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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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ROSS STORES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ 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.:
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(3) Filing Party:
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(4) Date Filed:
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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 Stock
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 1992 Stock 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 Stock 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 authorized for issuance under equity plans,
including the proposed increase in the Stock Option Plan reserve,
approximately 43.4 million shares remain available for future issuance.
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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 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 the
entire requested share increase in the Stock 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. 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,
George P. Orban
Chairman, Compensation Committee
Ross Stores, Inc. Board of Directors
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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 the amendment to the 1992 Stock Option Plan to increase the
share reserve by 2,300,000 shares.
3. To approve an increase in the number of authorized shares of common
stock 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
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TABLE OF CONTENTS
PAGE
PROXY SOLICITATION. . . . . . . . . . . . . . . . . . . . . . . . . . 1
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . 2
INFORMATION REGARDING NOMINEES AND INCUMBENT DIRECTORS. . . . . . . . 4
COMPENSATION AND OTHER TRANSACTIONS WITH OFFICERS AND DIRECTORS . . . 7
Summary Compensation Table . . . . . . . . . . . . . . . . . . . 7
Option Grants in Last Fiscal Year. . . . . . . . . . . . . . . . 9
Aggregated Option Exercises and Year-End Value Table . . . . . . 11
Compensation Committee Report. . . . . . . . . . . . . . . . . . 12
Stockholder Return Performance Graph . . . . . . . . . . . . . . 15
Compensation of Directors. . . . . . . . . . . . . . . . . . . . 16
Compensation Committee Interlocks and Insider Participation. . . 17
Employment Contracts, Termination of Employment and
Change-In-Control Arrangements. . . . . . . . . . . . . . . 17
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . 19
PROPOSAL 1 - ELECT CLASS III DIRECTORS. . . . . . . . . . . . . . . . 20
PROPOSAL 2 - APPROVE AMENDMENT TO INCREASE THE SHARE . . . . . . . . 20
RESERVE OF THE 1992 STOCK OPTION PLAN
PROPOSAL 3 - APPROVE AMENDMENT TO CERTIFICATE OF. . . . . . . . . . . 24
INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
PROPOSAL 4 - RATIFICATION 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
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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 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.
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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.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER AND AMOUNT AND NATURE OF PERCENT OF COMMON
THE DIRECTORS AND EXECUTIVE OFFICERS BENEFICIAL OWNERSHIP (1) STOCK OUTSTANDING
------------------------------------ -------------------- -----------------
<S> <C> <C>
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 directors as a 1,721,211 (14) 3.55%
group (15 persons, including the executive
officers and directors named above)
</TABLE>
_____
*Less than 1%
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(1) To the knowledge of the company, the persons named in the table have sole
voting and investment power with respect to all shares of common stock
shown as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes to this
table.
(2) Information is as of December 31, 1997, pursuant to the 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. Includes options to purchase 2,000 shares of the company's
common stock exercisable within 60 days of April 3, 1998.
(5) Mr. Ferber. Immediately exercisable options to purchase 2,000 shares of
the company's common stock.
(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. Includes 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 at 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 Restricted 1988 Stock
Plan, all of which remain subject to vesting.
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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.
<TABLE>
<CAPTION>
PRINCIPAL POSITION DIRECTOR
DURING LAST FIVE YEARS AGE SINCE
---------------------- --- -----
NOMINEES FOR ELECTION AS CLASS III DIRECTORS FOR TERMS EXPIRING IN 2001
<S> <C> <C> <C>
Philip Schlein Partner of U.S. Venture Partners since April 63 1987
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 September 1996. 49 1987
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 Officer of the 52 1993
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.
</TABLE>
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<TABLE>
<CAPTION>
PRINCIPAL POSITION DIRECTOR
DURING LAST FIVE YEARS AGE SINCE
---------------------- --- -----
INCUMBENT CLASS I DIRECTORS WITH TERMS EXPIRING IN 1999
<S> <C> <C> <C>
Stuart G. Moldaw Consultant to the company. Chairman Emeritus of 71 1982
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 Executive Officer 52 1982
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 Seiler and Company, 69 1982
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 & London, Inc., an 54 1986
investor relations and corporate communications
firm. Director of Crown Vantage, Inc. and Hancock
Fabrics, Inc.
Michael Balmuth Vice Chairman of the Board and Chief Executive 47 1996
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.
</TABLE>
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
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goals under that plan, and (ii) the 1992 Stock Option Plan. Decisions by the
Compensation Committee relating to the compensation of the company's
executive officers are reviewed and ratified by the full Board of Directors.
NOMINATING COMMITTEE. During fiscal 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.
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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.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------------- ------------------------
Securities
Other Restricted Under- All Other
Annual Stock lying Compen-
Name and Salary (1) Bonus (2) Compensation Awards (3) Options sation (4)
Principal Position Year ($) ($) ($) ($) (#) ($)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MICHAEL BALMUTH 1997 $628,667 $632,000 $2,078 $2,070,000 50,000 $8,447
Vice Chairman of the Board & 1996 $522,750 $584,000 $0 $542,500 50,000 $6,993
Chief Executive Officer 1995 $427,333 $404,100 $7,980 $788,750 40,000 $7,033
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 Officer 1995 $477,333 $489,000 $1,773 $847,500 60,000 $4,625
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 Merchandising 1995 $288,167 $191,400 $4,523 $70,500 20,000 $6,356
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 Merchandising 1995 $250,000 $190,000 $2,655 $199,750 50,000 $4,533
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 Merchandising 1995 $288,167 $191,400 $466 $146,875 40,000 $4,512
Manager
</TABLE>
(1) 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
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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.
(2) Includes all payments made to those executive officers listed in the above
Table under the company's Incentive Compensation Plan as described in the
Compensation Committee Report below. 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.
(3) 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 Award, 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
that vest 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 Grant 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
$2,210,000. Dividends are payable to all holders of restricted stock at
the same rate as paid to all stockholders.
(4) The company's 401(k) Plan provides that eligible employees generally may
contribute by authorizing a pre-tax payroll deduction of a minimum of 1%
and a maximum of 15% of their base salary compensation. The Deferred
Compensation Plan, in addition to the 401(k) Plan, allows eligible
employees to contribute by authorizing a pre-tax payroll deduction of a
percentage of their salary -- up to 100%. For every dollar that an
eligible employee contributes through payroll withholding either to the
401(k) Plan or the Deferred Compensation Plan, up to a maximum of 3% of
compensation for both Plans combined, the company also contributes one
dollar. The employer contribution to the 401(k) Plan vests after the
employee's third year of employment. The employer contribution to the
Deferred Compensation Plan vests immediately. The amounts listed for 1997,
1996 and 1995 for Messrs. Balmuth, Wilmore and Gluck and Ms. Levy and
Ms. Jamieson consist of company contributions made for the account of
executive officers under the company's 401(k) Plan and/or the Deferred
Compensation Plan.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information with respect to the named executive
officers concerning the grant of stock options under the company's 1992 Stock
Option Plan during fiscal 1997 There are no provisions under the terms of this
Plan for the granting of Stock Appreciation Rights (SARs).
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------
% of Total
Number of Options Potential Realizable
Securities Granted to Exercise Value at Assumed Annual
Underlying Employees or Base Rates of Stock Price Appreciation
Options in Fiscal Price Expiration for Option Term (4)
Name and Granted Year ($/Sh) Date ----------------------------------
Principal Position (1) (2) (1) (3) 0% 5% 10%
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MICHAEL BALMUTH 50,000 4.91% $25.8750 3/20/07 $0 $813,632 $2,061,904
Vice Chairman of the Board & Chief
Executive Officer
MELVIN A. WILMORE 50,000 4.91% $25.8750 3/20/07 $0 $813,632 $2,061,904
President &
Chief Operating Officer
BARRY S. GLUCK 16,000 1.57% $25.8750 3/20/07 $0 $260,362 $659,809
Senior Vice President & General
Merchandising Manager
IRENE A. JAMIESON 16,000 1.57% $25.8750 3/20/07 $0 $260,362 $659,809
Senior Vice President & General
Merchandising Manager
BARBARA LEVY 16,000 1.57% $25.8750 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' gain as a
percent of all stockholders' gain N/A N/A N/A N/A 0% 0.30% 0.30%
</TABLE>
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(1) 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".
(2) 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.
(3) 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.
(4) 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 $26.00, the closing
price of Ross Stores, Inc.'s common stock.
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AGGREGATED OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table provides information with respect to the named
executive officers concerning the exercise of stock options during the last
fiscal year and unexercised options held as of the end of last fiscal year.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
------------------------------------------------------------------------
Number of
Securities
Underlying
Unexercised Value of Unexercised
Options at In-the-Money
Fiscal Year-En Options at
(#) Fiscal Year-End
Number of Exercisable/ ($)
Name and Shares Acquired Unexercisable Exercisable/
Principal Position on Exercise Value Realized (1) (2) Unexercisable (3)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
(1) 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.
(2) 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.
(3) 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.
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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 those
individuals named in the previous Tables, consists of the following elements:
base salary, annual incentive bonus, restricted stock granted under the 1988
Restricted Stock Plan, stock options granted under the 1992 Stock Option Plan
and other benefits typically offered to corporate executives. A majority of the
total potential compensation for the company's executive officers is in the form
of annual incentive bonuses and stock plan awards that may vary 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 1992
Stock 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 1988 Restricted Stock Plan do
not qualify as performance-based compensation and, therefore, may not be fully
deductible to the extent the vesting of restricted stock, when added to other
non-exempt compensation for a particular executive, exceeds the $1 million limit
in any tax year. 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%.
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ANNUAL INCENTIVE BONUS. The company's Incentive Compensation Plan was
adopted by the Board of Directors, effective May 1987, and is designed to allow
management to share in the company's success based on the company's attainment
of varying levels of pre-tax earnings. At the commencement of each fiscal year,
the Committee determines the incentive awards payable at varying levels of pre-
tax earnings achieved by the company. Such awards are expressed as a percentage
of year-end base salary and are payable in the form of cash bonuses after fiscal
year-end 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
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
1988 Restricted Stock Plan ( "Restricted Stock Plan" ) and the 1992 Stock Option
Plan ( "Option Plan" ). A majority of the members of the Board are not
employees of the company and are therefore not eligible to receive awards under
either the Restricted Stock Plan or the Option Plan. The Restricted Stock Plan
and the Option Plan were established with two important objectives: (i) to align
the financial interests of the company's stockholders and the executive officers
by providing incentives that focus management's attention on the successful
long-term strategic management of the business and appreciation in stockholder
value; and (ii) to recruit, motivate and retain a high-performing group of
senior and middle managers.
The Committee makes recommendations to the Board of Directors concerning
the granting of awards to executive officers from both the Restricted Stock Plan
and the Option Plan. The levels of stock awards granted to executive officers
under the Option Plan are based on the following factors: the executive
officer's position, past and expected future contributions to the achievement of
the company's strategic objectives, existing stock ownership position and the
level of previous stock awards. Each member of the Committee individually
weighs the above factors and then the Committee reaches a consensus as to what
the awards should be. The levels of stock awards granted to executive officers
under the Restricted Stock Plan are determined primarily by the retentive value
of the grant necessary to retain key executives over the long term 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.
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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 provided for an 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 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
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STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total
stockholder returns for the company's common stock over the last five years
with the Standard & Poors 500 Index and the Standard & Poors Retail Composite
Index. The comparison graph assumes that the value of the investment in Ross
Stores common stock and the comparative indices was $100 on January 31, 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
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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COMPENSATION OF DIRECTORS
During the 1997 fiscal year, 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 the 1998
fiscal year, 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 outside director's fees.
Travel expenses are reimbursed. (See " Employment Contracts, Termination of
Employment and Change-In-Control Arrangements" for the discussion of Mr.
Ferber's agreement.)
Non-employee directors are eligible to receive stock options
automatically granted under the terms of the company's 1991 Outside Directors
Stock Option Plan (the "Directors Plan"), which is a "formula plan". During
the 1997 fiscal year, Messrs. Ferber, Moldaw, Orban, Schlein and Seiler and
Ms. Weaver each were automatically 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 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 of the executive medical insurance for Mr.
Moldaw and his spouse. (See also "Certain Transactions.")
NORMAN A. FERBER. In addition to compensation received as a Board
member, the company and Norman A. Ferber, Chairman of the Board, entered into
an employment agreement on June 1, 1995 which most recently was amended on
November 20, 1997 (the "agreement"). 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
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thereof; 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 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
expiration or termination of the agreement. 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 most recently was amended May 19, 1997, with a term
that currently runs through February 3, 2000 ("Employment Agreement"). 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 most recently was amended May 19, 1997, with a term that currently
runs through February 3, 2000 ("Employment Agreement"). 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
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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.
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 1988 RESTRICTED STOCK PLAN AND 1992 STOCK OPTION
PLAN. Under the terms of the individual agreements for all the participants
in the company's 1988 Restricted Stock Plan and 1992 Stock Option Plan, each
employee, including executive officers, is entitled only to those shares
vested as of the date of termination. However, the company's Board of
Directors generally has the discretion to accelerate vesting or change other
terms of an outstanding agreement. In the event of certain 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.
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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.
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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 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."
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PROPOSAL 2
1992 STOCK OPTION PLAN
APPROVE AMENDMENT TO INCREASE THE SHARE RESERVE
BACKGROUND
The Board has adopted, subject to stockholders' 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 STOCK OPTION PLAN
The Board of Directors believes that the company's Stock 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
Stock 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 Stock 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 Stock 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.
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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 1992 Stock 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 Stock 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 Stock 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.
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
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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, the Board has 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. As of April 3, 1998, ____ persons were eligible
to participate in the Option Plan.
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. 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 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
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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 option 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.
INCENTIVE STOCK OPTIONS. The company currently does not have any
Incentive Stock Option grants outstanding nor does it have any plans to grant
them.
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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.
<TABLE>
<CAPTION>
1992 STOCK OPTION PLAN
----------------------
NAME AND POSITION DOLLAR VALUE(1) NUMBER OF SHARES
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 (9 persons, including the above) $581,625 141,000
Non-Executive Officers as a group (32 persons) $641,850 155,600
All employees as a group (excluding the company's officers) $1,511,379 366,395
</TABLE>
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 on the date of the grant.
PROPOSAL 3
APPROVE 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, 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 19, 1998 approved, subject to
stockholder approval, amending the company's Certificate of Incorporation
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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 determine 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").
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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.
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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 TO 170,000,000 SHARES
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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.
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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.
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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
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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
<PAGE>
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)
<PAGE>
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.
<PAGE>
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 and quoted regularly in THE WALL STREET JOURNAL,
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
<PAGE>
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 and quoted regularly in THE WALL STREET JOURNAL, 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
<PAGE>
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
<PAGE>
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.
<PAGE>
(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
<PAGE>
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.
<PAGE>
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
<PAGE>
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 the amendment to the 1992 Stock Option Plan to
increase the share reserve by 2,300,000 shares.
FOR AGAINST ABSTAIN
PROPOSAL 3. To approve the 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.
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.
