SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)
(1) 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:
______________________________________________________________
2) Form, Schedule or Registration Statement No:
______________________________________________________________
3) Filing Party:
______________________________________________________________
4) Date Filed:
______________________________________________________________
April 24, 1998
Dear Stockholder:
Enclosed with this letter are the proxy materials for our upcoming
Annual Meeting. Among the items on the Agenda are two proposals:
(i) to approve an amendment to the 1992 Stock Option Plan to
increase the share reserve by 2,300,000 shares; and (ii) to approve
an amendment to the company's Certificate of Incorporation
increasing the shares of common stock authorized for issuance from
100 million to 170 million. 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
proposed changes fit into our goal of increasing the value of the
stockholders' investment.
COMPENSATION PHILOSOPHY
The cornerstone of our philosophy is the alignment of management's
financial interests with those of the stockholders. A significant
amount of total compensation for our executives is at risk in the
form of equity-based grants, including stock options. We believe
our 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, the Option Plan
is a broad-based program with grants primarily directed to those
employees who can have a meaningful effect on the company's
performance.
RECORD OPERATING RESULTS
Our record-breaking financial results in 1997 indicate that our
compensation strategy is working. During the year, same store sales
increased 10% on top of a 13% increase in 1996, and earnings per
share rose 49% to $2.35 following an 82% increase during 1996.
Driving these gains were unprecedented levels of operating
profitability. Earnings before taxes and interest as a percent of
sales almost doubled from 5.2% in 1995 to 9.8% in 1997.
1992 STOCK OPTION PLAN
We believe 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 this outstanding performance.
A key 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 -- management, buyers
and assistant buyers. Since 1992, we have more than tripled the
size of our buying organization, and we plan further additions in this
important area during 1998.
The company's Option Plan remains an important component of our
overall compensation program that enables Ross to attract, motivate
and retain the top performers necessary to compete in today's
competitive environment for apparel retailers. The proposal in
the Proxy Statement requests stockholder approval to increase the
Option Plan reserve by 2.3 million shares, or less than 5% of total
common stock outstanding.
CERTIFICATE OF INCORPORATION AND COMMON STOCK AUTHORIZED FOR ISSUANCE
The company's Certificate of Incorporation in the state of Delaware
currently allows for the issuance of up to 100 million shares of
common stock. After providing for shares already reserved for
issuance under equity plans, including the proposed increase in the
Option Plan reserve, approximately 43.4 million shares remain
available for future issuance.
The Board of Directors recommends an increase in the authorized
shares of common stock from 100 million to 170 million. Such an
increase ensures that an adequate number of shares would be
available in the event that the Board of Directors determines that
it is necessary or appropriate to permit future stock dividends or
stock splits, to raise additional capital through the sale of equity
securities, to acquire another company or its assets, to establish
strategic relationships with corporate partners, to provide equity
incentives to employees and officers, or for other corporate
purposes. Although the company has no current plans for these
actions, the availability of additional shares of common stock is
important in the event that the Board of Directors needs to
undertake any of the foregoing actions on an expedited basis.
STOCK REPURCHASE PROGRAM
The company's stock repurchase programs work in tandem with our
equity programs to enhance stockholder returns and to help minimize
the dilutive potential of the company's stock plans. Buying back
stock has helped Ross to recruit and retain the people responsible
for our outstanding earnings per share growth in recent years
without unduly diluting current stockholders' ownership.
In our most recent fiscal year, we repurchased a total of 3.0
million shares at an aggregate cost of $98 million, which
contributed to a 1.4 million reduction in shares outstanding by the
end of fiscal 1997. Subsequently, in January 1998, our Board of
Directors authorized the repurchase of an additional $110 million of
common stock. This dollar amount represents more than 5% of
existing shares outstanding based on current stock prices. If
completed as planned in fiscal 1998, in just one year this new
repurchase program could more than offset any dilution resulting
from the entire requested share increase in the Option Plan.
The company's Board of Directors and management firmly believe that
effective equity compensation programs have provided Ross with a key
advantage in today's increasingly competitive environment for
apparel retailers, and in particular, the off-price sector.
Approval of these Proxy proposals is critical to enabling the
company to continue to make progress in 1998 and beyond.
We appreciate your support on these initiatives.1 Should you have
any questions concerning these proposals, please contact either John
Call, Senior Vice President and Chief Financial Officer, or Katie
Loughnot, Director of Investor Relations and Assistant Secretary, at
1-800-289-7677.
Respectfully,
/s/G. Orban
George P. Orban
Chairman, Compensation Committee
Ross Stores, Inc. Board of Directors
ROSS STORES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
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 28, 1998 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 III directors for a three-year term.
2. To approve an amendment to the 1992 Stock Option Plan to
increase the share reserve by 2,300,000 shares.
3. To approve an amendment to the company's Certificate of
Incorporation to increase the number of authorized shares of
common stock from 100,000,000 to 170,000,000 shares.
4. To ratify the appointment of Deloitte & Touche LLP as the
company's independent certified public accountants for the
fiscal year ending January 30, 1999.
5. 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 3, 1998
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.
If you plan to attend the Annual Meeting and will need
special assistance,please contact Ms. Catherine C.Brady,
Manager, Legal Affairs, Ross Stores, Inc., 8333 Central Avenue,
Newark, CA 94560-3433 at least ten days before the meeting. Thank
you for your commitment to Ross Stores and for your cooperation
in returning your proxy without delay.
By order of the Board of Directors,
John G. Call
Corporate Secretary
Dated: April 24, 1998
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.
PRINTED ON RECYCLED PAPER
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 Option Value Table 11
Compensation Committee Report 12
Stockholder Return Performance Graph 15
Compensation of Directors 16
Compensation Committee Interlocks and Insider Participation 17
Employment Contracts, Termination of Employment and
Change in Control Arrangements 17
Certain Transactions 19
PROPOSAL 1 - ELECT CLASS II DIRECTORS 20
PROPOSAL 2 - APPROVE AN AMENDMENT TO INCREASE THE SHARE 20
RESERVE OF THE 1992 STOCK OPTION PLAN
PROPOSAL 3 - APPROVE AN AMENDMENT TO CERTIFICATE OF 24
INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
PROPOSAL 4 - RATIFY THE OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 26
PROXY SOLICITATION 27
TRANSACTION OF OTHER BUSINESS 27
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING 27
PROXY STATEMENT
1998 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 28, 1998,
at 11:00 a.m. PDT, or any adjournment thereof, at which stockholders
of record at the close of business on April 3, 1998, shall be
entitled to vote. The meeting will be held at the company's
corporate offices located at 8333 Central Avenue, Newark,
California.
The date of this Proxy Statement is April 24, 1998, the date on
which this Proxy Statement and the accompanying Proxy was first sent
or given to stockholders. The Annual Report to Stockholders for the
fiscal year ended January 31, 1998, 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 III directors to serve a three-year
term; (ii) approve an increase in the share reserve of the company's
1992 Stock Option Plan by 2,300,000 shares; (iii) amend the
company's Certificate of Incorporation to increase the number of
authorized shares of common stock from 100,000,000 to 170,000,000;
and (iv) ratify the appointment of Deloitte & Touche LLP as the
company's independent certified public accountants for the fiscal
year ending January 30, 1999.
The company had outstanding, on April 3, 1998, 47,950,192
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 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 3, 1998
(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.
Amount and Percent of
Name of Beneficial Owner and Nature of Common
the Directors and Executive Beneficial Stock
Officers Ownership (1) Outstanding
___________________________ ____________ _____________
FMR Corp. 5,262,900 (2) 11.05%
82 Devonshire Street
Boston, MA 02109
First Pacific Advisors 2,628,300 (2) 5.50%
11400 W. Olympic Blvd.,
Ste. 1200
Los Angeles, CA 90064
Michael Balmuth 307,238 (3) *
Stuart G. Moldaw 2,000 (4) *
Norman A. Ferber 2,000 (5) *
George P. Orban 381,004 (6) *
Philip Schlein 8,000 (7) *
Donald H. Seiler 161,420 (8) *
Donna L. Weaver 36,000 (9) *
Melvin A. Wilmore 268,665 (10) *
Barry S. Gluck 130,863 (11) *
Irene A. Jamieson 93,529 (12) *
Barbara Levy 111,487 (13) *
All executive officers and 1,721,211 (14) 3.55%
directors as a group
(15 persons, including the
executive officers and directors
named above)
_____
*Less than 1%
3
(1) To the knowledge of the company, the persons named in this
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.
All immediately exercisable options described in the
footnotes to this table are subject to certain vesting
restrictions whereby the company has the right to repurchase
all unvested shares at the optionee's exercise price if the
options are exercised before fully vested and the optionee's
employment with the company terminates.
(2) Information is as of December 31, 1997, pursuant to a
Schedule 13G filed with the Securities and Exchange
Commission, a copy of which was sent to the company.
(3) Mr. Balmuth. Includes immediately exercisable options to
purchase 101,665 shares of the company's common stock. Also
includes 205,000 shares of the company's common stock that
were granted under the company's 1988 Restricted Stock Plan
and remain subject to vesting.
(4) Mr. Moldaw. Represents options to purchase 2,000 shares of
the company's common stock exercisable within 60 days of
April 3, 1998.
(5) Mr. Ferber. Represents options to purchase 2,000 shares of
the company's common stock exercisable within 60 days of
April 3, 1998.
(6) Mr. Orban. Includes 333,204 shares held in the name of Orban
Partners and 9,800 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 38,000 shares of the
company's common stock exercisable within 60 days of April 3,
1998.
(7) Mr. Schlein. Represents options to purchase 8,000 shares of
the company's common stock exercisable within 60 days of
April 3, 1998.
(8) Mr. Seiler. Includes options to purchase 12,000 shares of
the company's common stock exercisable within 60 days of
April 3, 1998.
(9) Ms. Weaver. Includes options to purchase 30,000 shares of
the company's common stock exercisable within 60 days of
April 3, 1998.
(10) Mr. Wilmore. Includes immediately exercisable options to
purchase 101,665 shares of the company's common stock. Also
includes 167,000 shares of the company's common stock that
were granted under the company's 1988 Restricted Stock Plan
and remain subject to vesting.
(11) Mr. Gluck. Includes immediately exercisable options to
purchase 80,038 shares of the company's common stock. Also
includes 50,000 shares of the company's common stock that
were granted under the company's 1988 Restricted Stock Plan
and remain subject to vesting.
(12) Ms. Jamieson. Includes immediately exercisable options to
purchase 39,999 shares of the company's common stock. Also
includes 50,000 shares of the company's common stock that
were granted under the company's 1988 Restricted Stock Plan
and remain subject to vesting.
(13) Ms. Levy. Includes immediately exercisable options to
purchase 39,333 shares of the company's common stock. Also
includes 70,000 shares of the company's common stock that
were granted under the company's 1988 Restricted Stock Plan
and remain subject to vesting.
(14) Includes 575,423 shares subject to outstanding options held
by directors and executive officers which were exercisable on
April 3, 1998 or within 60 days thereof. Also includes
628,500 shares of the company's common stock granted to
executive officers under the company's 1988 Restricted Stock
Plan, all of which remain subject to vesting.
4
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 eight members with the Class II
directors having one vacant seat which the Board intends to fill.
The three Class III directors to be elected at the 1998 Annual
Meeting are being elected to hold office until the 2001 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 Director
During Last Five Years Age Since
NOMINEES FOR ELECTION AS CLASS III DIRECTORS FOR TERMS EXPIRING IN 2001
Philip Schlein Partner of U.S. Venture Partners 63 1987
since April 1985. From January 1974
to January 1985, Mr. Schlein was
Chief Executive Officer of Macy's
California. Director of ReSound Corp.,
Burnham Pacific and Quick Response
Services.
Norman A. Ferber Consultant to the company since 49 1987
September 1996. Chairman of the
Board since March 1993; Chief
Executive Officer of the company
from March 1993 through August 1996;
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 52 1993
Officer of 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
Egghead.com, Inc.
5
Principal Position Director
During Last Five Years Age Since
INCUMBENT CLASS I DIRECTORS WITH TERMS EXPIRING IN 1999
Stuart G. Moldaw Consultant to the company. 71 1982
Chairman Emeritus of the company
since 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. Chairman of the Board of
Gymboree Corporation.
George P. Orban Chairman of the Board and Chief 52 1982
Executive Officer of Egghead.com,
Inc. since January 1997. Managing
partner of Orban Partners, a private
investment company, since May 1984.
Donald H. Seiler Founder and senior partner of 69 1982
Seiler and Company, Certified
Public Accountants. Mr. Seiler
is a Certified Public Accountant.
Director of Mid-Peninsula Bancorp
and Greater Bay Bancorp.
INCUMBENT CLASS II DIRECTORS WITH TERMS EXPIRING IN 2000
Donna L. Weaver Chairman of Weaver, Field & 54 1986
London, Inc., an investor
relations and corporate
communications firm.
Director of Crown Vantage, Inc.
and Hancock Fabrics, Inc.
Michael Balmuth Vice Chairman of the Board and 47 1996
Chief Executive Officer of the
company since September 1996;
from July 1993 through August 1996,
Executive Vice President,
Merchandising; and from November 1989
through June 1993, Senior Vice
President Merchandising.
During fiscal 1997, the Board of Directors held seven meetings.
No member of the Board of Directors attended fewer than 75% of the
total number of Board meetings and each Committee member attended
100% of the applicable Committee meetings held during the year. The
company has an Audit Committee, a Compensation Committee and a
Nominating Committee.
AUDIT COMMITTEE. During fiscal 1997, Messrs. Seiler and Orban
and Ms. Weaver served as members of the Audit Committee, which held
three 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 scope of the annual audit; proposed fee
arrangements and the results of the annual audit; reviewing the
activities of the internal auditors; reviewing the adequacy of
accounting and financial controls; and reviewing the independence of
the independent accountants.
COMPENSATION COMMITTEE. During fiscal 1997, Messrs. Orban and
Schlein served as members of the Compensation Committee, which held
one meeting in March. Mr. Orban 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 Committee evaluates the performance of
the executive officers and makes recommendations concerning their
cash and equity compensation levels. The Committee administers the
company's (i) Incentive Compensation Plan and determines the
performance goals under that plan, and (ii) the 1992 Stock Option
Plan. Decisions by the Compensation Committee
6
relating to the compensation of the company's executive officers are
reviewed and ratified by the full Board of Directors.
NOMINATING COMMITTEE. During fiscal 1997, Messrs. 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 28,
1998. The Nominating Committee did not meet during fiscal 1997.
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 January 31, 1998.
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 1997, 1996 and 1995 fiscal years (the
"Named Executive Officers").
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
____________________________________________________________________ _________________________
Securities
Other Restricted Under- All Other
Annual Stock lying Compen-
Name and Salary Bonus Compensation Awards Options sation
Principal Position Year ($) ($) ($) ($) (#) ($)
MICHAEL BALMUTH 1997 $628,667 $632,000 $2,078 $2,070,000 50,000 $8,447
Vice Chairman of the 1996 $522,750 $584,000 $0 $542,500 50,000 $6,993
Board & Chief 1995 $427,333 $404,100 $7,980 $788,750 40,000 $7,033
Executive Officer
MELVIN A. WILMORE 1997 $623,833 $628,000 $3,970 $2,070,000 50,000 $4,925
President & 1996 $537,750 $564,000 $2,198 $434,000 50,000 $4,688
Chief Operating 1995 $477,333 $489,000 $1,773 $847,500 60,000 $4,625
Officer
BARRY S. GLUCK 1997 $358,417 $318,400 $4,848 $517,500 16,000 $6,035
Senior Vice President 1996 $332,167 $268,400 $969 $488,250 24,000 $5,875
& General 1995 $288,167 $191,400 $4,523 $70,500 20,000 $6,356
Merchandising Manager
IRENE A. JAMIESON 1997 $355,750 $317,600 $2,513 $258,750 16,000 $4,913
Senior Vice President 1996 $309,500 $267,600 $2,397 $461,125 24,000 $4,650
& General 1995 $250,000 $190,000 $2,655 $199,750 50,000 $4,533
Merchandising Manager
BARBARA LEVY 1997 $356,417 $316,800 $2,305 $258,750 16,000 $5,182
Senior Vice President 1996 $330,167 $266,800 $2,957 $447,563 24,000 $4,644
& General 1995 $288,167 $191,400 $466 $146,875 40,000 $4,512
Merchandising Manager
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.
8
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 on Executive Compensation below.
The following bonuses were paid outside of the Incentive Compensation
Plan: (i) Mr. Balmuth: the amount paid in 1996 includes a discretionary
bonus of $58,400 which reflects his change in position; (ii) Mr. Gluck:
the amount paid in 1997 includes a discretionary bonus of $30,000; (iii)
Ms. Jamieson: the amounts paid in 1995 and 1997 includes a discretionary
bonus of $25,000 and $30,000, respectively; and (iv) Ms. Levy: the
amount paid in 1997 includes a discretionary bonus of $30,000.
Under the terms of his Restricted Stock Agreement, dated March 16, 1995,
Mr. Balmuth was granted 30,000 shares of common stock that vest as
follows: 10,000 shares on March 16, 1997 and 20,000 shares on March 16,
1998. Under the terms of his Restricted Stock Agreement, dated July 28,
1995, Mr. Balmuth was granted 100,000 shares of common stock that vest as
follows: 50,000 shares on February 1, 1996, 20,000 shares on February 1,
1997, and 30,000 shares on February 1, 1998. Under the terms of his
Restricted Stock Agreement, dated March 19, 1996, Mr. Balmuth was granted
40,000 shares of common stock, that vest as follows: 20,000 shares each
on March 19th of 1998 and 1999. Under the terms of his Restricted Stock
Agreement, dated March 20, 1997, Mr. Balmuth was granted 80,000 shares
that vest as follows: 50,000 shares on March 20, 1999 and 30,000 shares
on March 20, 2000. Under the terms of his Restricted Stock Agreement,
dated March 16, 1995, Mr. Wilmore was granted 40,000 shares of common
stock that vest as follows: 20,000 shares each on March 16th of 1997 and
1998. Under the terms of his Restricted Stock Agreement, dated July 28,
1995, Mr. Wilmore was granted 100,000 shares of common stock that vest as
follows: 30,000 shares on February 1, 1996, 20,000 shares on February 1,
1997 and 50,000 shares on February 1, 1998. Under the terms of his
Restricted Stock Agreement, dated March 20, 1997, Mr. Wilmore was granted
80,000 shares of common stock that
vest as follows: 40,000 shares each on March 20th of 1999 and 2000.
Under the terms of his Restricted Stock Agreement, dated March 16, 1995,
Mr. Gluck was granted 12,000 shares of common stock that vested on March
16, 1997. Under the terms of his Restricted Stock Agreement, dated March
19, 1996, Mr. Gluck was granted 36,000 shares of common stock that vest
as follows: 18,000 shares each on March 19th of 1998 and 1999. Under
the terms of her Restricted Stock Agreement, dated March 16, 1995, Ms.
Jamieson was granted 34,000 shares of common stock that vest as follows:
14,000 shares on March 16, 1997 and 20,000 shares on March 16, 1998.
Under the terms of her Restricted Stock Agreement, dated March 19, 1996,
Ms. Jamieson was granted 34,000 shares of common stock that vest as
follows: 10,000 shares on March 19, 1998 and 24,000 shares on March 19,
1999. Under the terms of her Restricted Stock Agreement, dated March 16,
1995, Ms. Levy was granted 25,000 shares of common stock that vest as
follows: 20,000 shares on March 16, 1997 and 5,000 shares on March 16,
1998. Under the terms of her Restricted Stock Agreement, dated March 19,
1996, Ms. Levy was granted 33,000 shares of common stock that vest as
follows: 5,000 shares on March 19, 1998 and 28,000 shares on March 19,
1999. At January 31, 1998, unvested shares of restricted stock were
held by: Mr. Balmuth, 250,000 shares with a market value of $8,125,000;
Mr. Wilmore, 212,000 shares with a market value of $6,890,000; Mr. Gluck,
56,000 shares with a market value of $1,820,000; Ms. Jamieson, 64,000
shares with a market value of $2,080,000; and Ms. Levy, 68,000 shares
with a market value of $2,210,000. Dividends are payable to all holders
of restricted stock at the same rate as paid to all stockholders.
The company's 401(k) Plan provides that eligible employees generally may
contribute by authorizing a pre-tax payroll deduction of a minimum of 1%
and a maximum of 15% of their base salary compensation. The Deferred
Compensation Plan, in addition to the 401(k) Plan, allows eligible
employees to contribute by authorizing a pre-tax payroll deduction of a
percentage of their salary -- up to 100%. For every dollar that an
eligible employee contributes through payroll withholding either to the
401(k) Plan or the Deferred Compensation Plan, up to a maximum of 3% of
compensation for both Plans combined, the company also contributes one
dollar. The employer contribution to the 401(k) Plan vests after the
employee's third year of employment. The employer contribution to the
Deferred Compensation Plan vests immediately. The amounts listed for
1997, 1996 and 1995 for Messrs. Balmuth, Wilmore and Gluck and Ms.
Jamieson and Ms. Levy consist of company contributions made for the
account of these executive officers under the company's 401(k) Plan
and/or the Deferred Compensation Plan.
9
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information with respect to the
Named Executive Officers concerning the grant of stock options
under the company's 1992 Stock Option Plan during fiscal 1997
There are no provisions under the terms of this Plan for the granting of
Stock Appreciation Rights (SARs).
Individual Grants
% of Total
Number of Options Potential Realizable
Securities Granted to Exercise Value at Assumed Annual
Underlying Employees or Base Rates of Stock Price Appreciation
Options in Fiscal Price Expiration for Option Term
Name and Granted Year ($/Sh) Date
Principal Position 0% 5% 10%
MICHAEL BALMUTH 50,000 4.91% $25.875 3/20/07 $0 $813,632 $2,061,904
Vice Chairman of the Board
& Chief Executive Officer
MELVIN A. WILMORE 50,000 4.91% $25.875 3/20/07 $0 $813,632 $2,061,904
President &
Chief Operating Officer
BARRY S. GLUCK 16,000 1.57% $25.875 3/20/07 $0 $260,362 $659,809
Senior Vice President &
General Merchandising
Manager
IRENE A. JAMIESON 16,000 1.57% $25.875 3/20/07 $0 $260,362 $659,809
Senior Vice President &
General Merchandising
Manager
BARBARA LEVY 16,000 1.57% $25.875 3/20/07 $0 $260,362 $659,809
Senior Vice President &
General Merchandising
Manager
All Stockholders N/A N/A N/A N/A $0 $810,970,728 $2,055,170,997
Named executive officers' N/A N/A N/A N/A 0% 0.30% 0.30%
potential gain as a percent
of all stockholders'
potential gain
10
All options listed in the above table were granted on March 20,
1997, 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
1997 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 1,018,650 shares were granted in the form of non-
qualified stock options during fiscal 1997 to all participants
in the 1992 Stock Option Plan. No incentive stock options were
granted during 1997.
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
April 4, 1997, the last trading day of the fiscal month in
which the option grants in the above table were made, was
valued at $26.00, the closing price of Ross Stores, Inc.'s
common stock on that day.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
The following table provides information with respect to the Named
Executive Officers concerning the exercise of stock options during the
last fiscal year and unexercised options held as of the end of last
fiscal year.
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
Number of
Securities
Underlying Value of
Unexercised Unexercised
Options at In-the-Money
Fiscal Year-End Options at
Number of (#) Fiscal Year-End
Shares Value Exercisable/ ($)
Name and Acquired Realized Unexercisable Exercisable/
Principal Position on Exercise Unexercisable
MICHAEL BALMUTH 52,225 $1,033,040 74,861/0 $904,651/0
Vice Chairman of the Board
& Chief Executive Officer
MELVIN A. WILMORE 54,726 $1,165,402 75,834/0 $944,437/0
President &
Chief Operating Officer
BARRY S. GLUCK 35,000 $778,318 73,038/0 $1,509,004/0
Senior Vice President &
General Merchandising
Manager
IRENE A. JAMIESON 58,862 $1,316,676 55,502/0 $1,014,238/0
Senior Vice President &
General Merchandising
Manager
BARBARA LEVY 34,224 $807,936 32,668/0 $447,280/0
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 exercise price upon termination of the
optionee's
employment with the company. A portion of the exercisable shares shown
in the table above are unvested and subject to the right of repurchase by
the company if exercised before fully vested.
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 ($32.50) of Ross
Stores, Inc.'s common stock on January 30, 1998 (the last trading date of
the fiscal year), as reported on the Nasdaq National Market 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 also
seeks 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
the Named Executive Officers, consists of the following elements:
base salary, annual incentive bonus, restricted stock granted under
the 1988 Restricted Stock Plan ( "Restricted Stock Plan" ), stock
options granted under the 1992 Stock Option Plan ( "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 in value 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 a 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 compensation resulting from grants made
under the Option Plan will be fully deductible when an option is
exercised. The Committee also believes that payments under the
Incentive Compensation Plan will be fully deductible. Grants under
the company's 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. 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.
EXECUTIVE OFFICERS' 1997 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/her relative contribution in achieving the company's
strategic goals. During 1997, the average merit increase in base
salaries for all executive officers as a group was 6.7%.
13
ANNUAL INCENTIVE BONUS. The company's Incentive Compensation
Plan was adopted by the Board of Directors, effective May 1987, was
approved by the company's stockholders 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 pursuant to this formula. Potential awards
range 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.
The Incentive Compensation Plan for 1997 provided for awards to
executive officers that, at the targeted pre-tax earnings goal,
ranged from 35% to 65% of base salary. During fiscal 1997, the
company exceeded its targeted pre-tax earnings goal. Total payments
made under the Plan for fiscal 1997 to all executive officers as a
group represented approximately 82% of their total base salaries as
a group. Actual awards over the last three fiscal years have ranged
from 58% to 100% of the executive officers' base salaries.
STOCK AWARD PROGRAMS. The company's stock award programs
consist of the Restricted Stock Plan and the 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 and to protect
the company against outside offers of employment to key individuals,
as well as the factors listed 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 that
is 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 value of the company's common stock
appreciates over the value on the date of grant. All awards made in
fiscal 1997 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 exercise price.
CHIEF EXECUTIVE OFFICER'S 1997 COMPENSATION
A majority of the total potential compensation for Michael
Balmuth, the company's Chief Executive Officer, is in the form of an
annual incentive bonus and stock plan awards that may vary in value
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. Balmuth's 1997 incentive bonus and stock award
compensation were earned under the same plans made available to all
executive officers, as discussed above.
SALARY. Mr. Balmuth's base salary is established by the terms
of his employment agreement entered into with the company on
February 1, 1995, as amended, which extends through February 3,
2000, unless earlier extended, re-negotiated or terminated by the
parties. It provides for an
14
annual salary of not less than $575,000. Mr. Balmuth's 1997 annual
base salary of $632,000 represented a 8.2% increase over his 1996
base salary. (See " Employment Contracts, Termination of Employment
and Change in control Arrangements" for further discussion of Mr.
Balmuth's employment agreement.)
BONUS. The annual incentive bonus portion of Mr. Balmuth's
compensation was based on the company's achievement of targeted pre-
tax earnings, as established by the Committee. During fiscal 1997,
the company exceeded its targeted pre-tax earnings goal. Mr.
Balmuth received a bonus of $632,000 for 1997, which equaled 100% of
his base salary at year-end.
STOCK AWARDS. Mr. Balmuth received awards totaling 80,000
shares of restricted stock during 1997. During 1997, Mr. Balmuth
received options under the Option Plan for 50,000 shares of common
stock with an exercise price of $25.875, the closing price on the
date of grant.
The equity grants made to Mr. Balmuth were based primarily on the
equity value deemed necessary, in the Committee's and Board of
Directors' judgment, to ensure retention of Mr. Balmuth over the
vesting period of these shares. Secondary considerations, all
relatively equal in weight, in determining the size of his 1997
equity grants, were his past and expected future contributions to
the achievement of the company's strategic objectives and his
existing stock ownership position.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE
COMPANY'S BOARD OF DIRECTORS
GEORGE P. ORBAN, CHAIRMAN AND 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, Inc. common stock and the
comparative indices was $100 on January 31, 1993 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
1993 1994 1995 1996 1997 1998
ROSS STORES 100 60 49 93 193 308
S&P 500 100 113 113 157 199 252
S&P RETAIL COMPOSITE 100 96 89 96 115 170
16
Compensation of Directors
During fiscal 1997, directors who were not employees of the
company ("non-employee directors") received an annual retainer fee
of $27,000 (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 fiscal 1998, non-employee directors will receive an
annual retainer of $28,000 (paid quarterly), plus $1,000 for
attendance at each Board meeting and $500 for attendance at each
Board committee meeting. If more than one committee meeting is held
on the same day, each committee member receives payment for only one
committee meeting. During the term of his consultant agreement, Mr.
Ferber has waived his right to the non-employee director's fees.
Travel expenses are reimbursed. (See below for the discussion of Mr.
Ferber's agreement.)
Non-employee directors are eligible to receive stock options
granted automatically under the terms of the company's 1991 Outside
Directors Stock Option Plan (the "Directors Plan"), which is a
"formula plan." During fiscal 1997, Messrs. Ferber, Moldaw, Orban,
Schlein and Seiler and Ms. Weaver each automatically were granted an
option to purchase 2,000 shares of common stock under the Directors
Plan on March 18, 1997, with an exercise price of $26.625, which was
the closing price of the company's common stock as reported on the
Nasdaq National Market on such date. Mr. Ferber waived his right to
receive the initial grant of 10,000 shares. However, Mr. Ferber
remains eligible to receive the 2,000 shares granted annually under
the Directors Plan.
Stuart G. Moldaw. In addition to compensation received as a
non-employee 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 also pays the
annual premiums of $128,560 on a split dollar life insurance policy,
with a face value of $4 million. In the most recent fiscal year,
$81,430 of the premium was reported as taxable compensation to Mr.
Moldaw and approximately $47,130 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 on the executive medical
insurance for Mr. Moldaw and his spouse. (See also "Certain
Transactions.")
Norman A. Ferber. In addition to compensation received as a
non-employee Board member, the company and Norman A. Ferber, Chairman
of the Board, entered into an agreement on June 1, 1995 which most
recently was amended on November 20, 1997. The agreement extends
through January 31, 1999 ("Consultancy Termination Date"). Upon
notice from Mr. Ferber, at specified times, the Board will consider
extending the agreement for successive one-year periods.
Effective September 1, 1996, Mr. Ferber ceased to be Chief
Executive Officer and an employee of the company and was retained as
a consultant to the company. While he serves as a consultant to the
company, Mr. Ferber shall be paid a consulting fee of $83,333.33 per
month. At the time that Mr. Ferber became a consultant to the
company, all of his unvested restricted stock and stock options
became fully vested. 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 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.
Under the terms of the agreement, Mr. Ferber shall be paid a
guaranteed bonus of $761,000 for fiscal 1997. Additionally, the
company, or its successor, will continue Mr. Ferber's benefit
program including insurance payments and health care coverage under
the company's benefit plans, at no cost to Mr. Ferber, until his
death or the date of his 65th birthday, whichever occurs first.
In the event (i) Mr. Ferber's consultancy involuntarily
terminates due to disability; (ii) the company terminates his
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 consultant fee, including the
annual bonus for fiscal 1997, through the Consultancy Termination
Date or any extension thereof; and all stock options held by Mr.
Ferber would become fully vested. In the event there is a change in
control of the company, Mr. Ferber would be entitled to continued
payment of his then current
17
consulting fee, including any annual bonus, through the Consultancy
Termination Date or any extension thereof and all stock options held
by Mr. Ferber would become fully vested. In the event that Mr.
Ferber provides consulting services in connection with a change in
control, he shall receive a single payment of $1,500,000 upon the
consummation of the transaction even if the consummation is after
the Consultancy Termination Date or any extension thereof. Further,
he would be reimbursed for any excise taxes paid pursuant to
Internal Revenue Code Section 4999.
Compensation Committee Interlocks and Insider Participation
Mr. Orban and Mr. Schlein served on the Compensation Committee
of the Board of Directors for the past fiscal year. Mr. Orban is
the Chairman of the Compensation Committee and in January 1997
became Chief Executive Officer of Egghead.com, Inc., in addition to
being its Chairman of the Board. Melvin A. Wilmore also serves on
the Board of Directors of Egghead.com, Inc.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL ARRANGEMENTS
Michael Balmuth. The company and Michael Balmuth, Vice
Chairman of the Board and Chief Executive Officer, entered into an
employment agreement as of February 1, 1995 which was most recently
amended on May 19, 1997, with a term that currently runs through
February 3, 2000. Upon notice from Mr. Balmuth at specified times,
the Board will consider extending the term of the employment
agreement for successive two-year periods. The employment agreement
provides that Mr. Balmuth will receive an annual salary of not less
than $575,000. 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 will be vested pro rata as of the date of his termination
based upon vesting in equal monthly installments from the date of
grant.
In the event there is a change in control of the company, the
term of the employment agreement shall continue until the later of
(a) the Remaining Term (as defined below) or (b) the expiration of
any extension to the employment agreement. Mr. Balmuth would be
entitled to continued payment of his then current salary and annual
bonus. In addition to these payments, Mr. Balmuth would receive
$1,500,000 per year payable with his salary for two years after the
effective date of the change in control ("Remaining Term").
Further, all restricted stock held by Mr. Balmuth would become fully
vested. All unvested stock options would either be assumed by the
acquiring or successor corporation or become fully vested as
described below. Additionally, 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 which was most recently amended on
May 19, 1997, with a term that currently runs through February 3,
2000. Upon notice from Mr. Wilmore at specified times, the Board
will consider extending the term of the employment agreement for
successive two-year periods. The employment agreement provides that
Mr. Wilmore will receive an annual salary of not less than $550,000.
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 and he would be entitled to
certain restricted stock shares which will be vested pro rata as of
the date of his termination based upon vesting in equal monthly
installments from the date of grant.
18
In the event there is a change in control of the company, the
term of the employment agreement shall continue until the later of
(a) the Remaining Term (as defined below) or (b) the expiration of
any extension to the employment agreement. Mr. Wilmore would be
entitled to continued payment of his then current salary and annual
bonus. In addition to these payments, Mr. Wilmore would receive
$1,500,000 per year payable with his salary for two years after the
effective date of the change in control ("Remaining Term").
Further, all restricted stock held by Mr. Wilmore would become fully
vested. All unvested stock options would either be assumed by the
acquiring or successor corporation or become fully vested as
described below. Additionally, he would be reimbursed for any
excise taxes paid pursuant to Internal Revenue Code Section 4999.
Barry S. Gluck, Irene A. Jamieson and Barbara Levy. The company
entered into employment agreements with its Senior Vice Presidents
and General Merchandising Managers -- Barry S. Gluck, Irene A.
Jamieson and Barbara Levy on March 1, 1996 and amended on September
1, 1996 and March 1, 1998. The terms are the same for each
employment agreement, unless otherwise noted. The term of each
employment agreement extends through March 1, 2002. Upon notice
from the officer, at specified times, the Board will consider
extending the term of the agreement for successive three-year
periods. The agreements with Mr. Gluck and Ms. Levy provide that
each will receive an annual salary of not less than $330,000. The
agreement with Ms. Jamieson provides that she will receive an annual
salary of not less than $310,000. 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 pro rata
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
term of the each officer's employment agreement shall continue until
the later of (a) the Remaining Term (as defined below) or (b) the
expiration of any extension to the employment agreement. The
officer would be entitled to continued payment of his or her then
current salary and annual bonus. In addition to these payments, the
officer would receive $750,000 per year payable with his or her
salary for two years after the effective date of the change in
control ("Remaining Term"). Further, all restricted stock held by
the officer would become fully vested. All unvested stock options
would either be assumed by the acquiring or successor corporation or
become fully vested 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 Restricted Stock Plan and Option Plan.
Under the terms of the individual agreements for each participant in
the company's Restricted Stock Plan and 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 merger 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.
19
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, 1998 was $300,000.
The company leases one store in Roseville, California and,
until June 18, 1997, one store 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 1997, the company paid $262,500
in rent. Mr. Moldaw's and his trusts' interests in the partnership
total 40.4%. The Dublin, California store was leased from a
partnership in which Mr. Moldaw, trusts established by Mr. Moldaw
and members of his family were limited partners until June 18, 1997.
From February 2, 1997 to June 18, 1997, the company paid $73,071 in
rent. Mr. Moldaw's and his family's interests in the partnership
totaled 86.6%. 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.
20
PROPOSAL 1
ELECT CLASS III 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 AND BOARD OF DIRECTORS' RECOMMENDATION
The plurality of the votes cast by the shares of common stock
present or represented by proxy 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
1992 STOCK OPTION PLAN
APPROVE AN AMENDMENT TO INCREASE THE SHARE RESERVE
BACKGROUND
The Board has adopted, subject to stockholder approval, an
amendment to the Option Plan which increases the number of shares
which may be issued pursuant to the exercise of options granted or
to be granted under the Option Plan by 2,300,000 shares of Common
Stock (the "Amendment").
SUPPORTING ARGUMENTS FOR INCREASING THE SHARE RESERVE FOR THE OPTION
PLAN
The Board of Directors believes that the company's Option 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 Option 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 the Option Plan 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 significant amount of total compensation for
executives is at risk in the form of equity-based grants, including
stock options, with the goal of focusing management's attention on
developing and implementing strategies that will positively affect
the value of the stock over the long term. Further, the Option Plan
is a broad-based program with grants primarily directed to those
employees who can have a meaningful effect on the company's
performance.
21
The company's record-breaking financial results in 1997
indicate that this compensation strategy is working. During the
year, same store sales increased 10% on top of a 13% increase in
1996, and earnings per share rose 49% to $2.35 following an 82%
increase during 1996. Driving these gains were unprecedented levels
of operating profitability. Earnings before taxes and interest as
a percent of sales almost doubled from 5.2% in 1995 to 9.8% in 1997.
The Board of Directors and management strongly believe that the
ability to attract -- and more importantly retain -- what the
company considers to be the best talent available in the off-price
industry is the number one reason for this outstanding performance.
A key 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 -- management, buyers
and assistant buyers. Since 1992, the company has more than tripled
the size of its buying
organization, and further additions in this important area are
planned for 1998.
The company's Option Plan remains an important component of the
company's overall compensation program that enables Ross to attract,
motivate and retain the top performers necessary to compete in
today's competitive environment for apparel retailers. This
proposal requests stockholder approval to increase the Option Plan
reserve by 2.3 million shares, or less than 5% of total common stock
outstanding.
The Board of Directors and management are also sensitive to
potential dilution from the company's equity plans. Over the past
five years, the Board of Directors has authorized stock repurchase
programs that work in tandem with the equity plans to enhance
stockholder returns. Buying back stock has helped Ross to recruit
and retain the people responsible for the company's outstanding
financial performance in recent years without unduly diluting
current stockholders' ownership.
In the most recent fiscal year, the company repurchased a total
of 3.0 million shares at an aggregate cost of $98 million, which
contributed to a 1.4 million reduction in shares outstanding by the
end of 1997. Subsequently, in January 1998, the Board of Directors
authorized the repurchase of an additional $110 million of common
stock. This dollar amount represents more than 5% of existing
shares outstanding based on current stock prices. If completed as
planned in fiscal 1998, in just one year this new repurchase program
could more than offset the entire requested share increase for the
Option Plan.
The company's Board of Directors and management firmly believe
that effective equity compensation programs have provided Ross with
a key advantage in today's increasingly competitive environment for
apparel retailers, and in particular, the off-price sector.
Approval of this Proxy proposal is critical to enabling the company
to continue to make progress in 1998 and beyond.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
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 and 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 AMENDMENT TO THE OPTION PLAN TO INCREASE
THE SHARE RESERVE.
22
SUMMARY OF THE OPTION PLAN
The following summary of the Option Plan is qualified in its
entirety by the specific language of the Option Plan, as amended.
Copies of the Option Plan are available to any stockholder upon
request to the Investor Relations Department, Ross Stores, Inc.,
8333 Central Avenue, Newark, California 94560.
The Option Plan is administered by the Board of Directors or a
committee of members of the Board appointed by the Board. Options
granted, which may either be nonqualified stock options or incentive
stock options, provide a right to purchase shares of the company's
Common Stock. All options must be granted, if at all, by March 16,
2002.
Subject to approval by the stockholders, in January 1998, the
Board amended the plan to increase the aggregate number of shares
issuable under the Option Plan by 2,300,000 shares, subject to
adjustment for stock splits or other changes in the company's
capital structure. As of April 3, 1998, 740,597 shares remain
available for future stock option grants and 2,589,521 shares are
outstanding and eligible for exercise. In addition, the Option Plan
limits the number of shares for which options may be granted to any
employee within any fiscal year to no more than 492,655 shares. The
Option Plan provides that appropriate adjustments will be made to
the share reserve, the limitation on the maximum size of option
grants, and to outstanding options 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 outstanding option expires or
terminates prior to exercise in full or if shares issued upon the
exercise of an option are repurchased by the company, the shares for
which the option is not exercised or the repurchased shares are
returned to the Option Plan and become available for future grants.
All employees (including officers) of the company, persons who
become employees within thirty (30) days of the date of the grant of
an option, and consultants may, in the discretion of the Board, be
granted options under the Option Plan. Non-employee members of the
Board of Directors are ineligible to participate under the Option
Plan. As of April 3, 1998, approximately 700 persons were eligible
to participate in the Option Plan. The Board presently has
established a policy of granting options which are nonqualified
stock options for purposes of federal tax law.
Options granted under the Option Plan are evidenced by written
agreements specifying the number of shares covered thereby and the
option price, which shall not be less than the fair market value of
the shares as of the date of the grant of the option. Generally,
any stock options not exercised within ten years of the date of
grant expire and the shares subject to the option become available
for future grants. The Board has the authority to select the
optionee, fix the number of shares to be covered by each option,
determine the fair market value of the common stock, and determine
the manner of vesting and exercisability of the option. Unless
otherwise specified by the Board, all options are immediately
exercisable, subject to the company's right to repurchase unvested
shares at the optionee's original per share cost in the event that
the optionee's employment with the company terminates. The Board
typically grants options that provide for vesting in progressively
increasing monthly increments over a three or four year period.
Shares subject to an option granted under the Option Plan may
be purchased for cash, by check or cash equivalent, by tender of
certain shares of the company's Common Stock owned by the optionee
having a fair market value not less than the option price, by
minimum cash down payment and the optionee's promissory note for the
balance (if permitted by the Board of Directors), by the assignment
of the proceeds of a sale of some or all of the shares of Common
Stock being acquired upon the exercise of the option, or by any
combination of these methods.
During the lifetime of the optionee, the option may be
exercised only by the optionee. An option may not be transferred or
assigned, except by beneficiary designation, by will, or by the laws
of descent and distribution or, if provided in the specific option
agreement, by nonqualified option transfers based on certain court
orders. Unless otherwise provided by the Board, in the event an
optionee ceases to be an employee of the company for any reason,
except death or disability,
the optionee may exercise an option in order to purchase vested
shares within three months after the date of termination of
employment, but
23
in any event no later than the date of expiration of the option. In
the event of termination of employment due to death or disability,
an optionee (or the optionee's legal representative) may exercise an
option in order to purchase vested shares within twelve months after
such date of termination of employment (to the extent exercisable on
that date), but in any event no later than the date of expiration of
the option.
Generally, in the event of certain mergers or acquisitions of
the voting stock or assets of the company constituting a change in
control, the Board of Directors, in its sole discretion, will either
provide that all shares acquired upon exercise of options will
become fully vested shares or arrange for the acquiring corporation
to assume all outstanding options. To the extent that options are
neither exercised as of the date of the change-of-control nor
assumed by the acquiring corporation, they will terminate.
The Board may terminate or amend the Option Plan at any time,
but, without the approval of the company's stockholders, the Board
may not amend the Option Plan to increase the number of shares
subject thereto or to change the class of persons eligible to
receive options under the Option Plan.
SUMMARY OF THE FEDERAL TAX CONSEQUENCES OF THE OPTION 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 Option Plan.
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 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. If the optionee is an employee, such ordinary income
generally is subject to withholding of income and employment taxes.
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
Securities Exchange Act of 1934 (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, unless the optionee makes a timely election to
treat the exercise date as the Determination Date. 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 Determination
Date, will be taxed as a capital gain or loss. A capital gain or
loss will be mid-term if the optionee has held the shares more than
twelve (12) months from the Determination Date and less than
eighteen (18) months and a day. A capital gain or loss will be long-
term if the optionee has held the shares more than eighteen (18)
months. 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 a nonqualified stock option, subject to
the requirements of reasonableness, satisfaction of a withholding
obligation and satisfaction of the limits in deductible compensation
paid to certain executives imposed under Section 162(m)
of the Code.
Section 162(m) of the Code. Section 162(m) of the Code denies
a deduction to any publicly held corporation for compensation paid
to certain executives in a taxable year to the extent that
compensation exceeds $1 million for certain executive officers.
Certain kinds of compensation, including qualified "performance-
based compensation," are disregarded for purposes of the deduction
limitation. In accordance with proposed Section 162(m) regulations,
compensation attributable to stock options will qualify as
performance-based compensation, provided that: (i) the stock award
plan contains a per employee limitation on the number of shares for
which stock options and stock appreciation rights may be granted
during a specified period; (ii) the per employee limitation is
approved by the stockholders; (iii) the award is granted by a
compensation committee comprised solely of "outside directors"; and
(iv) the exercise price of the award is no less than the fair market
value of the stock on the date of the grant. Compensation received
from grants made under the Option Plan are treated as performance-
based compensation and, therefore, are excluded for purposes of
calculating the $1 million deduction limit.
24
Incentive Stock Options. The company currently does not have
any Incentive Stock Option grants outstanding nor does it have any
plans to grant them.
The stock option grants to be made under the Option Plan for
the remainder of fiscal 1998 and future years are not determinable
now. The following table shows the grants made to the indicated
executive officers and groups for fiscal 1998, as of April 3, 1998,
under the Option Plan. The company anticipates that for fiscal
1998, these amounts will be approximately 87% of the options
granted. Any grants made under the Option 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
Option Plan.
1992 STOCK OPTION PLAN
NAME AND POSITION DOLLAR
VALUE NUMBER OF
(1) SHARES
MICHAEL BALMUTH $144,375 35,000
Vice Chairman & Chief Executive Officer
MELVIN A. WILMORE $144,375 35,000
President & Chief Operating Officer
BARRY S. GLUCK $49,500 12,000
Senior Vice President & General
Merchandising Manager
IRENE A. JAMIESON $49,500 12,000
Senior Vice President & General
Merchandising Manager
BARBARA LEVY $49,500 12,000
Senior Vice President & General Merchandising
Manager
All Executive Officers as a group $581,625 141,000
(9 persons, including the above)
Non-Executive Officers as a group (33 $641,850 155,600
persons)
All employees as a group (excluding the $1,511,379 366,395
company's officers)
1 Based on the difference between the exercise price of the options
($42.00) and the fair market value of the company's common stock on
April 3, 1998 ($46.125). All options are granted with an exercise
price equal to the fair market value as determined by the closing price
as reported by the Nasdaq National Market on the date of the grant.
PROPOSAL 3
APPROVE AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
BACKGROUND
Under Delaware law, the company may only issue shares of Common
Stock to the extent such shares have been authorized for issuance
under the company's Certificate of Incorporation ("Certificate").
The Certificate currently authorizes the issuance by the company of
up to 100,000,000 shares of Common Stock, $0.01 par value. However,
as of April 3, 1998, 47,950,192 shares of the company's Common Stock
were issued and outstanding and 6,331,653 unissued shares of Common
Stock were reserved for issuance under the company's equity
compensation plans, leaving 45,718,155 shares of Common Stock
unissued and unreserved. If the company's stockholders approve
Proposal 2, regarding an increase in the maximum number of shares
issuable under the company's Option Plan, only 43,418,155 shares of
Common Stock will remain unissued and unreserved. In order to
ensure sufficient shares of Common Stock will be available for
issuance by the company, the Board of Directors on March
25
19, 1998 approved, subject to stockholder approval, amending the
company's Certificate of Incorporation to increase the number of
shares of such Common Stock authorized for issuance from 100,000,000
to 170,000,000.
PURPOSE AND EFFECT OF THE AMENDMENT
The principal purpose of the proposed amendment to the
Certificate is to authorize additional shares of Common Stock which
will be available in the event the Board of Directors determines
that it is necessary or appropriate to permit future stock dividends
or stock splits, to raise additional capital through the sale of
equity securities, to acquire another company or its assets, to
establish strategic relationships with corporate partners, provide
equity incentives to employees and officers or other corporate
purposes. The company declared and paid a two-for-one stock
dividend in March 1997. The Board of Directors has no current
intention to split the outstanding Common Stock by declaring a stock
dividend, and the declaration and payment of such a stock dividend
by the Board would be contingent upon several factors, including the
market price of the company's stock, the company's expectations
about future performance, and the company's beliefs about general
stock market trends. The availability of additional shares of
Common Stock is particularly important in the event that the Board
of Directors needs to undertake any of the foregoing actions on an
expedited basis and thus to avoid the time and expense of seeking
stockholder approval in connection with the contemplated issuance of
Common Stock. The Board of Directors has no present agreement,
arrangement or intention to issue any of the shares for which
approval is sought. If the amendment is approved by the
stockholders, the Board of Directors does not intend
to solicit further stockholder approval prior to the issuance of any
additional shares of Common Stock, except as may be required by
applicable law.
The increase in authorized Common Stock will not have any
immediate effect on the rights of existing stockholders. However,
the Board will have the authority to issue authorized Common Stock
without requiring future stockholder approval of such issuances,
except as may be required by applicable law. To the extent that
additional authorized shares are issued in the future, they may
decrease the existing stockholders' percentage equity ownership and,
depending on the price at which they are issued, could be dilutive
to the existing stockholders. The holders of Common Stock have no
preemptive rights and the Board of Directors has no plans to grant
such rights with respect to any such shares.
The increase in the authorized number of shares of Common Stock
and the subsequent issuance of such shares could have the effect of
delaying or preventing a change in control of the company without
further action by the stockholders. Shares of authorized and
unissued Common Stock could, within the limits imposed by applicable
law, be issued in one or more transactions which would make a change
in control of the company more difficult, and therefore less likely.
Any such issuance of additional stock could have the effect of
diluting the earnings per share and book value per share of
outstanding shares of Common Stock and such additional shares could
be used to dilute the stock ownership or voting rights of a person
seeking to obtain control of the Company.
The Board of Directors is not currently aware of any attempt to
take over or acquire the company. While it may be deemed to have
potential anti-takeover effects, the proposed amendment to increase
the authorized Common Stock is not prompted by any specific effort
or takeover threat currently perceived by management.
If the proposed amendment is approved by the stockholders,
Article Fourth (A) of the company's Certificate of Incorporation
will be amended to read as follows:
A. Capitalization. The total number of shares of all
classes of stock which the Corporation will have authority to
issue is One Hundred Seventy Four Million (174,000,000),
consisting of
1. Four Million (4,000,000) shares of Preferred Stock,
par value one cent ($.01) per share (the "Preferred Stock");
and
2. One Hundred Seventy Million (170,000,000) shares of
Common Stock, par value one cent ($.01) per share (the "Common
Stock").
26
The additional shares of Common Stock to be authorized pursuant
to the proposed amendment will have a par value of $.01 per share
and be of the same class of Common Stock as is currently authorized
under the Certificate. The company does not have any current
intentions, plans, arrangements, commitments or understandings to
issue any shares of its capital stock except in connection with its
existing stock option and purchase plans and as stock dividends to
holders of outstanding stock.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the shares of outstanding
Common Stock is required for approval of this proposal. Abstentions
and broker non-votes will be counted as present for purposes of
determining if a quorum is present. Abstentions and broker non-
votes will have the same effect as a negative vote on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT TO THE CERTIFICATE
OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 100,000,000 TO 170,000,000 SHARES.
PROPOSAL 4
RATIFY 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 January 30, 1999. 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 AND BOARD OF DIRECTORS' RECOMMENDATION
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 JANUARY 30, 1999
27
PROXY SOLICITATION
The cost of solicitation of proxies will be borne by the
company. The company has retained Financial Relations Board to
assist in soliciting proxies by mail, telephone and personal
interview for a fee of approximately $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.
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 28, 1998 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,
John G. Call
Corporate Secretary
Dated: April 24, 1998
ROSS STORES, INC.
SECOND AMENDED AND RESTATED
1992 STOCK OPTION PLAN
Introduction. On February 24, 1984, the Ross Stores, Inc. 1984
Stock Option Plan (the "Initial Plan") was adopted. The Initial Plan
has been amended from time to time. On March 16, 1992, the Initial
Plan was amended and restated in its entirety and renamed the Ross
Stores, Inc. 1992 Stock Option Plan (the "1992 Plan"), and has been
subsequently amended from time to time, once in the form of an
amendment and restatement. The 1992 Plan is hereby amended and
restated in its entirety (the "Plan"), effective as of the date of
the 1998 Annual Meeting of the Stockholders of Ross Stores, Inc.
1. Purpose.
(a) The purpose of the Plan is to provide a means by
which selected employees and directors of and consultants to Ross
Stores, Inc. (the "Company") and its Affiliates, may be given an
opportunity to benefit from increases in value of the stock of the
Company through the granting of incentive stock options and
nonqualified stock options.
(b) The Company, by means of the Plan, seeks to retain
the services of persons who are now employees or directors of or
consultants to the Company or its Affiliates, to secure and retain
the services of new employees, directors and consultants, and to
provide incentives for such persons to exert maximum efforts for the
success of the Company and its Affiliates.
2. Administration.
(a) The Plan shall be administered by the Board of
Directors (the "Board") unless and until the Board delegates
administration to a Committee as provided in subparagraph 2(c).
(b) The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the
persons eligible under the Plan shall be granted an option under the
Plan (an "Option"); when and how each Option shall be granted;
whether an Option will be an incentive stock option as defined in
section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") or a nonqualified stock option; the provisions of each
Option granted (which need not be identical), including the time or
times such Option may be exercised in whole or in part; and the
number of shares for which an Option shall be granted to each such
person.
(ii) To construe and interpret the Plan and Options
granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of
this power, may correct any defect, omission or inconsistency in the
Plan or in any option agreement, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iii) To amend the Plan as provided in paragraph 12.
(iv) Generally, to exercise such powers and to
perform such acts as the Board deems necessary or expedient to
promote the best interests of the Company, which are not in conflict
with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to
a committee composed of two (2) or more members (the "Committee"),
all of the members of which Committee may be, in the discretion of
the Board, Non-Employee Directors and/or Outside Directors. If
administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate
to a subcommittee of two (2) or more directors (who may or may not
be Outside Directors or Non-Employee Directors) any of the
administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the
Committee or such a subcommittee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as
may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this
paragraph 2 to the contrary, the Board or the Committee may delegate
to a committee of one (1) or more members of the Board the authority
to grant Options to eligible persons who: (1) are not then subject
to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and/or (2) are either (i) not then Covered
Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Option, or (ii) not
persons with respect to whom the Company wishes to comply with
section 162(m) of the Code.
(d) "Affiliate" means any parent corporation or
subsidiary corporation, whether now or hereafter existing, as those
terms are defined in Sections 424(e) and (f) respectively, of the
Code.
(e) "Covered Employee" means the chief executive officer
and the four (4) other highest compensated officers of the Company
for whom total compensation is required to be reported to
stockholders under the Exchange Act, as determined for purposes of
Section 162(m) of the Code.
(f) "Non-Employee Director" means a Director who either
(i) is not a current employee or officer of the Company or its
parent or subsidiary, does not receive compensation (directly or
indirectly) from the Company or its parent or subsidiary for
services rendered as
a consultant or in any capacity other than as a director (except for
an amount as to which disclosure would not be required under Item
404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item
404(a) of Regulation S-K, and is not engaged in a business
relationship as to which disclosure would be required under Item
404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(g) "Outside Director" means a director who either (i) is
not a current employee of the Company or an "affiliated corporation"
(as defined in the Treasury regulations promulgated under section
162(m) of the Code), is not a former employee of the Company or an
"affiliated corporation" receiving compensation for prior services
(other than benefits under a tax-qualified pension plan), was not an
officer of the Company or an "affiliated corporation" at any time,
and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any
capacity other than as a director, or (ii) is otherwise considered
an "outside director" for purposes of section 162(m) of the Code.
(h) "Securities Act" means the Securities Act of 1933, as
amended.
3. Eligibility.
(a) The Options may be granted only to employees
(including officers and directors), persons who become employees
within thirty (30) days of the date of grant of an Option and
consultants of the Company. The Board shall, in the Board's sole
discretion, determine which persons shall be granted Options (an
"Optionee"). Incentive stock options may be granted only to
employees. Nonqualified stock options may be granted only to
employees, directors and consultants. A Non-Employee Director shall
not be eligible to receive the grant of an Option, even if providing
consulting services to the Company.
(b) To the extent that the aggregate fair market value
(determined at the time of grant) of stock with respect to which
incentive stock options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company
and its Affiliates) exceeds one hundred thousand dollars ($100,000),
the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as
nonqualified stock options.
(c) Subject to the provisions of paragraph 7 relating to
adjustments upon changes in stock, no person shall be eligible to be
granted Options covering more than that number of shares equal to
two percent (2%) of the Company's outstanding common stock on April
10, 1995, the record date for the Company's 1995 Annual Meeting of
Stockholders (or four hundred ninety-two thousand six hundred fifty-
five (492,655)) shares of the Company's common stock during any
calendar year.
4. Shares Subject to the Plan. The maximum number of shares
which may be issued under the Plan shall be nine million nine
hundred thousand (9,900,000) shares of the Company's authorized but
unissued common stock or treasury stock, subject to the provisions
of paragraph 7 relating to adjustments upon changes in stock. In
the event that any outstanding Option for any reason expires or is
terminated and/or shares subject to repurchase are repurchased by
the Company, the shares of common stock allocable to the unexercised
portion of such Option, or so repurchased, may again be subjected to
an Option.
5. Time for Granting Options. All Options shall be granted,
if at all, within ten (10) years from March 16, 1992.
6. Terms, Conditions and Form of Options. Subject to the
provisions of the Plan, the Board shall determine for each Option
(which need not be identical) the number of shares for which the
Option shall be granted, the option price of the Option, the
exercisability of the Option, whether the Option is a nonqualified
stock option or an incentive stock option, and all other terms and
conditions of the Option not inconsistent with this paragraph 6.
All Options shall be separately designated incentive stock options
or nonqualified stock options at the time of grant, and a separate
certificate or certificates will be issued for shares purchased on
exercise of each type of Option. Options granted pursuant to the
Plan shall be evidenced by written agreements specifying the number
of shares covered thereby, in such form as the Board shall from time
to time establish, and shall comply with and be subject to the
following terms and conditions:
(a) The exercise price shall be not less than one hundred
percent (100%) of the fair market value, as determined by the Board,
of the stock of the Company subject to the Option on the date the
Option is granted, except that the exercise price for an incentive
stock option granted to any person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes
of stock of the Company or of any of its Affiliates (a "Ten Percent
Owner Optionee") shall be not less than one hundred ten percent
(110%) of the fair market value of the stock of the Company subject
to the incentive stock on the date the incentive stock option is
granted. Notwithstanding the foregoing, an Option (whether an
incentive stock option or a nonqualified stock option) may be
granted with an exercise price (other than that set forth in the
preceding sentence if such Option is granted pursuant to an
assumption or substitution for another Option in a manner satisfying
the provisions of Section 424(a) of the Code.
(b) Exercise Period of Options. The Board shall have the
power to set the time or times within which each Option shall be
exercisable or the event or events upon the occurrence of which all
or a portion of each Option shall be exercisable and the term of
each Option; provided, however, that no incentive stock option shall
be exercisable after the expiration of ten (10) years from the date
such Option is granted, no nonqualified stock option shall be
exercisable after the expiration of ten (10) years and one (1) month
from the date such Option is granted, and provided further that no
Option which is an incentive stock option granted to a Ten Percent
Owner Optionee shall be exercisable after the expiration of five (5)
years from the date such Option is granted.
(c) Payment of Option Price. Payment of the exercise
price for the number of shares being purchased pursuant to any
Option shall be made to the extent permitted by applicable statutes
and regulations, either (i) in cash or by check or (ii) at the
discretion of the Board, at the time of the grant of the Option,
under one of the following alternatives:
(i) Provided that at the time of exercise the common
stock is publicly traded pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which, prior to the
issuance of common stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to
pay the aggregate exercise price to the Company from the sales
proceeds;
(ii) Provided that at the time of exercise the common
stock is publicly traded by delivery of already-owned shares of common stock,
held for the period required to avoid a charge to the Company's reported
earnings, and owned free and clear of any liens, claims,
encumbrances or security interests, which common stock shall be
valued at its fair market value on the date of exercise;
(iii) Pursuant to a deferred payment alternative,
provided that, at any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value" (as defined in
the Delaware General Corporation Law) shall not be made by deferred
payment, the principal shall be due and payable not more than four
(4) years after the Option is granted, interest shall be payable at
least annually and be at least equal to the minimum interest rate to
avoid imputed interest pursuant to all applicable sections of the
Code, and the Board shall have the authority from time to time to
permit the Optionee to secure any promissory note used to exercise
an Option with collateral other than the Company's common stock.
(iv) In any other form of legal consideration that
may be acceptable to the Board; or
(v) By any combination of the above methods.
Notwithstanding the foregoing, in the event the Company at any
time becomes subject to the regulations promulgated by the Board of
Governors of the Federal Reserve System affecting the extension of
credit in connection with the Company's securities, any promissory
note shall not initially exceed the maximum loan value of the
collateral as defined by applicable regulations and the Optionee
shall prepay, at the request of the Company, any promissory note to
the extent necessary to permit the Company to comply with applicable
regulations. 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.
(d) Option Transferability. An incentive stock option
shall not be transferable except by will or by the laws of descent
and distribution, and shall be exercisable during the lifetime of
the person to whom the incentive stock option is granted only by
such person. A nonqualified stock option may be transferable to the
extent expressly provided in the option agreement provided, however,
that if the Option agreement does not specifically provide for
transferability, then such nonqualified stock option shall not be
transferable except by will or by the laws of descent and
distribution or pursuant to a domestic relations order, and shall be
exercisable during the lifetime of the person to whom the
nonqualified stock option is granted only by such person or any
transferee pursuant to a domestic relations order. Notwithstanding
the foregoing, the person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to
the Company, designate a third party who, in the event of the death
of the person to whom such Option was granted, shall thereafter be
entitled to exercise the Option, or as the Board or Committee shall
determine in its discretion.
(e) Early Exercise. The Option may, but need not,
include a provision whereby the Optionee may elect at any time
before such Optionee terminates service with the Company to exercise
the Option as to any part or all of the shares subject to the Option
prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the
Company or any other restriction the Board determines appropriate.
(f) Standard Option Terms.
(i) Incentive Stock Options. Unless otherwise
provided for by the Board at the time an Option is granted, an
Option designated by the Board as an "Incentive Stock Option" shall
comply with and be subject to the terms and conditions set forth in
the form of Incentive Stock Option Agreement.
(ii) Nonqualified Stock Options. Unless otherwise
provided for by the Board at the time an Option is granted, an
Option designated by the Board as a "Nonqualified Stock Option"
shall comply with and be subject to the terms and conditions set
forth in the form of Nonqualified Stock Option Agreement.
(iii) Authority to Vary Terms. The Board shall
have the authority from time to time to vary the terms of the option
agreements 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 option agreements 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 not immediately
exercisable; provided, however, that in the event of (1) a merger in
which the Company is not the surviving corporation, (2) the sale or
exchange by the stockholders of the Company of all or substantially
all of the stock of the Company where the stockholders before such
sale or exchange do not retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock of the
Company, or (3) the sale or exchange of all or substantially all of
the Company's assets (other than a sale or transfer to a subsidiary
of the Company as defined in section 424(f) of the Code), any
outstanding Options which are not immediately exercisable under
their terms, shall become fully exercisable prior to consummation of
such merger or sale of assets at such time as the Board shall
determine; or the surviving or acquiring corporation, as a condition
precedent to consummation of such merger or sale of assets shall
assume the outstanding Options or issue substitute Options.
7. Effect of Change in Stock Subject to Plan. Appropriate
adjustments shall be made in the number and class of shares of stock
subject to the Plan, the maximum number of shares subject to award
to any person during any calendar year pursuant to subparagraph
3(c), and to any outstanding Options and in the exercise price of
any outstanding Options in the event any change is made in the stock
subject to the Plan, or subject to any Option, without the receipt
of consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend,
dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in
corporate structure or other transaction not involving the receipt
of consideration by the Company). Such adjustments shall be made by
the Board, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the
receipt of consideration by the Company.")
8. Covenants Of The Company.
(a) During the terms of the Options, the Company shall
keep available at all times the number of shares of stock required
to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such
authority as may be required to grant Options and to issue and sell
shares of common stock upon exercise of the Options; provided,
however, that this undertaking shall not require the Company to
register under the
Securities Act the Plan, any Options or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or
agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue
and sell stock upon exercise of such Options unless and until such
authority is obtained.
9. Use Of Proceeds From Stock.
Proceeds from the sale of stock pursuant to Options shall
constitute general funds of the Company.
10. Miscellaneous.
(a) The Board shall have the power to accelerate the time
at which an Option may first be exercised or the time during which
an Option or any part thereof will vest, notwithstanding the
provisions in the Option stating the time at which it may first be
exercised or the time during which it will vest.
(b) No Optionee shall be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares
subject to such Option unless and until such person has satisfied
all requirements for exercise of the Option pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or
Option granted pursuant thereto shall confer upon any Optionee any
right to continue in the employ of the Company or any Affiliate (or
to continue acting as a director or consultant) or shall affect the
right of the Company or any Affiliate to terminate the employment of
any employee with or without cause, the right of the Board and/or
the Company's stockholders to remove any director pursuant to the
terms of the Company's Bylaws and the provisions of applicable laws,
or the right to terminate the relationship of any consultant
pursuant to the terms of such consultant's agreement with the
Company or Affiliate to which such consultant is providing services.
(d) The Company may require any Optionee, or any person
to whom an Option is transferred pursuant to subsection 6(d), as a
condition of exercising or acquiring stock under any Option, (1) to
give written assurances satisfactory to the Company as to such
person's knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory
to the Company who is knowledgeable and experienced in financial and
business matters, and that he or she is capable of evaluating, alone
or together with the purchaser representative, the merits and risks
of exercising the Option; and (2) to give written assurances
satisfactory to the Company stating that such person is acquiring
the stock subject to the Option for such person's own account and
not with any present intention of selling or otherwise distributing
the stock. The foregoing requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise or acquisition of stock
under the Option has been registered under a then currently
effective registration statement under the Securities Act, or (ii)
as to any particular requirement, a determination is made by counsel
for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The
Company may require the holder of the Option to provide such other
representations, written assurances or information which the Company
shall determine is necessary, desirable or appropriate to comply
with applicable securities and other laws as a condition of granting
an Option to such person or permitting the holder of the Option to
exercise such Option. The Company may, upon advice of counsel to
the Company, place legends on stock certificates
issued under the Plan as such counsel deems necessary or appropriate
in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(e) To the extent provided by the terms of an Option
agreement, the Optionee may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of
stock under an Option by any of the following means or by a
combination of such means (in addition to the Company's right to
withhold from any compensation paid to the Optionee by the Company):
(1) tendering a cash payment; (2) authorizing the Company to
withhold shares from the shares of the common stock otherwise
issuable to the Optionee as a result of the exercise or acquisition
of stock under the Option; or (3) delivering to the Company owned
and unencumbered shares of the common stock of the Company.
11. Provision of Information. Each Optionee shall be given
information concerning the Company equivalent to that information
generally made available to the Company's common stockholders.
12. Amendment of The Plan.
(a) The Board at any time, and from time to time, may
amend the Plan. However, except as provided in paragraph 7 relating
to adjustments upon changes in stock, no amendment shall be
effective unless approved by the stockholders of the Company to the
extent stockholder approval is necessary for the Plan to satisfy the
requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other
amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the
requirements of Section 162(m) of the Code and the regulations
promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend
the Plan in any respect the Board deems necessary or advisable to
provide eligible employees with the maximum benefits provided or to
be provided under the provisions of the Code and the regulations
promulgated thereunder relating to incentive stock options and/or to
bring the Plan and/or incentive stock options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted
before amendment of the Plan shall not be impaired by any amendment
of the Plan unless (i) the Company requests the consent of the
Optionee and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may
amend the terms of any one or more Options; provided, however, that
the rights and obligations under any Option shall not be impaired by
any such amendment unless (i) the Company requests the consent of
the Optionee and (ii) such person consents in writing.
13. Termination Or Suspension Of The Plan.
(a) The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on March
15, 2002, which shall be within ten (10) years from the date the
Plan is adopted by the Board or approved by the stockholders of the
Company, whichever is earlier. No Options may be granted under the
Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while
the Plan is in effect shall not be impaired by suspension or
termination of the Plan, except with the written consent of the
Optionee.
14. Continuation of Initial Plan and 1992 Plan as to
Outstanding Options. Notwithstanding any other provision of the
Plan to the contrary, the terms of the Initial Plan and the 1992
Plan shall remain in effect and apply to Options granted pursuant to
such version of stock option plan.
15. Choice Of Law. All questions concerning the construction,
validity and interpretation of this Plan, shall be governed by the
law of the State of Delaware, without regard to such state's
conflict of laws rules.
Front:
PROXY
ROSS STORES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Michael Balmuth 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 28, 1998 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.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side)
YOUR VOTE IS IMPORTANT TO THE COMPANY
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. To elect for a three-year term three Class III Directors
proposed in the accompanying Proxy Statement.
Philip Schlein Norman A. Ferber Melvin A. Wilmore
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 1992 Stock Option Plan to
increase the share reserve by 2,300,000 shares.
FOR AGAINST ABSTAIN
PROPOSAL 3. To approve an amendment to the company's Certificate of
Incorporation to increase the number of shares of Common
Stock authorized thereunder by 70,000,000 shares from
100,000,000 to 170,000,000 shares.
FOR AGAINST ABSTAIN
PROPOSAL 4. To ratify the appointment of Deloitte & Touche LLP as
the company's independent certified public accountants
for the fiscal year ending January 30, 1999.
FOR AGAINST ABSTAIN
PROPOSAL 5. To transact such other business as may properly come
before the annual meeting or any adjournments or
postponements thereof.
The undersigned hereby acknowledges receipt of: (a) Notice of
Annual Meeting of Stockholders dated April 24, 1998; (b) the
accompanying Proxy Statement; and (c) the Annual Report to
Stockholders for the fiscal year ended January 31, 1998 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.
Signature
Dated , 1998
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.
