Plan and other
benefits typically offered to corporate executives. A
majority of the total potential compensation for the company's
executive officers is in the form of annual incentive bonuses and stock plan
awards that may vary according to the company's achievement of
its strategic objectives in addition to those motivational and
retentive factors deemed necessary and appropriate by the Committee.
The Committee believes that the components of the total
compensation program for executives outlined in this report work
together to enable the company to attract, motivate and retain the
executive talent necessary to successfully execute the company's
strategies over the long term in an increasingly challenging
environment for apparel retailers.
Section 162(m) of the Internal Revenue Code of 1986
It is the Committee's policy to seek to qualify executive
compensation for deductibility under Section 162(m) of the Internal
Revenue Code of 1986 to the extent consistent with the
company's overall objectives in attracting, motivating and retaining
its executives. The Committee has reviewed the company's executive
compensation structure in light of the current tax law. The Committee
believes that grants made under its 1992 Stock Option Plan will be
fully deductible when an option is exercised. Grants under the
company's 1988 Restricted Stock Plan do not qualify as performance-based
compensation and, therefore, may not be fully deductible to the extent
the vesting of restricted stock, when added to other non-exempt
compensation for a particular executive, exceeds the $1 million limit
in any tax year. However, the Committee believes that only
compensation paid to the company's (i) Chairman and Chief Executive
Officer; or (ii) President and Chief Operating Officer; or (iii) Executive
Vice President, Merchandising is at risk of not being fully deductible
because of the size of their restricted stock awards. The
Committee has concluded that amending the Restricted Stock Plan
to comply with the requirements for performance-based compensation
under Section 162(m) would weaken the company's efforts to recruit
and retain key executives over the long term. The Committee has
recommended that the company request stockholder approval of the
company's Incentive Compensation Plan so that future bonuses paid
under the plan will qualify for deductibility under Section 162(m).
(See "Proposal 4, Incentive Compensation Plan" for further discussion
of the Plan). The Committee will continue to evaluate the
advisability of qualifying certain elements of the company's
executive compensation as fully deductible performance-based
compensation.
13
Executive Officers' 1995 Compensation
Salary. Base salaries for executive officers are initially
determined by competitive requirements to recruit the executive.
Salaries are then reviewed annually with recommended
adjustments made based upon the individual performance
of each executive officer and his or her relative contribution in
achieving the company's strategic goals. During 1995, the average
merit increase in base salaries for all executive officers as a group
was 4%.
Annual Incentive Bonus. The company's Incentive Compensation
Plan was adopted by the Board of Directors, effective May 1987, and
is designed to allow management to share in the company's success
based on the company's attainment of varying levels of pre-tax
earnings. At the commencement of each fiscal year, the Committee
determines the incentive awards payable at varying levels of pre-
tax earnings achieved by the company. Such awards are expressed
as a percentage of year-end base salary and are payable in the
form of cash bonuses after fiscal year-end based on this
previously determined formula. (See "Proposal 4, Incentive
Compensation Plan" for further discussion of the Plan.)
Based on the targeted pre-tax earnings goal set for 1995, the
Plan provided for awards to executive officers that ranged from 33%
to 65% of base salary, depending on the position of the executive
officer. During fiscal 1995, the company exceeded its targeted
pre-tax earnings goal. Total payments made under the Plan for
fiscal 1995 to all executive officers as a group represented
approximately 80% of their total salaries as a group. Potential
and actual awards over the last three fiscal years have ranged from
0% to 100% of executive officers' base salaries, based on the
actual level of pre-tax earnings achieved each year relative to
the targeted goal, as well as the position of the executive officer.
Stock Award Programs. The company's stock award programs
consist of the 1988 Restricted Stock Plan ( "Restricted Stock
Plan" ) and the 1992 Stock Option Plan ( "Option Plan" ). A
majority of the members of the Board are not employees of the
company and are therefore not eligible to receive awards under
either the Restricted Stock Plan or the Option Plan. The Restricted
Stock Plan and the Option Plan were established with two important
objectives: (i) to align the financial interests of the company's
stockholders and the executive officers by providing incentives that
focus management's attention on the successful long-term strategic
management of the business and appreciation in stockholder value;
and (ii) to recruit, motivate and retain a high-performing group of
senior and middle managers.
The Committee makes recommendations to the Board of Directors
concerning the granting of awards to executive officers from both the
Restricted Stock Plan and the Option Plan. The levels of stock
awards granted to executive officers under the Option Plan are
based on the following factors: the executive officer's position,
past and expected future contributions to the achievement of
the company's strategic objectives, existing stock ownership
position and the level of previous stock awards.
Each member of the Committee individually weighs the above
factors and then the Committee reaches a consensus as to what the
awards should be. The levels of stock awards granted to executive
officers under the Restricted Stock Plan are determined primarily
by the retentive value of the grant necessary to retain key
executives over the long term as well as to protect the company
against outside offers of employment to key individuals as well
as the same factors listed above for stock option awards. The
officers must satisfy vesting requirements in order to retain the
stock.
All stock option awards are granted with an exercise price based on
the fair market value of the company's common stock on the date of grant.
These awards provide value to the executive officers only when and to the
extent that the fair market value of the company's common stock
appreciates over the fair market value on the date of grant. All
awards made in fiscal 1995 to executive officers under the Option
Plan have a term of ten years and vest monthly in progressively
increasing annual increments over a three year period. Unless
otherwise specified in the stock option agreement, all options are
immediately exercisable, subject to the company's right to
repurchase unvested shares at the optionee's cost.
14
Chief Executive Officer's 1995 Compensation
A majority of the total potential compensation for the company's
Chief Executive Officer is in the form of annual incentive bonuses
and stock plan awards that may vary according to the company's
achievement of its strategic objectives in addition to those
motivational and retentive factors deemed necessary and
appropriate by the Committee, which are discussed below. Mr.
Ferber's 1995 incentive bonus and stock award compensation were
earned under the same plans made available to all executive
officers, as discussed above.
Salary. Mr. Ferber's base salary is established by the terms
of his employment agreement entered into with the company on June
1, 1995 which extends through February 3, 1997, unless earlier
extended, re-negotiated or terminated by the parties. It provided
for an annual salary of not less than $542,000. Mr.
Ferber's 1995 annual base salary of $546,000
represented an increase of 6% over his 1994 base salary. (See
"Employment Contracts, Termination of Employment and Change-In-
Control Arrangements" for further discussion of Mr. Ferber's
employment agreement.)
Bonus. The annual incentive bonus portion of Mr.
Ferber's compensation is based on the company's achievement of
targeted pre-tax earnings, as established by the Committee and
the Board of Directors. During fiscal 1995, the company
exceeded its targeted pre-tax earnings goal. Mr. Ferber received an
annual bonus of $546,000 for 1995, which equaled 100% of his salary
at year-end.
Stock Awards. Mr. Ferber did not receive an award of restricted
stock during 1995. During 1995, Mr. Ferber received options under
the Option Plan for 45,000 shares of common stock with an exercise
price of $11.75, the closing price on the date of grant. These
shares vest monthly in progressively increasing annual increments
over a period of three years. The stock option grant made to Mr.
Ferber was based primarily on the equity value deemed
necessary, in the Committee's and Board of Directors'
judgment, to ensure retention of Mr. Ferber over the vesting
period of these shares. Secondary considerations, all relatively
equal in weight, in determining the size of his 1995 stock option
grant, were Mr. Ferber's position with the company, his past and
expected future contributions to the achievement of the company's
strategic objectives, his existing stock ownership position and the
level of previous equity grants.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS
George P. Orban Philip Schlein
15
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative
total stockholder returns for the company's common stock over the
last five years with the Standard & Poors 500 Index and the
Standard & Poors Retail Composite Index. The comparison graph
assumes that the value of the investment in Ross Stores common
stock and the comparative indices was $100 on January 31, 1991 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 the company's actual fiscal
year end date for each period. Data with respect to returns for
the Standard & Poors indices is not readily available for periods
shorter than one month. The total return assumes the reinvestment of
dividends. The Company began paying dividends during 1994. The
graph is an historical representation of past performance only and
is not necessarily indicative of future returns to stockholders.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG ROSS STORES, INC., S&P 500 AND S&P RETAIL COMPOSITE INDEX
1991 1992 1993 1994 1995 1996
ROSS STORES 100 344 354 212 175 330
S&P 500 100 123 136 153 154 213
S&P RETAIL COMPOSITE 100 140 167 161 149 161
16
Compensation of Directors
During the fiscal year ended February 3, 1996, directors who
were not employees of the company received an annual retainer fee of
$24,000 (paid quarterly), plus $1,000 for attendance at each Board
Meeting and $500 for attendance at each meeting of a committee of
the Board. For the fiscal year ending February 1, 1997,
directors who are not employees of the company will receive an
annual retainer of $25,000 (paid quarterly), plus $1,000 for
attendance at each Board Meeting and $500 for attendance at each
meeting of a committee of the Board. For both fiscal 1996 and
1995, if more than one committee meeting is held on the same day,
each committee member receives payment for only one committee
meeting. Travel expenses are reimbursed.
In addition to compensation received as a Board member,
Stuart G. Moldaw, Chairman Emeritus, receives administrative
support and an annual fee of $80,000 for his services as
consultant to the company. The company pays the annual premiums
of $128,500 on a split dollar life insurance policy, with a face
value of $4 million. In the most recent fiscal year, $70,630 of
the premium was reported as taxable compensation to Mr. Moldaw and
$57,930 of the premium was added to the amount refundable to
the company upon death or cancellation of the policy. The company
also pays the premiums of the executive medical insurance for Mr.
Moldaw and his spouse. (See also " Certain Transactions.")
Directors who are not employees of the company are eligible to
receive stock options automatically granted under the terms of the
company's 1991 Outside Directors Stock Option Plan (the"Directors
Plan"), which is intended to qualify as a "formula plan" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the
"Exchange Act"). During the 1995 fiscal year, Messrs. Moldaw, Orban,
Schlein and Seiler and Ms. Weaver each were automatically granted an
option to purchase 1,000 shares of common stock under the Directors
Plan on March 18, 1995, with an exercise price of $11.6875, which was the
closing price of the company's common stock as reported on the
Nasdaq National Market on such date. For further information
regarding the Directors Plan, see Proposal 3.
Compensation Committee Interlocks and Insider Participation
Mr. Fisher, Mr. Orban and Mr. Schlein served on the
Compensation Committee of the Board of Directors for the past fiscal
year. Mr. Fisher resigned from the Board of Directors after the
company's 1995 Annual Stockholders Meeting on May 25, 1995. Mr.
Orban is currently the Chairman of the Compensation Committee.
Employment Contracts, Termination of Employment and Change-In-
Control Arrangements
Norman A. Ferber. The company and Norman A. Ferber, Chairman
of the Board and Chief Executive Officer, entered into an employment
agreement on June 1, 1995 which extends through February 3, 1997.
Upon notice from Mr. Ferber, at specified times, the Board will
consider extending the agreement for successive one-year periods.
The agreement provides that Mr. Ferber will receive an annual
salary of not less than $542,000; however, for the fiscal year
beginning February 4, 1996, Mr. Ferber will be paid an annual salary
of not less than $750,000.
During the period (a) beginning on the earlier of (i) February
4, 1997 or (ii) the effective date of the election of a successor to
Mr. Ferber as Chief Executive Officer of the company and (b) ending on
January 31, 1998 ("Consultancy Termination Date"), Mr. Ferber shall cease
to be an employee of the company and shall be retained as a consultant to
the company. If Mr. Ferber's employment with the company is extended one
additional year, then Mr. Ferber's retention as a consultant shall
commence on the expiration of his extended employment and shall
be for a twelve month period. While he serves as a consultant to
the company, Mr. Ferber shall be paid a consulting fee of $62,500
per month. If, as a result of Mr. Ferber's status as a consultant
to the company, he is (i) subject to an increased tax liability
or (ii) ineligible to participate in any of the company's employee
benefit plans, then the consulting fees shall be
17
increased so that his tax liability is the same as when he was an
employee and to enable Mr. Ferber to procure (to the extent
available) such benefits at no additional after tax cost to him.
During his employment or consultancy, Mr. Ferber shall be
paid an annual bonus under the company's Incentive Compensation
Plan. However, each such bonus shall be in an amount equal to the
greater of (i) the bonus attributable to fiscal 1995 ($546,000) or
(ii) the bonus attributable to the fiscal year prior to the year
in which Mr. Ferber's employment or consultancy terminated or
(iii) the bonus Mr. Ferber would have earned under the Incentive
Compensation Plan in the year he was terminated had he remained in
its employment or as a consultant to the company.
In the event (i) Mr. Ferber's employment or consultancy
involuntarily terminates due to disability; (ii) the company
terminates his employment or consultancy without cause and, in
certain instances, for cause; or (iii) he resigns for good reason,
Mr. Ferber would be entitled to continued payment of his then
current salary, including an annual bonus, through the
Consultancy Termination Date or any extension thereof; all stock
options held by Mr. Ferber would become fully vested and he would
be entitled to those restricted stock shares which are vested as
of the date of his termination based upon vesting in equal monthly
installments over a three-year period beginning February 3, 1994.
Additionally, if Mr. Ferber's employment or consultancy terminates for
any reason, the company would continue Mr. Ferber's (and/or his eligible
dependents) health care coverage under the company's benefit plans
at no cost to Mr. Ferber (and/or his eligible dependents) for a
five year period. In the event there is a change-in-control of
the company, Mr. Ferber would be entitled to continued payment of his
then current salary, including an annual bonus, through the
Consultancy Termination Date or any extension thereof; all restricted
stock and stock options held by Mr. Ferber would become fully vested
(except as described below). Further, he would be reimbursed for
any excise taxes paid pursuant to Internal Revenue Code Section 4999.
Melvin A. Wilmore. The company and Melvin A. Wilmore,
President and Chief Operating Officer, entered into an employment
agreement as of March 15, 1994, amended March 16, 1995 and June 1,
1995, which extends through February 3, 1999. Upon notice from
Mr. Wilmore at specified times, the Board will consider extending
the term of the agreement for successive two-year periods. The
agreement, as amended, provides that Mr. Wilmore will receive an
annual salary of not less than $475,000. In the event (i) Mr.
Wilmore's employment involuntarily terminates due to disability;
(ii) the company terminates his employment without cause and, in
certain instances, for cause; or (iii) he resigns for good
reason, Mr. Wilmore would be entitled to continued payment of
his then current salary, including an annual bonus, through the
remaining term of the employment agreement, and all
stock options held by Mr. Wilmore would become fully vested.
Additionally, under the above circumstance, Mr. Wilmore's restricted
stock grant agreements, dated March 15, 1994 and March 16, 1995,
provide that he would be entitled to those shares of restricted
stock (45,000 and 20,000 shares, respectively) which are vested as
of the date of his termination based upon vesting in equal monthly
installments over a three-year period beginning on the date of
grant. In the event there is a change-in-control of the company,
Mr. Wilmore would be entitled to continued payment of his then
current salary, including an annual bonus, through the remaining term
of the employment agreement, and all restricted stock and stock
options held by Mr. Wilmore would become fully vested (except as
described below). Additionally, he would be reimbursed for any excise
taxes paid pursuant to Internal Revenue Code Section 4999.
Michael Balmuth. The company and Michael Balmuth, Executive
Vice President, Merchandising, entered into an employment
agreement as of February 1, 1995, amended June 1, 1995, which
extends through February 3, 1999. Upon notice from Mr. Balmuth at
specified times, the Board will consider extending the term of
the agreement for successive two-year periods. The agreement, as
amended, provides that Mr. Balmuth will receive an annual salary of
not less than $440,000. In the event (i) Mr. Balmuth's employment
involuntarily terminates due to disability; (ii) the company
terminates his employment without cause and, in certain
instances, for cause; or (iii) he resigns for good reason, Mr.
Balmuth would be entitled to continued payment of his then current
salary, including an annual bonus, through the remaining term of the
employment agreement; all stock options held by Mr. Balmuth would
become fully vested; and he would be entitled to certain restricted
stock shares which are vested as of the date of his termination
based upon vesting in equal monthly installments over a two-year
period beginning February 1, 1995. In the event there is a change-in-
control of the company, Mr. Balmuth would be entitled to continued
payment of his then current salary, including an annual bonus,
through the
18
remaining term of the employment agreement, and all restricted
stock and stock options held by Mr. Balmuth would become fully
vested (except as described below). Additionally, he would be
reimbursed for any excise taxes paid pursuant to Internal Revenue
Code Section 4999.
Barry S. Gluck and Barbara Levy. Effective as of March 1, 1996, the
company entered into employment agreements with its Senior Vice Presidents and
General Merchandising Managers -- Barry S. Gluck and Barbara Levy. The
terms are the same for each employment agreement. The term of
each employment agreement extends through March 1, 1999. Upon notice
from the officer, at specified times, the Board will consider
extending the term of the agreement for successive two-year periods.
The agreement provides that the officer will receive an annual
salary of not less than $330,000. In the event (i) the officer's
employment involuntarily terminates due to disability; (ii) the
company terminates his or her employment without cause and, in
certain instances, for cause; or (iii) he or she resigns for good
reason, the officer would be entitled to continued payment of his
or her then current salary, including an annual bonus, through the
remaining term of the employment agreement; all stock options held
by the officer would become fully vested; and he or she would be
entitled to certain restricted stock shares which are prorata
vested as of the date of his or her termination over the
original vesting period beginning on the date of grant.
In the event there is a change-in-control of the company, the
officer would be entitled to continued payment of his or her then
current salary, including an annual bonus, through the remaining
term of the employment agreement, and all restricted stock and
stock options held by the officer would become fully vested
(except as described below). Additionally, he or she would be
reimbursed for any excise taxes paid pursuant to Internal Revenue
Code Section 4999.
Participants in the 1988 Restricted Stock Plan and 1992 Stock
Option Plan. Under the terms of the individual agreements for all
the participants in the company's 1988 Restricted Stock Plan and 1992
Stock Option Plan, each employee, including executive officers, is
entitled only to those shares vested as of the date of
termination. However, the company's Board of Directors generally
has the discretion to accelerate vesting or change other terms of
an outstanding agreement. In the event of certain mergers or
acquisition transactions which result in a change-in-control of
the company, any unvested shares of restricted stock
automatically become vested shares and the company's Board of
Directors must either accelerate vesting of all outstanding stock
options or arrange for the options to be assumed by the acquiring or
successor corporation.
Certain Transactions
On February 5, 1993, the company made a relocation loan of
$300,000 to Mr. Wilmore at an annual interest rate of 0%. The loan,
which is secured by a deed of trust on his home, was originally
due on February 5, 1996. However, on January 25, 1996, the Board
approved an extension of the loan for another three years with an
annual interest rate of 5.5%. The amount of principal outstanding
on March 31, 1996 was $300,000.
The company leases two stores, one in Roseville, California and
one in Dublin, California, from entities affiliated with Stuart
G. Moldaw, a current director. The Roseville, California store
is leased from a partnership in which trusts established by a
former director of the company and Stuart G. Moldaw are partners.
Donald H. Seiler, also a director, is a trustee of these trusts.
In fiscal 1995, the company paid $262,500 in rent. Mr. Moldaw's
and his trusts' interests in the partnership total 40.38%. The
Dublin, California store is leased from a partnership in which Mr.
Moldaw, trusts established by Mr. Moldaw and members of his family
are limited partners. In fiscal 1995, the company paid $243,571 in
rent. Mr. Moldaw's and his family's interests in the partnership total
86.57%. The company believes that the general terms and conditions of the
above leases, including the rental payments by the company, were made
at prevailing market rates.
Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the company's
officers and directors and persons who own more than ten percent of
a registered class of the company's equity securities to file reports of
19
ownership and changes in ownership with the Securities and
Exchange Commission. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the
company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received
by it, or written representations from certain reporting persons
that no Forms 5 were required to be filed for those persons, the
company believes that, during fiscal 1995, all filing
requirements applicable to its officers, directors and greater
than ten percent owners were complied with, except that Mr.
Ferguson, Senior Vice President, Distribution, was late in
reporting an option grant for 40,000 shares which was reported
on an amended Form 3.
PROPOSAL 1
ELECTION OF CLASS I DIRECTORS
If elected, each nominee will hold office for a three-year
term or until his successor is elected and qualified unless he
resigns or his office becomes vacant by death, removal, or other
cause in accordance with the Bylaws of the company. Management
knows of no reason why any of these nominees should be unable or
unwilling to serve, but if any nominee(s) should for any reason be
unable or unwilling to serve, the proxies will be voted for the
election of such other person(s) for the office of director as
management may recommend in the place of such nominee(s).
Vote Required
The plurality of the votes cast by the shares of common stock
present or represented and voting at the Annual Meeting will
determine the election of the directors. Abstentions and broker
non-votes will be counted as present in determining if a quorum
is present but will not affect the election of directors.
The Board of Directors unanimously recommends that the stockholders
vote FOR the three nominees listed under "Information Regarding
Nominees and Incumbent Directors."
PROPOSAL 2
1988 RESTRICTED STOCK PLAN
APPROVAL OF AN AMENDMENT TO INCREASE THE SHARE RESERVE
BY 1,000,000 SHARES
Background
The Board of Directors believes that, for the reasons discussed
below, the availability of an adequate number of shares in the share
reserve for the 1988 Restricted Stock Plan ("Restricted Stock
Plan") is an important factor in attracting, retaining and
motivating the qualified officers and employees essential to the
success of the company. Therefore, subject to stockholder
approval, the Board has amended the Restricted Stock Plan to
increase the number of shares reserved for issuance under the
Restricted Stock Plan by 1,000,000 shares.
20
Supporting Arguments For Increasing The Share Reserve For The
Restricted Stock Plan
The Board of Directors believes that the company's Restricted
Stock Plan has played a key role in enabling the company to recruit,
motivate and retain an effective group of senior and middle level
management. The need to amend the Restricted Stock Plan has caused
management and the Board of Directors to re-evaluate its long-
term role in providing appropriate incentives to increase the
value of the company for the benefit of its stockholders. From
that review, it was determined that this stock award program
continues to deliver substantial benefits to the company and its
stockholders, as discussed below.
The cornerstone of the company's compensation philosophy
is the alignment of management's financial interests with
those of the stockholders. A meaningful amount of total
compensation in the form of equity-based grants focuses
management's attention on developing and implementing strategies
that will positively affect long-term valuation of the stock.
Further, equity-based compensation is directed to those
employees who can have a meaningful effect on the company's
performance.
The Board of Directors recommends a vote in favor of this
proposal primarily because the Restricted Stock Plan is an effective
program that enables Ross to attract, motivate and retain
the key employees, particularly in the merchandising organization,
necessary to compete in an increasingly tough environment for off-
price apparel retailers.
A key management focus over the past few years has been the
expansion and strengthening of the company's merchandising staff
through the addition of talented merchants at every level of the
organization -- management, buyers and assistant buyers. The
Restricted Stock Plan is an important vehicle that strengthens
the overall competitiveness of the company's compensation
packages and enables Ross to accomplish this strategic
objective. The Board of Directors believes that this program
helped the company deliver respectable financial results in both
1994 and 1995. Despite one of the toughest climates ever for off-
price retailers, Ross was the only publicly-traded company in the
off-price apparel industry to report gains in both same store
sales and earnings per share over the past two years. During 1994,
Ross Stores comparable store sales increased 2%, and earnings per
share rose 9% to $1.24. In 1995, earnings per share increased 40%
on a comparable store sales gain of 2%.
The total proposed increase in the Restricted Stock Plan's
share reserve is for 1.0 million shares, or about 4% of total
common stock outstanding. Dilution from the equity compensation
plans has been offset by the company's stock repurchase programs
over the past several years. As a result, fully-diluted shares
outstanding today are actually lower than they were in 1988 when
the company initiated its first stock repurchase program.
The company's Board of Directors and management firmly believe
that effective equity compensation programs represent a key
competitive advantage in today's increasingly difficult
environment for apparel retailers, and in particular, the off-
price sector. Approval of this proposal is critical to enabling
the company to continue to make progress in 1996 and beyond.
Vote Required
The affirmative vote of a majority of the shares of common
stock present or represented by proxy and entitled to vote at the
Annual Meeting is required for approval of this proposal.
Abstentions will be counted as present in determining if a quorum
is present and will be counted as if voted against this proposal.
Broker non-votes will be counted as present in determining if a
quorum is present but will have no effect on this proposal.
The Board of Directors unanimously recommends that stockholders vote
FOR approval of this proposal to increase the share reserve for the
Restricted Stock Plan.
21
Summary of the Restricted Stock Plan
The following summary of the Restricted Stock Plan is qualified
in its entirety by the specific language of the Restricted Stock
Plan, as amended. Copies of the Restricted Stock Plan are available
to any stockholder upon request addressed to Investor Relations,
Ross Stores, Inc., 8333 Central Avenue, Newark, California 94560.
The Restricted Stock Plan is administered by the Board of
Directors or a committee of members of the Board appointed by the
Board. Under the Restricted Stock Plan, all employees (including
officers) of the company and any current or future parent or
subsidiary corporation of the company are eligible to receive shares
of common stock pursuant to the Restricted Stock Plan ("Plan
Shares"). The Board in its sole discretion, determines which
individuals will be awarded Plan Shares ("Participants"), the number
of shares awarded and the vesting of the Plan Shares. Plan
Shares are granted at no cost to the Participant.
Subject to approval by the stockholders, the Board has
amended the Restricted Stock Plan to increase the aggregate number
of shares issuable under the plan by 1,000,000 shares. As of
April 10, 1996, excluding the proposed increase, 517,050 shares
remained available for future awards. The Restricted Stock Plan
provides that appropriate adjustments will be made to the share
reserve in the event of any stock dividend, stock split, reverse
stock split, combination, reclassification or similar change in the
capital structure of the company. To the extent that any Plan
Shares are reacquired by the company, such shares are returned to
the plan and become available for future grants.
Vesting of Plan Shares is set forth in a stock grant
agreement executed between the company and the Participant. Plan
Shares typically vest two to five years after the date of
grant. In the event a Participant's employment with the company
is terminated before his or her Plan Shares vest, all unvested
shares are automatically reacquired by the company at no cost.
(See "Employment Contracts, Termination of Employment and Change-In-
Control Arrangements" for certain exceptions.)
The Board of Directors may at any time terminate or
amend the Restricted Stock Plan. However, the rights of a
Participant with respect to Plan Shares granted prior to any such
action by the Board may not be impaired without such Participant's
consent. Unless extended by the Board, the Restricted Stock Plan
will terminate on March 14, 1998.
Summary of the Federal Income Tax Consequences of the Restricted
Stock Plan
The following summary is a general guide as to the United
States federal income tax consequences under current law with
respect to participation in the Restricted Stock Plan and does not
attempt to describe all possible federal or other tax consequences of
such participation or tax consequences based on particular
circumstances.
A Participant will recognize ordinary income on the
Determination Date (as described below) in an amount equal to the
fair market value on the Determination Date of the stock acquired
under the Restricted Stock Plan. Generally, such ordinary income
is subject to withholding of income and employment taxes. The
company generally should be entitled to a deduction
equal to the amount of ordinary income recognized by the
Participant, subject to the limit on the deductibility of
compensation paid to certain executives imposed under Section 162(m)
of the Code.
Under Section 162(m) of the Code, certain kinds of
compensation, including qualified "performance-based compensation,"
are disregarded for purposes of this deduction limitation. Since
the company's standard form of stock grant agreement does not make
vesting of these grants contingent upon the achievement of an
objective performance goal, compensation received from grants
made under the Restricted Stock Plan will not be treated as
"performance-based compensation" and, therefore, will be
included for purposes of calculating the $1 million deduction limit.
The Determination Date for a Participant's Plan Shares is the
date those Plan Shares vest or, if applicable, the later date when
they are no longer subject to a substantial risk of forfeiture
pursuant to
22
Section 16(b) of the Exchange Act or a violation of the company's
trading window policy. However, the Participant may elect pursuant
to Section 83(b) of the Code to have the determination date be the date
the Plan Shares are transferred to the Participant by filing an election
(a "Section 83(b) Election") with the Internal Revenue Service not
later than 30 days after the date of such transfer.
In general, any gain or loss recognized by the Participant on
the sale or exchange of the Plan Shares should be capital gain or
loss. Such gain or loss will be long-term if the Participant holds
the Plan Shares for more than twelve months after the
Determination Date and short-term if the Participant holds the
Plan Shares for twelve months or less after the Determination
Date. The Participant's basis in the Plan Shares should
generally be the fair market value of such Plan Shares on the
Determination Date. There are no federal income tax consequences
to the company as a result of a sale or exchange of the Plan Shares
by the Participant.
Pro Forma Benefits Under the Restricted Stock Plan
The stock awards to be made under the Restricted Stock Plan
for the remainder of fiscal 1996 and future years are not
determinable now. The following table shows the grants made to
the indicated executive officers and groups for fiscal 1996, as of
April 5, 1996, under the Restricted Stock Plan. The majority of
restricted stock awards granted by the Compensation Committee in any
fiscal year is in March. Any awards made under this plan during
the remainder of the fiscal year will be to new hires or due to
promotions. Non-employee directors are not eligible to participate
in the company's Restricted Stock Plan.
1988 RESTRICTED STOCK PLAN
DOLLAR NUMBER
NAME & POSITION VALUE(F1) OF
SHARES
Norman A. Ferber -- Chairman & Chief Executive Officer $0 0
Melvin A. Wilmore -- President & Chief Operating Officer $432,000 16,000
Michael Balmuth -- Executive Vice President, Merchandising $540,000 20,000
Barbara Levy -- Senior Vice President & General Merchandising Manager $445,500 16,500
Barry S. Gluck -- Senior Vice President & General Merchandising Manager $486,000 18,000
Executive Officers as a group (13 persons, including the above) $2,632,500 97,500
Eligible employees as a group (119 persons, excluding executive officers) $2,727,000 101,000
Based on the fair market value of the company's common stock on
April 4, 1996, the last trading day of the fiscal month ($27.00).
23
PROPOSAL 3
1991 OUTSIDE DIRECTORS STOCK OPTION PLAN
APPROVAL OF AN AMENDMENT TO INCREASE THE SHARE RESERVE
BY 50,000 SHARES
Background
The Board of Directors believes that the availability of an
adequate number of shares in the share reserve for the company's
Directors Plan is an important factor in attracting and retaining
experienced and qualified persons to serve on the company's Board of
Directors. The Board of Directors also believes that the Directors
Plan works to align the financial interests of the Board members with
those of the company's stockholders. Therefore, subject to stockholder
approval, the Board has amended the Directors Plan to increase the number of
shares reserved for issuance under the Directors Plan by 50,000 shares.
Vote Required
The affirmative vote of a majority of the shares of common
stock present or represented by proxy and entitled to vote at the
Annual Meeting is required for approval of this proposal. Abstentions
will be counted as present in determining if a quorum is present
and will be counted as if voted against this proposal. Broker non-
votes will be counted as present in determining if a quorum is
present but will have no effect on this proposal.
The Board of Directors unanimously recommends that the stockholders vote
FOR approval of this proposal to increase the share reserve for the
Directors Plan.
Summary of the Directors Plan
The following summary of the Directors Plan is qualified
in its entirety by the specific language of the Directors Plan,
as amended. Copies of the Directors Plan are available to any
stockholder upon request addressed to Investor Relations, Ross
Stores, Inc., 8333 Central Avenue, Newark, California 94560.
Only directors of the company who are not employees of the
company or any parent and/or subsidiary corporations (the "Outside
Directors") are eligible to participate in the Directors Plan. The
Directors Plan by its terms provides for the following schedule of grants to
be made automatically. Each existing Outside Director has received, and
upon initial election to the Board of Directors each new Outside Director
will receive, a onetime grant of an option to purchase 5,000 shares
of common stock (an "Initial Option"). Each existing Outside
Director received in 1991 a one-time grant of an option to purchase
1,000 shares of common stock for each full year of past services as
an Outside Director (a "Past Service Option"). In addition, each
Outside Director is to be granted an option to purchase 1,000 shares
of common stock after completion of each full year of
future service as an Outside Director after the Initial Option grant
(an "Annual Option"). The exercise price of any option granted under
the Directors Plan may not be less than 100% of the fair market value
of the common stock of the company on the date of grant as determined
by the closing price of the company's common stock reported on the Nasdaq
National Market. As of April 4, 1996, such closing price was $27.00
per share. Shares subject to an option granted under the Directors
Plan may be purchased for cash, by check or cash equivalent, or by assignment
assisgnment of the proceeds of a sale of some or all of the shares
being acquired upon exercise of an option.
24
Subject to approval by the stockholders, the Board has amended the
Directors Plan to increase the aggregate number of shares issuable under
the Directors Plan by 50,000 shares (subject to adjustment in the
event of stock dividends, stock splits, reverse stock splits,
combinations, reclassifications, or like changes in the capital
structure of the company). As of April 10, 1996, excluding the proposed
increase, 19,000 shares remained available for future stock option grants
and options to purchase 86,000 shares were outstanding.
Under the Directors Plan, options are first exercisabl six months
after the date of grant (the "Initial Exercise Date"),and, unless
otherwise specified by the Board of Directors, one-sixth of each Initial
Option and each Annual Option vests upon the Initial Exercise Date, with
the balance of such grants vesting and becoming exercisable
monthly in equal amounts over a two and one-half year period from the
Initial Exercise Date. Each Past Service Option was fully vested upon the
date of grant. No option will be exercisable after the expiration of 10
years after the date such option is granted. During the lifetime of an
optionee, an option may be exercised only by the optionee. An option may
not be transferred or assigned, except by will or by the laws of descent and
distribution.
Generally, if an optionee ceases to be a director of the company for
any reason, except death or disability, the optionee may exercise his or
her option (to the extent unexercised and exercisable on the
date of termination) within three months after the date of termination
of service as a director, but in any event not later than the expiration of
the option term. If an optionee ceases to be a director of the company due
to death or disability, the optionee (or his or her legal
representative) may generally exercise the option (to the extent unexercised
and exercisable on the date of such death or disability) within twelve
months after the date of termination of service as a director, but in any
event not later than the expiration of the option term. Any options which
are not exercisable on the date of termination, or which are not exercised
within the allotted time after the date of termination, are returned to the
share reserve. The period for exercise of an option upon termination of
service as a director is extended under certain circumstances if exercise of
the option would be a violation of applicable federal or state securities
law.
In the event of a transfer of control of the company, any
unexercisable portion of an option shall be immediately exercisable as
of a date prior to the transfer of control. The Board of
Directors may terminate or amend the Directors Plan at any time.
However, without the approval of the company's stockholders, no
amendment may increase the number of shares subject to the Directors Plan,
materially change the class of persons eligible to receive
options thereunder, or materially change the amount, timing or
exercise price formula applicable to grants of options
under the Directors Plan. No amendment may adversely affect any
outstanding option without the consent of the optionee.
Summary of the Federal Tax Consequences of the Directors Plan
The following summary is a general guide as to the United States
federal income tax consequences under current law with respect to
participation in the Directors Plan and does not attempt to describe all
possible federal or other tax consequences of such participation
or tax consequences based on particular circumstances.
The Directors Plan allows only grants of nonqualified stock
options. Nonqualified stock options have no special tax status. An optionee
generally recognizes no taxable income as the result of the grant of
such an option. Upon exercise of a nonqualified stock option,
the optionee normally recognizes ordinary income in the amount of the
difference between the option price and the fair market value of the stock
on the Determination Date. The Determination Date is the date on which
the option is exercised unless the shares are not vested and/or the sale of
the shares at a profit would subject the optionee to suit under Section
16(b) of the Exchange Act, in which case the determination date is the
later of (i) the date on which the shares vest, or (ii) the date the sale of
the shares at a profit would no longer subject the optionee to suit under
Section 16(b) of the Exchange Act. Section 16(b) of the Exchange
Act is applicable only to executive officers, directors and beneficial owners
of more than 10% of the common stock of the company. Upon the sale
of stock acquired by the exercise of a nonqualified stock option,
any gain or loss, based on the difference between the sale price and
fair market value on the date of
25
recognition of income, will be taxed as a capital gain or loss. A
capital gain or loss will be long-term if the optionee has held the
shares more than twelve months from the Determination Date.
The company generally should be entitled to a deduction
equal to the amount of ordinary income recognized by the
optionee as a result of the exercise of an nonqualified stock
option. The deduction limitations of Section 162(m) are not
applicable to the Directors Plan since it applies only to compensation
of certain employees of the company and only directors who are not
employees of the company are eligible to participate in the Directors Plan.
Pro Forma Benefits Under the Directors Plan
Stock options to be granted under the Directors Plan for future
years are not determinable now. The following table shows the stock
option grants made to the outside directors for fiscal 1996, as of March 18,
1996, under the Directors Plan. In addition, on March 20, 1996,
Maynard Jenkins became a new director of the company and was
automatically granted an Initial Option under the Directors Plan.
Employees of the company are not eligible to participate in the Directors
Plan.
1991 OUTSIDE DIRECTORS STOCK OPTION PLAN
NUMBER
DOLLAR OF
OUTSIDE DIRECTORS VALUE SHARES
Stuart G. Moldaw $0 1,000
Maynard Jenkins $0 5,000
George P. Orban $0 1,000
Philip Schlein $0 1,000
Donald H. Seiler $0 1,000
Donna L. Weaver $0 1,000
[FN]
Based on the difference between the exercise price of the
options ($27.25 for the Annual Options and $27.0625 for Mr.
Jenkins' Initial Option) and the fair market value of the
company's common stock on April 4, 1996, the last trading
day of the fiscal month, ($27.00). All options are
granted with an exercise price equal to the fair
market value as determined by the closing price of the company's
common stock on the date of grant as reported on the Nasdaq
National Market.
[/FN]
PROPOSAL 4
APPROVAL OF INCENTIVE COMPENSATION PLAN
Background
The stockholders are being asked to approve the company's
Incentive Compensation Plan ("Incentive Plan"). The Incentive Plan
is designed to provide members of the company's management and
certain key employees with financial incentives to meet or exceed
pre-determined financial goals of the company. Exceeding the
profit performance goal results in a larger incentive award for
each participant and failure to achieve the profit performance
goal will eliminate, or substantially reduce, the incentive award.
Compensation paid under the Incentive Plan is intended to
qualify as "performance-based compensation" under Section 162(m)
of the Internal Revenue Code. Under Section 162(m), the federal
26
income tax deductibility of compensation paid to the company's
chief executive officer and to each of its next four most highly
compensated executive officers may be limited to the extent that it
exceeds $1 million in any one year. However, the company can
continue to deduct compensation in excess of that amount if the
compensation qualifies as "performancebased compensation."
In order that the company might continue to provide
incentive compensation to its executive officers, and continue to
receive a federal income tax deduction for the payment of such
compensation, the company's Board of Directors has amended the
Incentive Plan in order to comply with Section 162(m). The plan is
now being submitted to stockholders for their approval.
Vote Required
The affirmative vote of a majority of the shares of common
stock present or represented by proxy and entitled to vote at the
Annual Meeting is required for approval of this proposal.
Abstentions will be counted as present in determining if a quorum
is present and will be counted as if voted against this proposal.
Broker non-votes will be counted as present in determining if a
quorum is present but will have no effect on this proposal.
The Board of Directors unanimously recommends that the stockholders
vote FOR approval of the Incentive Compensation Plan.
Summary of the Incentive Plan
The following summary of the Incentive Plan is qualified
in its entirety by the specific language of the Incentive Plan.
Copies of the Incentive Plan are available to any stockholder upon
request addressed to Investor Relations, Ross Stores, Inc.,
8333 Central Avenue, Newark, California 94560.
Eligible participants of the Incentive Plan are the officers
of the company and those employees designated as District
Managers, Directors, Buyers, Counselors and other employees
designated by the Compensation Committee.
The Compensation Committee establishes a profit performance
goal for each fiscal year and a threshold for incentive award
payments set at a percentage of the profit performance goal,
below which no incentive award is payable, except to those
participants, other than Executive Officers, whose performance is
rated as "exceptional" during the fiscal year. In the event the
threshold for incentive award payments is not achieved, but the
company is profitable, those participants (excluding Executive
Officers) who receive an "exceptional" rating will be paid the
amount of incentive award that would otherwise have been payable
had 100% of the profit performance goal been achieved. Target
awards will be expressed as a percentage of the participant's
base salary.
The profit performance goal is established to reflect
operating performance. For purposes of the Incentive Plan,
"profit" shall mean adjusted pretax earnings, prior to the
payment of the incentive awards, excluding, however,
extraordinary items. Extraordinary items are
significant unanticipated and/or non-recurring items that would
impact the year's pretax earnings either positively or negatively.
The individual bonus targets and the profit performance goal
shall be adopted by the Compensation Committee in its sole
discretion with respect to each performance period no later
than the latest time permitted by Section 162(m) of the Code.
In setting the target awards and performance goals for a fiscal
year, the Committee will establish threshold (or minimum), target
and maximum award payment levels which apply depending upon the
participant's position and the actual level of performance
achieved. The payout levels for differing positions and
performance results will be established by the Committee for each
fiscal year, with payouts which increase or decrease as performance
increases or decreases, depending upon the extent to which
27
the pre-determined goals for a fiscal year are achieved or exceeded.
After the end of each fiscal year, and prior to any payment being
made under the Incentive Plan, the Compensation Committee must
certify in writing the extent to which the performance goals were
achieved or exceeded.
Under the Incentive Plan, all awards are to be paid in
cash. Additionally, participants who are not Executive Officers may
have their incentive award amounts increased or decreased from the
amount otherwise payable, based on their individual job performance
for the year and the nature of their position. The
Compensation Committee shall have no discretion or authority to
increase the amount of an incentive award paid to an Executive
Officer in excess of the amount determined under the incentive
award formula applicable to such participant. In addition, under no
circumstances may the maximum award payable to any participant under
the Incentive Plan for any fiscal year exceed 200% of the Chief
Executive Officer's salary at the time the Incentive Plan is
approved by the company's stockholders. If a participant's
employment with the company is terminated, unless by death or
disability, prior to the end of a fiscal year, the participant
will not be eligible for an award for that fiscal year. If a
participant's employment terminates prior to the end of the fiscal
year due to death or disability, then the company will pay a prorata
portion of the incentive award that the participant would have
otherwise received for such fiscal year.
The Compensation Committee may amend the Incentive Plan at any
time; however, in doing so, the requirements of Section 162(m) must
be met in order that awards made to the participants thereunder
remain eligible as deductible expense to the company for federal tax
purposes.
Pro Forma Benefits Under Incentive Plan
The awards to be paid under the Incentive Plan for future
years are not determinable now. The following table shows the
awards paid under the Incentive Plan in March 1996 for the company's 1995
fiscal year. Nonemployee directors are not eligible to participate in
the company's Incentive Plan.
INCENTIVE COMPENSATION PLAN
DOLLAR NUMBER OF
NAME & POSITION VALUE SHARES
Norman A. Ferber -- Chairman & Chief Executive Officer $546,000 N/A
Melvin A. Wilmore -- President & Chief Operating Officer $489,000 N/A
Michael Balmuth -- Executive Vice President, Merchandising $404,100 N/A
Barbara Levy -- Senior Vice President & General Merchandising Manager $191,400 N/A
Barry S. Gluck -- Senior Vice President & General Merchandising $191,400 N/A
Manager
Executive Officers as a group (13 persons, including the above) $3,045,192 N/A
Eligible employees as a group $5,308,055 N/A
(171 persons, excluding executive officers)
There is no equity component to the company's Incentive Compensation
Plan.
As described previously, not all employees are eligible to participate
in the company's Incentive Compensation Plan.
28
PROPOSAL 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the company's Audit
Committee, has appointed Deloitte & Touche LLP as the independent certified
public accountants for the company for the fiscal year ending February 1,
1997. Deloitte & Touche LLP, or its predecessor Touche Ross & Co., has
acted in such capacity since 1982. It is anticipated that a
representative of Deloitte & Touche LLP will be present at the
Annual Meeting to respond to appropriate questions and to make a
statement if he or she so desires.
Vote Required
The affirmative vote of a majority of the shares of common stock
present or represented by proxy and voting at the Annual Meeting is
required for approval of this proposal. Abstentions and broker non-
votes each will be counted as present in determining if a quorum is
present, but will not be counted as having been voted on this proposal.
The Board of Directors unanimously recommends that the stockholders vote
FOR approval of the ratification of the appointment of Deloitte & Touche LLP
as the company's independent certified public accountants for the fiscal
year ending February 1, 1997.
PROXY SOLICITATION
The cost of solicitation of Proxies will be borne by the company. The
company has retained Georgeson & Co. to assist in soliciting proxies by
mail, telephone and personal interview for a fee of $10,000 plus
expenses. Management may use the services of its directors,
officers and others to solicit Proxies, personally or by telephone.
Arrangements may also be made with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation material to the
beneficial owners of the stock held of record by such persons, and the
company may reimburse them for reasonable out-of-pocket expenses
incurred by them in so doing.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which
management intends to present or knows that others will present at the
Annual Meeting is as set forth above. If any other matter or matters are
properly brought before the Annual Meeting, or any adjournment thereof,
it is the intention of the persons named in the accompanying Proxy to
vote the Proxy on such matters in accordance with their best judgment.
29
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next
annual meeting of stockholders of the company (1) must be received by
the company at its offices at 8333 Central Avenue, Newark, California
94560 no later than December 26, 1996 and (2) must satisfy the
conditions established by the Securities and Exchange Commission for
stockholder proposals to be included in the company's Proxy Statement for
that meeting.
By Order of the Board of Directors,
Kathleen B. Loughnot
Assistant Secretary
Dated: April 24, 1996
Front:
PROXY
ROSS STORES, INC.
The undersigned hereby appoints Norman A. Ferber and Melvin A.
Wilmore, and either of them, as attorneys of the
undersigned with full power of substitution, to vote all
shares of stock which the undersigned is entitled to vote at
the Annual Meeting of Stockholders of Ross Stores, Inc., to be
held on May 30, 1996 at 11:00 a.m. PDT, at the company's
corporate offices, 8333 Central Avenue, Newark, California,
and at any continuation or adjournment thereof, with all
powers which the undersigned might have if personally present
at the meeting.
WHERE NO CONTRARY CHOICE IS INDICATED BY THE STOCKHOLDER, THIS
PROXY, WHEN RETURNED, WILL BE VOTED FOR SUCH NOMINEES
AND PROPOSALS AND WITH DISCRETIONARY AUTHORITY UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THIS
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby acknowledges receipt of: (a) Notice
of Annual Meeting of Stockholders dated April 24, 1996; (b)
the accompanying Proxy Statement; and (c) the Annual Report
to Stockholders for the fiscal year ended February 3, 1996
and hereby expressly revokes any and all proxies heretofore
given or executed by the undersigned with respect to the
shares of stock represented by this Proxy and by filing
this Proxy with the Assistant Secretary of the Corporation,
gives notice of such revocation.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
ADDRESS CHANGE
See Reverse Side
Back:
Common X Please mark your votes as indicated in this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS:
PROPOSAL 1. Election for a three-year term of three Class I Directors
proposed in the accompanying Proxy Statement.
Stuart G. Moldaw George P. Orban Donald H. Seiler
FOR all nominees listed (except as marked to the
contrary)
WITHHOLD AUTHORITY to vote for all nominees listed.
INSTRUCTION: To withhold authority to vote for any individual
nominee write that nominee's name in the space
provided below.
PROPOSAL 2. To approve an amendment to the 1988 Restricted
Stock Plan to increase the share reserve by
1,000,000 shares.
FOR AGAINST ABSTAIN
PROPOSAL 3. To approve an amendment to the 1991 Outside
Directors Stock Option Plan to increase the share
reserve by 50,000 shares.
FOR AGAINST ABSTAIN
PROPOSAL 4. To approve the Incentive Compensation Plan.
FOR AGAINST ABSTAIN
PROPOSAL 5. To ratify the appointment of Deloitte & Touche
LLP as the company's independent certified public
accountants for the fiscal year ending February 1, 1997.
FOR AGAINST ABSTAIN
PROPOSAL 6. To transact such other business as may properly come before
the annual meeting or any adjournments or
postponements thereof.
Dated: (Be sure to date Proxy) , 1996
Authorized Signature
Printed Name
Please sign exactly as your name(s) appear(s) on your stock
certificate. If shares of stock are held of record in the
names of two or more persons or in the name of husband and
wife, whether as joint tenants or otherwise, both or all of
such persons should sign the Proxy. If shares of stock are
held of record by a corporation, the Proxy should be
signed by the President or Vice President or the
Secretary or Assistant Secretary. Executors or
administrators or other fiduciaries who execute the above
Proxy for a deceased stockholder should give their full titles.
YOUR VOTE IS IMPORTANT TO THE COMPANY
THIRD AMENDED AND RESTATED
ROSS STORES, INC.
1988 RESTRICTED STOCK PLAN
(As Amended March 19, 1996)
1. Purpose. The Ross Stores, Inc. 1988 Restricted Stock
Plan (the "Initial Plan") was adopted on March 14, 1988. On
March 17, 1989, the Initial Plan was amended and restated in
its entirety (the "First Plan"). On March 18, 1991, the First
Plan was amended and restated in its entirety (the "Second
Plan"). The Second Plan is hereby amended and restated in its
entirety (the "Plan"), effective March 16, 1992. The Plan is
established to create additional incentive for key employees of
Ross Stores, Inc. and any successor corporation thereto
(collectively referred to as the "Company"), and any present or
future parent and/or subsidiary corporations of such
corporation (all of whom along with the Company being
individually referred to as a "Participating Company" and
collectively referred to as the "Participating Company Group")
to promote the financial success and progress of the
Participating Company Group. For purposes of the Plan, a
parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Internal Revenue
Code of 1986, as amended (the "Code").
2. Administration. The Plan shall be administered by
the Board of Directors of the Company (the "Board") and/or by a
duly appointed committee of the Board having such powers as
shall be specified by the Board. Any subsequent references to
the Board shall also mean the committee if it has been
appointed. All questions of interpretation of the Plan or of
the provisions of the grant of shares under the Plan shall be
determined by the Board, and such determinations shall be final
and binding upon all persons having an interest in the Plan.
Any officer of a Participating Company shall have the authority
to act on behalf of the Company with respect to any matter,
right, obligation, or election which is the responsibility of
or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter,
right, obligation, or election.
3. Eligibility. All employees (including officers) of a
Participating Company are eligible to participate in the Plan.
The Board shall, in the Board's sole discretion, determine
which individuals shall have the right to acquire shares under
the Plan (the "Participants").
4. Share Reserve. There shall be a share reserve of 3,650,000
shares of the common stock of the Company (the "Stock"). Such
share reserve shall be reduced by the number of shares of Stock
granted under the Plan. (In the event that any shares granted
pursuant to the Plan are reacquired under the terms of the Plan
by a Participating Company, the shares so reacquired shall be
returned to the share reserve.) Appropriate adjustments shall
be made in the number and class of shares of Stock in such
share reserve in the event of a stock dividend, stock split,
reverse stock split, combination, reclassification or like
change in the capital structure of the Company.
2
5. Compliance with Securities Laws. Inability of the
Company to obtain from any regulatory body having jurisdiction
authority deemed by the Company's counsel to be necessary to
the lawful issuance of any Stock hereunder shall relieve the
Company of any liability in respect of the nonissuance of such
Stock as to which such requisite authority shall not have been
obtained.
6. Stock Grant. After the Board has granted a Participant shares
of Stock under the Plan, the Company shall advise such Participant in
writing of the terms, conditions and restrictions of the grant,
including the number of shares of Stock which the Participant
has been granted. The number of shares of Stock which a
Participant may receive under the Plan shall be determined by
the Board in its sole discretion. Subject to the provisions of
paragraph 7 hereof, the grant shall be made in the form
attached hereto as Exhibit A ("Stock Grant Agreement").
Notwithstanding any other provision of the Plan to the
contrary, the Board may not require a Participant to make any
monetary payment as a condition of receiving a grant under the
Plan. Therefore, for purposes of Rule 16b-3(a)(1), the "price
at which securities may be offered" shall be zero (0) dollars.
7. Authority to Vary Terms. The Board shall have the
authority from time to time to vary the terms of the standard form of Stock
Grant Agreement set forth as Exhibit A either in connection
with a single grant or in connection with the authorization of
a new standard form or forms; provided, however, that the terms
and conditions of such revised or amended stock grant
agreements shall be in accordance with the terms of the Plan.
8. Provision of Information. Each Participant who
receives a grant shall be given access to information concerning the Company
equivalent to that information generally made available to the
Company's common stockholders so long as the Participant
retains ownership of such shares.
9. Term. Unless otherwise terminated, the Plan shall
continue until March 14, 1998.
10. Termination or Amendment of Plan. The Board may terminate
or amend the Plan at any time. In any event, no amendment may
adversely affect any outstanding grant without the consent of
the Participant. A grant shall be considered as outstanding as
of the effective date of such grant as determined by the Board.
11. Continuation of Initial Plan, First Plan and Second
Plan. Notwithstanding any other provision of the Plan to the
contrary, the terms of the Initial Plan, the First Plan and the
Second Plan shall remain in effect and apply to grants made
pursuant to the terms of the Initial Plan, the First Plan and
the Second Plan.
ROSS STORES, INC.
1991 OUTSIDE DIRECTORS STOCK OPTION PLAN
(As Amended March 19, 1996)
1. Purpose. The Ross Stores, Inc. 1991 Outside Directors Stock
Option Plan (the "Plan") is established effective as of March
18, 1991 (the "Effective Date") to create additional incentive
for the non-employee directors of Ross Stores, Inc. and any
successor corporation thereto (collectively referred to as the
"Company"), to promote the financial success and progress of
the Company.
2. Administration. The Plan shall be administered by the Board
of Directors of the Company (the "Board") and/or by a duly
appointed committee of the Board having such powers as shall be
specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has
been appointed and, unless the powers of the committee have
been specifically limited, the committee shall have all of the
powers of the Board granted herein, including, without
limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable
limitations imposed by law. All questions of interpretation of
the Plan or of any options granted under the Plan (an "Option")
shall be determined by the Board, and such determinations shall
be final and binding upon all persons having an interest in the
Plan and/or any Option. Any officer of the Company shall have
the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein,
provided the officer has apparent authority with respect to
such matter, right, obligation, or election.
3. Eligibility and Type of Option. Options may be granted only to
directors of the Company who are not employees of the Company
or any parent and/or subsidiary corporations of the Company.
Options granted to eligible directors of the Company ("Outside
Directors") shall be nonqualified stock options; that is,
options which are not treated as having been granted under
section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"). For purposes of the Plan, a parent corporation
and a subsidiary corporation shall be as defined in sections
424(e) and 424(f) of the Code.
4. Shares Subject to Option. Options shall be options for the
purchase of the authorized but unissued common stock of the
Company (the "Stock"), subject to adjustment as provided in
paragraph 7 below. The maximum number of shares of Stock which
may be issued under the Plan shall be one hundred seventy-five
thousand (175,000) shares. In the event that any outstanding
Option for any reason expires or is terminated or cancelled
and/or shares of Stock subject to repurchase are repurchased by
the Company, the shares allocable to the unexercised portion of
such Option, or such repurchased shares, may again be subjected
to an Option grant.
5. Terms, Conditions and Form of Options. Options granted pursuant
to the Plan shall be evidenced by written agreements specifying
the number of shares of Stock covered
2
thereby, in substantially the form attached hereto as Exhibit A
for grants made pursuant to paragraphs (a)(i) or (a)(iii)
below, in substantially the form attached hereto as Exhibit B
for grants made pursuant to paragraph (a)(ii) below, or in
substantially the form attached hereto as Exhibit C for grants
made pursuant to paragraph (a)(iv) below, and incorporated
herein by reference (the "Option Agreements"). Options shall
comply with and be subject to the following terms and
conditions:
(a) Automatic Grant of Options. Subject to
execution by each Outside Director of the appropriate Option
Agreement:
(i) On the Effective Date, each present Outside
Director shall be granted an Option to purchase five thousand
(5,000) shares of Stock.
(ii) Furthermore, on the Effective Date, each
present Outside Director shall be granted an additional option
to purchase that number of shares of Stock equal to one
thousand (1,000) multiplied by the number of such Outside
Director's full years of past service as a nonemployee director
ending on the Effective Date. The preceding sentence shall not
apply to Outside Directors elected after the Effective Date.
(iii) After the Effective Date, each new
Outside Director shall be granted an Option to purchase five
thousand (5,000) shares of Stock upon the date such Outside
Director is first elected to serve on the Board.
(iv) Each Outside Director shall be granted an
additional Option to purchase one thousand (1,000) shares of
Stock upon each Anniversary Date of such Outside Director.
(v) The Anniversary Date of an Outside Director
who was first elected to the Board prior to the Effective Date
shall be March 18, commencing with March 18, 1992. The
Anniversary Date of an Outside Director who is first elected to
the Board on or after the Effective Date shall be the date
which is twelve (12) months after such election and successive
anniversaries thereof.
(vi) Notwithstanding any other provision of the
Plan, no Option shall be granted to any individual who is no
longer serving as an Outside Director of the Company on an
Anniversary Date which would otherwise be a date of grant.
(b) Option Exercise Price. The option exercise
price per share of Stock for an Option shall be the fair market
value of the common stock of the Company, as determined by the
closing price of a share of such common stock on the National
Association of Securities Dealers Automated Quotations system
(the "NASDAQ System") or other national securities exchange on
which the shares of such common stock are then trading, on the
date of the granting of the Option. If the date of the
granting of the Option does not fall on a day on
3
which the common stock of the Company is trading on the NASDAQ
System or other national securities exchange, the date on which
the option exercise price per share shall be established shall
be the last day on which the common stock of the Company was so
traded prior to the date of the granting of the Option.
Notwithstanding the foregoing, an Option may be granted with an
option exercise price lower than the minimum exercise price set
forth above if such Option is granted pursuant to an assumption
or substitution for another option in a manner qualifying with
the provisions of section 424(a) of the Code.
(c) Exercise Period of Options. Any Option granted
pursuant to the Plan shall be exercisable for a term of ten
(10) years.
(d) Payment of Option Price. Payment of the option
exercise price for the number of shares of Stock being
purchased pursuant to any Option shall be made (i) in cash, by
check or in cash equivalent, or
(ii) by the assignment in a form acceptable to the Company of
the proceeds of a sale of some or all of the shares being
acquired upon the exercise of an Option (including, without
limitation, through an exercise complying with the provisions
of Regulation T as promulgated from time to time by the Board
of Governors of the Federal Reserve System). The Company
reserves, at any and all times, the right, in the Company's
sole and absolute discretion, to establish, decline to approve
and/or terminate any program and/or procedures for the exercise
of Options by means of an assignment of the proceeds of a sale
of some or all of the shares of Stock to be acquired
upon such exercise.
(e) Stockholder Approval. Any Option granted
pursuant to the Plan shall be subject to obtaining stockholder
approval of the Plan at the first annual meeting of
stockholders after the Effective Date. Notwithstanding the
foregoing, stockholder approval shall not be necessary in order
to grant any Option granted on the Effective Date; provided,
however, that the exercise of any such Option shall be subject
to obtaining stockholder approval of the Plan.
6. Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of the Option Agreements set
forth as Exhibit A, Exhibit B, and Exhibit C, respectively,
either in connection with the grant of an individual Option or
in connection with the authorization of a new standard form or
forms; provided, however, that the terms and conditions of such
revised or amended standard form or forms of stock option
agreement shall be in accordance with the terms of the Plan.
Such authority shall include, but not by way of limitation, the
authority to grant Options which are immediately exercisable
subject to the Company's right to repurchase any unvested
shares of Stock acquired by the Optionee on exercise of an
Option in the event such Optionee's service as a director of
the Company is terminated for any reason.
7. Effect of Change in Stock Subject to Plan. Appropriate
adjustments shall be made in the number and class of shares of
Stock which may be issued under the Plan and to any outstanding
Options and in the option exercise price of any outstanding
Options in the event of a stock dividend, stock split, reverse
stock split, combination, reclassification, or like change in
the capital structure of the Company. No adjustment shall be
made pursuant to this paragraph to the number of shares of
Stock subject to the automatic grant of an Option pursuant to
paragraph 5(a) above.
4
8. Ownership Change and Transfer of Control. An "Ownership Change"
shall be deemed to have occurred in the event any of the
following occurs with respect to the Company:
(a) the direct or indirect sale or exchange by the
stockholders of the Company of all or substantially all of the
stock of the Company;
(b) a merger in which the Company is a party; or
(c) the sale, exchange, or transfer of all or
substantially all of the Company's assets (other than a sale,
exchange or transfer to one or more corporations where the
stockholders of the Company before such sale, exchange, or
transfer retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the
corporation(s) to which the assets were transferred).
A "Transfer of Control" shall mean an Ownership Change in which
the stockholders of the Company before such Ownership Change do not
retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company.
In the event of a Transfer of Control, any unexercisable
portion of an outstanding Option shall be immediately
exercisable and vested as of a date prior to the Transfer of
Control. The exercise and vesting of any Option that is
permissible solely by reason of this paragraph 8 shall be
conditioned upon the consummation of the Transfer of Control.
Any Options which are not exercised as of the date of the
Transfer of Control shall terminate effective as of the date of
the Transfer of Control.
9. Options Non-Transferable. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee. No Option
shall be assignable or transferable by the Optionee, except by
will or by the laws of descent and distribution.
10. Termination or Amendment of Plan. The Board,
including any duly appointed committee of the Board, may
terminate or amend the Plan at any time; provided, however,
that without the approval of the Company's stockholders, there
shall be (a) no increase in the total number of shares of Stock
covered by the Plan (except by operation of the provisions of
paragraph 7 above), (b) no material change in the class of
persons eligible to receive Options, and (c) no material change
in the amount, timing or exercise price formula of automatic
grants of Options pursuant to paragraph 5(a) above. In any
event, no amendment may adversely affect any then outstanding
Option, or any unexercised portion thereof, without the consent
of the Optionee.
ROSS STORES, INC.
INCENTIVE COMPENSATION PLAN
The Incentive Compensation Plan (the "Plan") of Ross
Stores, Inc., a Delaware corporation (the "company"), is
authorized annually by the Compensation Committee of the
company's Board of Directors which shall be comprised solely
of directors who are "outside directors" as defined by
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").
The Plan is based on a total compensation concept and is
designed to allow members of management to share in the
company's profits based on the attainment of pre-
established, corporate profit performance and individual
performance goals.
The Plan is designed so that if adjusted pretax earnings,
prior to payment of Plan incentive awards, are equal to or
exceed the profit performance goal, each participant in the
Plan will be paid an incentive award equal to a preestablished
percent of salary. Exceeding the profit performance goal
results in a larger incentive award for each participant and
failure to achieve the profit performance goal will
eliminate, or substantially reduce, the incentive award.
Additionally, Plan participants other than the Chief
Executive Officer, President, Executive Vice Presidents and
Senior Vice Presidents ("Executive Officers") may have
their incentive award amounts increased or decreased based
on individual, appraised job performance.
PARTICIPANTS
Participants shall be the Officers of the company and
those employees designated as District Managers, Directors,
Buyers, Counselors and other employees designated by the
Compensation Committee.
PLAN DESIGN
At the beginning of each fiscal year, the Compensation
Committee shall establish in writing a profit performance goal
for such fiscal year and a threshold for incentive award
payment set at a percentage of the profit performance goal,
below which no incentive award is payable, except to those
eligible participants, other than Executive Officers,
whose performance is rated as "exceptional" during the fiscal
year. In the event the threshold for incentive award payment
is not achieved, but the company is profitable, those
participants who are not Executive Officers and who have
received an appraisal rating of "exceptional" will be paid the
amount of incentive award that would otherwise have been
payable had 100% of the profit performance goal been achieved
(the individual performance factor is not applicable in this
event).
The incentive award payable upon meeting or exceeding the
threshold level of achievement of the profit performance
goal consists of preestablished percentages of base salary
based on the organizational level of the participant and
the actual profit performance of the company. At the
beginning of each fiscal year, the Compensation
2
Committee shall establish in writing for each participant
organizational level, a formula setting forth the percentage of
base salary payable as an incentive award determined by the
actual profit performance relative to the profit performance
goal for the fiscal year (the "Incentive Award
Formula"). Additionally, participants who are not Executive
Officers may have their incentive award amount increased or decreased from
the amount otherwise payable, based on their individual job
performance for the year and the nature of their
position. Notwithstanding the individual performance
factor, the incentive award payable is a function of the
percentage of the profit performance goal actually
achieved, which determines the percentage of the incentive
award which would otherwise have been payable at 100% of
target.
The terms "salary" and/or "base salary" shall mean the
employee's base salary in effect on the final day of
the company's fiscal year. Notwithstanding the above, all
awards shall be subject to the limit set forth in "Maximum
Award Payable" below.
MAXIMUM AWARD PAYABLE
For any fiscal year, no Executive Officer of the company shall
be paid an award in excess of 200% of the Chief Executive
Officer's salary at the time the Plan is approved by the
company's stockholders.
PROFIT GOALS
At the beginning of each fiscal year, the Management Committee
will submit to the Compensation Committee of the Board of
Directors recommendations for the profit performance goal and
the Incentive Award Formula for the fiscal year. The profit
performance goal and Incentive Award Formula will then be
reviewed, approved and established in writing by the
Compensation Committee as described above. The establishment
by the Compensation Committee of the profit performance goal
and the Incentive Award Formula for the fiscal year shall be
no later than the latest time permitted under Section 162(m)
of the Code. At the end of the company's fiscal year,
the Compensation Committee will determine whether or not the
company's profit performance goal has been met and will
certify such determination in writing prior to payment of the
incentive awards earned.
The profit performance goal is established to reflect operating
performance. For purposes of the Plan, "profit" shall mean
adjusted pretax earnings, prior to the payment of the incentive
awards, excluding, however, extraordinary items.
Extraordinary items are significant unanticipated and/or non-
recurring items that would impact the year's pretax earnings
either positively or negatively.
Each participant in the Plan shall be advised of the profit
performance goal for the coming fiscal year and the Incentive
Award Formula that will determine for a participant at such
participant's organizational level the incentive award that
will be payable upon achieving or exceeding the threshold
percentage of the profit performance goal.
3
ELIGIBILITY FOR PAYMENT OF INCENTIVE AWARD
Except as otherwise provided below, in order to be
eligible for an incentive award, a participant must be an
active, full-time employee of the company on the last day of
the fiscal year for which the incentive award is earned.
New Employees and Promotions. New employees who become eligible
participants after the beginning of the fiscal year will
receive a prorata incentive award based on length of
employment. An employee who is promoted into a position
eligible for an incentive award (or subject to an Incentive
Award Formula for a higher organizational level) during the
fiscal year will receive an incentive award prorated on the
basis of the starting date in his or her new position. An
employee who is promoted into a position as an Executive
Officer during the fiscal year will be eligible for an
incentive award on a prorata basis and will not be
eligible for an additional individual performance award.
Termination. Voluntary resignation prior to the end of a
fiscal year will serve as a forfeiture of all incentive
awards that the participant would have otherwise received.
In the event of death prior to the last day of the
applicable fiscal year, the company will pay to the estate
of the participant a prorata portion of the incentive award
that the participant would have otherwise received for such
fiscal year.
An eligible participant involuntarily terminated for reasons other than
cause prior to the last day of the applicable fiscal year, will
be entitled to a prorata share of the incentive award that
the participant would otherwise have received for such
fiscal year. If employment is terminated for cause,
including, but not limited to, dishonesty, violation of company
policy or other actions harmful to the company, the
Compensation Committee may at its discretion declare any incentive award
forfeited.
Eligible employees, who terminate for any reason, other than
for cause, after the end of the applicable fiscal year,
will be entitled to full payment of any earned incentive
award on the date fixed for payment.
The prorated portion of an incentive award paid in the event
of death or involuntary termination will be determined on
the basis of the period of employment during the applicable
fiscal year prior to the date of death or termination, as the
case may be. In no event will such prorated portion be paid
unless achievement of the profit performance goal has been
certified in writing by the Compensation Committee.
Disability. If a participant is disabled by an accident or
illness and is disabled long enough to be placed on the
company's long term disability plan, his or her incentive
award for the fiscal year shall be prorated, so that no
incentive award shall be earned during the period the
participant remains on long term disability.
Nothing in the Plan shall confer upon the participant any right
to continue in the employ of the company or interfere in any
way with the right of the company to terminate the
participant's employment at any time. The
Incentive Compensation Plan will not be
4
deemed to constitute a contract of employment with any
participant, nor be deemed to be consideration for the
employment of any Participant.
Payment. Incentive awards shall be paid by check, as soon
as possible, after the fiscal year financial results are
available and achievement of the profit performance goal
has been certified in writing by the Compensation
Committee.
To receive payment an eligible participant, whose employment
relationship with the company has terminated, must submit a
written request for such payment to the Senior Vice
President, Human Resources by February 15th of the following
year (e.g., to receive an award for the 1996 fiscal year, a
written request is due February 15, 1995). The notification
must include the participant's current home address and
telephone number.
Non-Transferability. An incentive award shall be payable
only to the participant and may not be transferred in any
manner other than by will or laws of descent and
distribution. An award cannot be alienated by assignment
or by any other means, and shall not be subject to any action
taken by the participant's creditors.
Withholding. All appropriate taxes will be deducted and
withheld from the award payments, as required by foreign,
federal, state and/or local laws.
Any rights accruing to a participant or his or her beneficiary
under the Plan shall be solely those of an unsecured general
creditor of the company. Nothing contained in the Plan and
no action taken pursuant to the provisions thereof will
create or be construed to create a trust of any kind, or a
pledge, or a fiduciary relationship between the company or the
Compensation Committee and the participant, or his or her
beneficiary, or any other person. Nothing herein will be
construed to require the company or the Compensation
Committee to maintain any fund or to segregate any amount
for a participant's benefit.
PLAN AUTHORITY AND ADMINISTRATION
The Plan, as set forth in this document, represents the general guidelines
the company presently intends to utilize to determine
what incentive awards, if any, will be paid. If, however, at
the sole discretion of the Compensation Committee, the
company's best interest is served by applying different
guidelines to certain individuals, or to individuals
under special or unusual circumstances, it reserves the right
to do so by notice to such individuals at any time, or from
time to time. To the extent that such applications are
contrary to any provisions of the Plan, the Plan will be
deemed amended to such extent. Notwithstanding the
foregoing, the Compensation Committee shall have no
discretion or authority to increase the amount of an
incentive award paid to an Executive Officer in excess of the
amount determined under the Incentive Award Formula applicable
to such participant.
The Compensation Committee shall have full power and authority
to interpret and administer the Plan and shall be the sole
arbiter of all matters of interpretation and application of
the Plan and the Compensation Committee's determination shall
be final.
5
STOCKHOLDER APPROVAL
The material terms of this Plan shall be submitted to
the company's stockholders for approval in accordance with
Section 162(m) of the Code. The payment of awards under this
Plan, for fiscal years beginning in 1996, is contingent upon
the company obtaining such stockholder approval.
PLAN TERM
This Plan shall continue until terminated by the
company's Board of Directors. The Board of Directors may at
any time amend or terminate this Plan; provided, however, that
if, and to the extent required to ensure the Plan's
qualification under Section 162(m) of the Code as "performance-
based compensation", any such amendment shall be subject to
stockholder approval.
