<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ROSS STORES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------------------------------------
2) Form, Schedule or Registration Statement No:
---------------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
[LETTERHEAD]
May 8, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Ross Stores' Annual Meeting of
Stockholders which will be held at 11:00 a.m. on Wednesday, June 7, 2000 at
the company's corporate headquarters located at 8333 Central Avenue, Newark,
California. If you will need special assistance at the meeting, please
contact Ms. Judy Wirzberger, Finance Department, Ross Stores, Inc., 8333
Central Avenue, Newark, CA 94560-3433 at least 10 days before the meeting.
Please complete the enclosed proxy card and return it in the envelope
provided for that purpose as soon as possible so that your shares will be
represented and voted at the meeting.
Thank you for your commitment to Ross Stores and for your cooperation in
returning your proxy without delay.
Sincerely,
ROSS STORES, INC.
/s/ Michael Balmuth
Michael Balmuth
Vice-Chairman and
Chief Executive Officer
ROSS STORES, INC. 8333 Central Avenue, Newark, California 94560-3433
(510) 505-4400
<PAGE>
ROSS STORES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 7, 2000
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
Wednesday, June 7, 2000 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 two Class II directors for a three-year term.
2. To approve the amendment to the Employee Stock Purchase Plan
to increase the share reserve by 1,000,000 shares.
3. To ratify the appointment of Deloitte & Touche LLP as the
company's independent certified public accountants for the
fiscal year ending February 3, 2001.
4. 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 17, 2000 are
entitled to notice of and to vote at the Annual Meeting and any adjournments
or postponements thereof. For ten days prior to the Annual Meeting, a
complete list of stockholders entitled to vote at the Annual Meeting will be
available for examination by any stockholder for any purpose related to the
Annual Meeting during ordinary business hours at the principal office of the
company located at 8333 Central Avenue, Newark, California.
By order of the Board of Directors,
/s/ John G. Call
John G. Call
Corporate Secretary
Dated: May 8, 2000
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
[GRAPHIC OMITTED]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROXY SOLICITATION............................................................... 1
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................... 2
INFORMATION REGARDING NOMINEES AND INCUMBENT DIRECTORS........................... 4
COMPENSATION AND OTHER TRANSACTIONS WITH OFFICERS AND DIRECTORS.................. 7
Summary Compensation Table................................................... 7
Option Grants in Last Fiscal Year............................................ 9
Aggregated Option Exercises and Year-End Option Value Table.................. 10
Compensation Committee Report................................................ 11
Stockholder Return Performance Graph......................................... 14
Compensation of Directors.................................................... 15
Compensation Committee Interlocks and Insider Participation.................. 16
Employment Contracts, Termination of Employment and
Change in Control Arrangements........................................... 16
Certain Transactions......................................................... 17
Section 16(a) Beneficial Ownership Reporting Compliance...................... 18
PROPOSAL 1 - ELECT CLASS II DIRECTORS............................................ 18
PROPOSAL 2 - APPROVAL OF AN AMENDMENT TO THE EMPLOYEE STOCK PURCHASE
PLAN TO INCREASE SHARE RESERVE BY 1,000,000 SHARES.................. 18
PROPOSAL 3 - RATIFY APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS........................................ 21
PROXY SOLICITATION............................................................... 22
TRANSACTION OF OTHER BUSINESS.................................................... 22
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING..................... 22
</TABLE>
<PAGE>
PROXY STATEMENT
2000 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 Wednesday, June 7, 2000, at 11:00 a.m.
PDT, or any adjournment thereof, at which stockholders of record at the close
of business on April 17, 2000, 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 May 8, 2000, 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 29, 2000, 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
two Class II directors to serve a three-year term; (ii) approve an increase
in the share reserve of the company's Employee Stock Purchase Plan; and (iii)
ratify the appointment of Deloitte & Touche LLP as the company's independent
certified public accountants for the fiscal year ending February 3, 2001.
The company had outstanding, on April 17, 2000, 84,150,115 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.
-1-
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information as of April 1, 2000 (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>
Wellington Management Company LLP 7,677,400 (2) 9.11%
75 State Street
Boston, MA 02109
Vanguard/Windsor Funds, Inc. 7,549,600 (2) 8.96%
P. O. Box 260, V37
Valley Forge, PA 19482
FMR Corp. 6,779,980 (2) 8.04%
82 Devonshire Street
Boston, MA 02109
First Pacific Advisors 4,671,700 (2) 5.54%
11400 W. Olympic Blvd., Suite 1200
Los Angeles, CA 90064
Michael Balmuth 1,066,057 (3) 1.26%
Norman A. Ferber 10,000 (4) *
Lawrence G. Higby 14,000 (5) *
Stuart G. Moldaw 7,490 (6) *
George P. Orban 724,608 (7) *
Philip Schlein 14,000 (8) *
Donald H. Seiler 318,840 (9) *
Donna L. Weaver 78,000 (10) *
Barry S. Gluck 278,912 (11) *
Michael Hamilton 152,500 (12)
Irene A. Jamieson 276,684 (13) *
Barbara Levy 272,810 (14) *
Melvin A. Wilmore 70,000 (15) *
All executive officers and directors 3,893,901 (16) 4.53%
as a group (17 persons, including
the executive officers and
directors named above)
</TABLE>
- ----------
* Less than 1%
2
<PAGE>
(1) To the knowledge of the company, the persons named in this table have
sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them, subject to community
property laws where applicable and the information contained in the
footnotes to this table. All immediately exercisable options described
in the footnotes to this table are subject to certain vesting
restrictions whereby the company has the right to repurchase all
unvested shares at the optionee's exercise price if the options are
exercised before fully vested and the optionee's employment with the
company terminates.
(2) Information is as of December 31, 1999, pursuant to Schedule 13G's
filed with the Securities and Exchange Commission.
(3) Mr. Balmuth. Includes options to purchase 634,167 shares of the
company's common stock exercisable within 60 days of April 1, 2000.
Also includes 430,000 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. Ferber. Represents options to purchase 10,000 shares of the
company's common stock exercisable within 60 days of April 1, 2000.
(5) Mr. Higby. Represents options to purchase 14,000 shares of the
company's common stock exercisable within 60 days of April 1, 2000.
(6) Mr. Moldaw. Represents options to purchase 7,490 shares of the
company's common stock exercisable within 60 days of April 1, 2000.
(7) Mr. Orban. Includes 618,508 shares held in the name of Orban Partners
and 24,100 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 82,000
shares of the company's common stock exercisable within 60 days of
April 1, 2000.
(8) Mr. Schlein. Represents options to purchase 14,000 shares of the
company's common stock exercisable within 60 days of April 1, 2000.
(9) Mr. Seiler. Includes options to purchase 10,000 shares of the company's
common stock exercisable within 60 days of April 1, 2000.
(10) Ms. Weaver. Includes options to purchase 8,112 shares of the company's
common stock exercisable within 60 days of April 1, 2000. Ms. Weaver's
term as a member of the Board of Directors expires on June 7, 2000.
(11) Mr. Gluck. Includes options to purchase 152,000 shares of the company's
common stock exercisable within 60 days of April 1, 2000. Also includes
95,500 shares of the company's common stock that were granted under the
company's 1988 Restricted Stock Plan and remain subject to vesting.
(12) Mr. Hamilton. Includes options to purchase 102,500 shares of the
company's common stock exercisable within 60 days of April 1, 2000.
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. Jamieson. Includes options to purchase 127,998 shares of the
company's common stock exercisable within 60 days of April 1, 2000.
Also includes 102,000 shares of the company's common stock that were
granted under the company's 1988 Restricted Stock Plan and remain
subject to vesting.
(14) Ms. Levy. Includes options to purchase 114,666 shares of the company's
common stock exercisable within 60 days of April 1, 2000. Also includes
102,000 shares of the company's common stock that were granted under
the company's 1988 Restricted Stock Plan and remain subject to vesting.
3
<PAGE>
(15) Mr. Wilmore. Includes options to purchase 70,000 shares of the
company's common stock exercisable within 60 days of April 1, 2000. Mr.
Wilmore resigned as a director and as the company's President and Chief
Operating Officer effective January 28, 2000.
(16) Includes 1,678,489 shares subject to outstanding options held by
directors and executive officers, which were exercisable on April 1,
2000 or within 60 days thereof. Also includes 945,000 shares of the
company's common stock granted to executive officers under the
company's 1988 Restricted Stock Plan, all of which remain subject to
vesting.
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
currently consists of eight members with Class III having one vacant seat. In
addition, Donna Weaver, a Class II director whose term expires on June 7,
2000, will not be standing for re-election, which will create a second
opening on the Board. The Board of Directors intends to fill both openings.
The remaining two Class II directors to be elected at the 2000 Annual Meeting
are being elected to hold office until the 2003 Annual Meeting and until
their successors shall have been elected and qualified. Proxies cannot be
voted for more than two 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
---------------------- --- --------
<S> <C> <C> <C>
NOMINEES FOR ELECTION AS CLASS II DIRECTORS WITH TERMS EXPIRING IN 2003
Michael Balmuth Vice Chairman of the Board and Chief Executive 49 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.
Lawrence G. Higby President and Chief Operating Officer of Apria 54 1998
Healthcare Group, Inc. since 1997. From 1994 to 1997,
President of 76 Products Company, Unocal Corporation.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL POSITION DIRECTOR
DURING LAST FIVE YEARS AGE SINCE
---------------------- --- --------
<S> <C> <C> <C>
INCUMBENT CLASS III DIRECTORS WITH TERMS EXPIRING IN 2001
Philip Schlein Partner of U.S. Venture Partners since April 1985. 65 1987
From January 1974 to January 1985, Mr. Schlein was
Chief Executive Officer of Macy's California. Director
of Burnham Pacific, Quick Response Services, NBCi.com
and Homegrocer.com.
Norman A. Ferber Consultant to the company since September 1996. 51 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.
INCUMBENT CLASS I DIRECTORS WITH TERMS EXPIRING IN 2002
Stuart G. Moldaw Consultant to the company. Chairman Emeritus 73 1982
of the company since March 1993. From August 1982
until March 1993, Chairman of the Board and, from
February 1987 until January 1988, Chief Executive
Officer of the company. Until February 1990, general
partner of U.S. Venture Partners. Chairman of the Board
of Gymboree Corporation since January 1994 and Chief
Executive Officer since February 2000. Director of
iParty.com.
George P. Orban Chairman of the Board of Egghead.com, Inc. since 54 1982
January 1997, and Chief Executive Officer from January
1997 to November 1999. Managing partner of Orban
Partners, a private investment company, since May 1984.
Donald H. Seiler Founding Partner of Seiler and Company. Mr. Seiler 71 1982
is a Certified Public Accountant. Director of Greater
Bay Bancorp.
</TABLE>
During fiscal 1999, the Board of Directors held six meetings. No
member of the Board, other than Mr. Moldaw, attended fewer than 75% of the
total number of Board meetings and applicable Committee meetings held during
the year. The company has standing audit, compensation and nominating
committees.
AUDIT COMMITTEE. The Audit Committee consists of directors Seiler,
Higby and Weaver, none of whom is an employee of the company. Ms. Weaver's
term as a member of the Board of Directors expires on June 7, 2000. During
fiscal 1999, the Audit Committee met two times. The functions of the Audit
Committee include recommending the independent accountants to the Board;
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.
5
<PAGE>
COMPENSATION COMMITTEE. The Compensation Committee consists of
directors Orban and Schlein, neither of whom is an employee of the company.
The committee held one meeting during fiscal 1999. 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 Compensation 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) 1992
Stock Option Plan, (ii) Employee Stock Purchase Plan, (iii) 1988 Restricted
Stock Plan and (iv) Incentive Compensation Plan and determines the
performance goals under that plan. Decisions by the Compensation Committee
relating to the compensation of the company's executive officers are reviewed
and ratified by the full Board.
NOMINATING COMMITTEE. The Nominating Committee consists of directors
Higby, Orban, Schlein, Seiler and Weaver, all of whom are independent outside
directors. Ms. Weaver's term as a member of the Board of Directors expires on
June 7, 2000. The Nominating Committee is primarily responsible for
evaluating the qualifications of and making recommendations concerning
potential new director nominees to the company's Board. 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 January 8, 2001. The Nominating
Committee did not meet in fiscal 1999.
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 29, 2000.
6
<PAGE>
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 for the 1999, 1998 and 1997 fiscal
years 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 as of the
end of the 1999 fiscal year (the "Named Executive Officers"), together with the
company's former President and Chief Operating Officer who resigned during the
fiscal year.
<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 1999 $815,736 $721,111 $5,420 $0 0 $4,996
Vice Chairman of the Board & 1998 $693,750 $650,000 $4,043 $6,037,500 670,000 $7,522
Chief Executive Officer 1997 $628,667 $632,000 $2,078 $2,070,000 100,000 $8,447
- ------------------------------ -------- ------------- ------------ ---------------- ------------- -------------- -----------
MICHAEL HAMILTON (5) 1999 $349,984 $375,393 $0 $1,082,813 80,000 $93,072
Senior Vice President 1998 n/a n/a n/a n/a n/a n/a
Store Operations 1997 n/a n/a n/a n/a n/a n/a
- ------------------------------ -------- ------------- ------------ ---------------- ------------- -------------- -----------
BARRY S. GLUCK 1999 $408,313 $251,838 $2,699 $476,438 24,000 $6,164
Senior Vice President & 1998 $383,875 $217,125 $1,215 $504,000 24,000 $8,931
General Merchandising Manager 1997 $358,417 $318,400 $4,848 $517,500 32,000 $6,035
- ------------------------------ -------- ------------- ------------ ---------------- ------------- -------------- -----------
IRENE A. JAMIESON 1999 $407,313 $251,226 $3,613 $736,313 24,000 $4,102
Senior Vice President & 1998 $382,875 $216,563 $0 $672,000 24,000 $5,064
General Merchandising Manager 1997 $355,750 $317,600 $2,513 $258,750 32,000 $4,913
- ------------------------------ -------- ------------- ------------ ---------------- ------------- -------------- -----------
BARBARA LEVY 1999 $406,313 $250,614 $3,365 $909,563 24,000 $5,078
Senior Vice President & 1998 $381,875 $216,000 $2,375 $504,000 24,000 $4,864
General Merchandising Manager 1997 $356,417 $316,800 $2,305 $258,750 32,000 $5,182
- ------------------------------ -------- ------------- ------------ ---------------- ------------- -------------- -----------
MELVIN A. WILMORE (6) 1999 $703,625 $625,872 $5,492 $0 0 $4,038
Former President & 1998 $669,250 $546,812 $2,746 $1,050,000 70,000 $4,913
Chief Operating Officer 1997 $623,833 $628,000 $3,970 $2,070,000 100,000 $4,925
- ------------------------------ -------- ------------- ------------ ---------------- ------------- -------------- -----------
</TABLE>
7
<PAGE>
(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 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 on Executive
Compensation below. The following bonuses were paid outside of the
Incentive Compensation Plan: (i) Mr. Hamilton: the amount paid in 1999
includes a signing bonus of $100,000 and a relocation bonus of $75,000;
(ii) Mr. Gluck: the amount paid in 1997 includes a discretionary bonus
of $30,000; (iii) Ms. Jamieson: the amount paid in 1997 includes a
discretionary bonus of $30,000; 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 20,
1997, Mr. Balmuth was granted 160,000 shares that vest as follows:
100,000 shares on March 20, 1999 and 60,000 shares on March 20, 2000.
Under the terms of his Restricted Stock Agreement, dated November 19,
1998, Mr. Balmuth was granted 300,000 shares that vest as follows:
100,000 shares on October 15, 2001 and 200,000 shares on October 15,
2002. Under the terms of his Restricted Stock Agreement dated March 17,
1999, Mr. Hamilton was granted 50,000 shares of common stock that vest
as follows: 10,000 shares on March 8, 2001, 20,000 shares on March 8,
2002 and 20,000 shares on March 8, 2003. Under the terms of his
Restricted Stock Agreement, dated March 20, 1997, Mr. Wilmore was
granted 160,000 shares of common stock that vest as follows: 80,000
shares each on March 20, 1999 and 80,000 shares on January 27, 2000.
Under the terms of his Restricted Stock Agreement dated March 19, 1998,
Mr. Wilmore was granted 50,000 shares of common stock that vest on
January 27, 2000. At January 29, 2000, unvested shares of restricted
stock were held by: Mr. Balmuth, 490,000 shares with a market value of
$6,308,750; Mr. Hamilton, 50,000 shares with a market value of
$643,750; Mr. Gluck, 86,000 shares with a market value of $1,107,250;
Ms. Jamieson, 86,000 shares with a market value of $1,107,250; and Ms.
Levy, 86,000 shares with a market value of $1,107,250. 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 to either 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 fully after the employee's third year of
employment. The employer contribution to the Deferred Compensation Plan
vests immediately. The amounts listed for 1999, 1998 and 1997 for
Messrs. Balmuth, Gluck and Wilmore and for Ms. Jamieson and Ms. Levy
consist of company contributions made for the account of these
executive officers under the company's 401(k) Plan and/or the Deferred
Compensation Plan. The amount listed for 1999 for Mr. Hamilton consists
of reimbursement and associated tax gross-ups for moving expenses.
(5) Mr. Hamilton joined the company effective March 1, 1999.
(6) Effective January 28, 2000, Mr. Wilmore resigned as a director and as
the company's President and Chief Operating Officer.
8
<PAGE>
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 1999. 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)
Granted Year ($/Sh) Date
Name and -------- --------------- ----------------
Principal Position (1) (2) (1) (3) 0% 5% 10%
- ---------------------------------- ------------- ------------ ----------- ------------ -------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
MICHAEL BALMUTH 0 0% n/a n/a $0 $0 $0
Vice Chairman of the Board &
Chief Executive Officer
MICHAEL HAMILTON 80,000 5.22% $23.25 3/8/09 $0 $1,169,744 $2,964,361
Senior Vice President
Store Operations
BARRY S. GLUCK 24,000 1.56% $21.66 3/17/09 $0 $326,868 $828,348
Senior Vice President &
General Merchandising Manager
IRENE A. JAMIESON 24,000 1.56% $21.66 3/17/09 $0 $326,868 $828,348
Senior Vice President &
General Merchandising Manager
BARBARA LEVY 24,000 1.56% $21.66 3/17/09 $0 $326,868 $828,348
Senior Vice President &
General Merchandising Manager
MELVIN A. WILMORE (5) 0 0% n/a n/a $0 $0 $0
Former President &
Chief Operating Officer
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All options listed in the above table were granted on March 17, 1999,
except the grant of 80,000 shares to Mr. Hamilton, which was awarded on
March 8, 1999. All options were granted 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 1999 to those executive officers listed in the table 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 1,533,966 shares were granted in the form of non-qualified
stock options during fiscal 1999 to all participants in the 1992 Stock
Option Plan. No incentive stock options were granted during 1999.
(3) All non-qualified stock option grants made under the 1992 Stock Option
Plan have a term of ten years from the date of grant.
9
<PAGE>
(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 that 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 dollar gain for the
optionee.
(5) Effective January 28, 2000, Mr. Wilmore resigned as a director and as
the company's President and Chief Operating Officer.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
The following table provides information with respect to the Named
Executive Officers concerning the exercise of stock options during fiscal 1999
and unexercised options held as of the end of fiscal 1999.
<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 Options at
Year-End Fiscal Year-End
Number of (#) ($)
Name and Shares Acquired Exercisable/ Exercisable/
Principal Position on Exercise Value Realized (1) Unexercisable Unexercisable (3)
(2)
--------------------------------- ------------------- ---------------------- ---------------- ---------------------
<S> <C> <C> <C> <C>
MICHAEL BALMUTH 92,788 $821,306 655,000/0 $0/$0
Vice Chairman of the Board &
Chief Executive Officer
MICHAEL HAMILTON 0 $0 80,000/0 $0/$0
Senior Vice President
Store Operations
BARRY S. GLUCK 58,076 $1,081,470 116,000/0 $301,370/$0
Senior Vice President &
General Merchandising Manager
IRENE A. JAMIESON 12,000 $224,378 91,998/0 $73,125/$0
Senior Vice President &
General Merchandising Manager
BARBARA LEVY 18,000 $325,265 78,666/0 $0/$0
Senior Vice President &
General Merchandising Manager
MELVIN A. WILMORE (4) 34,772 $386,201 99,168/0 $0/$0
Former President &
Chief Operating Officer
--------------------------------- ------------------- ---------------------- ---------------- ---------------------
</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.
10
<PAGE>
(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
($12.875) of Ross Stores, Inc.'s common stock on January 28, 2000 (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.
(4) Effective January 28, 2000, Mr. Wilmore resigned as a director and as
the company's President and Chief Operating Officer and all outstanding
options became fully vested and exercisable.
ROSS STORES, INC.
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 seeks also to integrate executive
pay with the long-term strategic objectives of the company, recognize
individual initiative and achievements and assist the company in attracting,
motivating and retaining a group of high-performing executives.
Compensation for the company's executive officers, including the
Named Executive Officers, consists of the following elements: base salary,
annual incentive bonus, restricted stock granted under the 1988 Restricted
Stock Plan ("Restricted Stock Plan"), stock options granted under the 1992
Stock Option Plan ("Option Plan") and other benefits typically offered to
corporate executives. A majority of the total potential compensation for the
company's executive officers is in the form of annual incentive bonuses and
stock plan awards that may vary 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
11
<PAGE>
compensation structure in light of the current tax law. The Committee
believes that compensation resulting from grants made under the Option Plan
will be fully deductible when an option is exercised. The Committee also
believes that payments under the Incentive Compensation Plan will be fully
deductible. Grants under the company's Restricted Stock Plan do not qualify
as performance-based compensation and, therefore, may not be fully deductible
to the extent the vesting of restricted stock, when added to other non-exempt
compensation for a particular executive, exceeds the $1 million limit in any
tax year. The Committee has concluded that amending the Restricted Stock Plan
to comply with the requirements for performance-based compensation under
Section 162(m) would weaken the company's efforts to recruit and retain key
executives over the long term.
EXECUTIVE OFFICERS' 1999 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 1999, the
average merit increase in base salaries for all executive officers as a group
was 5.7%.
ANNUAL INCENTIVE BONUS. The company's Incentive Compensation Plan
was adopted by the Board of Directors effective May 1987, was approved by the
company's stockholders and is designed to allow management to share in the
company's success based on the company's attainment of varying levels of
pre-tax earnings. At the commencement of each fiscal year, the Committee
determines the incentive awards payable at varying levels of pre-tax earnings
achieved by the company. Such awards are expressed as a percentage of
year-end base salary and are payable in the form of cash bonuses after fiscal
year-end pursuant to this formula. Potential awards now 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 1999 provided for awards to
executive officers that, at the targeted pre-tax earnings goal, ranged from
40% to 65% of base salary. During fiscal 1999, the company exceeded its
targeted pre-tax earnings goal. Total payments made under the Plan for fiscal
1999 to all executive officers as a group represented approximately 62% of
their total salaries as a group. Actual awards over the last three fiscal
years have ranged from 41% to 100% of executive officers' base salaries.
STOCK AWARD PROGRAMS. In fiscal year 1999, the company's executive
officers were eligible for stock awards under the Restricted Stock Plan and
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 their 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 1999 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
12
<PAGE>
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 1999 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 1999 incentive bonus and stock award
compensation are earned under the same plans made available to all executive
officers, as discussed above.
SALARY. Mr. Balmuth's base salary is established by the terms of his
employment agreement entered into with the company on February 1, 1995, as
amended, which extends through February 3, 2003, unless earlier extended,
renegotiated or terminated by the parties. As of February 3, 1999, the
agreement provided for an annual base salary of not less than $800,000. Mr.
Balmuth's 1999 annual base salary of $815,736 represented an increase of 2%
over his 1998 base salary of $800,000. (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 1999, the company
exceeded its targeted pre-tax earnings goal. Mr. Balmuth received a bonus of
$721,111 for 1999, which equaled 88% of his base salary at year-end.
STOCK AWARDS. Mr. Balmuth did not receive any restricted stock or
option awards in 1999.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE
COMPANY'S BOARD OF DIRECTORS
GEORGE P. ORBAN, CHAIRMAN AND PHILIP SCHLEIN
13
<PAGE>
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total
stockholder returns for the company's common stock over the last five years
with the Standard & Poors 500 Index and the Standard & Poors Retail Composite
Index. The comparison graph assumes that the value of the investment in Ross
Stores, Inc. common stock and the comparative indices was $100 on January 31,
1995 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
[OBJECT OMITTED]
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C>
ROSS STORES 100 189 391 624 763 500
S&P 500 100 139 175 222 295 320
S&P RETAIL COMPOSITE 100 108 129 191 313 319
</TABLE>
14
<PAGE>
COMPENSATION OF DIRECTORS
During fiscal 1999, directors who were not employees of the company
("non-employee directors") received an annual retainer fee of $29,000 (paid
quarterly), plus $1,000 for attendance at each Board meeting and $500 for
attendance at each meeting of a committee of the Board. For fiscal 2000,
non-employee directors will receive an annual retainer of $30,000 (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. Travel expenses are reimbursed. During the term
of his consultant agreement, Mr. Ferber has waived his right to the
non-employee director's fees. (See below for a discussion of Mr. Ferber's
agreement.)
Non-employee directors are eligible to receive stock options granted
automatically under the terms of the company's 1991 Outside Directors Stock
Option Plan (the "Directors Plan"). On a split-adjusted basis, the Directors
Plan provides for an initial option grant of 20,000 shares to newly elected
directors and for an annual option grant of 4,000 shares to each incumbent
director. Mr. Ferber waived his right to receive the initial grant but
remains eligible to receive the 4,000 shares granted annually. During fiscal
1999, each of Messrs. Ferber, Higby, Moldaw, Orban, Schlein and Seiler and
Ms. Weaver was granted an option to purchase 2,000 shares of common stock
under the Directors Plan on March 18, 1999, with an exercise price of
$21.5625, which was the closing price of the company's common stock as
reported on the Nasdaq National Market on that date. In addition, pursuant to
amendments to the Directors Plan approved by the stockholders of the company,
on May 27, 1999, each of Messrs. Ferber, Higby, Moldaw, Orban, Schlein and
Seiler and Ms. Weaver was granted another option to purchase 4,000 shares of
common stock, with an exercise price of $23.00, which was the closing price
of the company's common stock as reported on the Nasdaq National Market on
that date.
NORMAN A. FERBER. Mr. Ferber receives certain compensation pursuant
to an Independent Contractor Consultancy Agreement ("Consultancy Agreement")
with the company that became effective February 1, 2000. The agreement
extends through January 31, 2001 ("Consultancy Termination Date"). While he
serves as a consultant to the company, Mr. Ferber shall be paid a consulting
fee of $1,140,000 annually, paid in monthly installments, and has voluntarily
declined the annual retainer and meeting fees otherwise payable to Board
members. Mr. Ferber continues to receive equity grants under the Directors
Plan.
In the event there is a change in control of the company, Mr. Ferber
would be entitled to continued payment of his then current consulting fee
through the Consultancy Termination Date or any extension thereof. 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 occurs after the
Consultancy Termination Date or any extension thereof. Further, he would be
reimbursed for any excise taxes paid pursuant to Internal Revenue Code
Section 4999.
Additionally, effective February 1, 2000 the company entered into a
Retirement Benefit Package Agreement ("Benefit Agreement") with Mr. Ferber.
The Benefit Agreement provides that the company, or its successor, will
provide at no cost to Mr. Ferber health benefits under the company's plans
for Mr. Ferber and his immediate family until the death of both Mr. Ferber
and his spouse. In addition, the company will provide all other employee
benefits typically offered to executive officers until the death of Mr.
Ferber. The agreement further states that if, as a result of Mr. Ferber's
status as a consultant to the company, he is ineligible to participate in any
of the company's employee benefit plans, the payments made under this Benefit
Agreement shall be increased to enable Mr. Ferber to procure (to the extent
available) such benefits at no additional after tax cost to him. In addition,
the Benefit Agreement states that the company will provide administrative
support for Mr. Ferber as long as he serves as a member of the company's
Board of Directors.
STUART G. MOLDAW. In addition to compensation received as a
non-employee Board member, Stuart G. Moldaw, Chairman Emeritus, receives
administrative support and an annual fee of $80,000 for his services as
consultant to the company. The company also pays the annual premiums of
$128,560 on a split dollar life insurance policy, with a face value of $3.5
million. In the most recent fiscal year, $10,627 of the premium was reported
as taxable compensation to Mr. Moldaw and approximately $117,933 of the
premium was added to the amount refundable to the company upon death or
cancellation of the policy. The company also pays the
15
<PAGE>
premiums on the executive medical insurance for Mr. Moldaw and his spouse.
(See also "Certain Transactions.")
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. Mr. Orban is currently Chairman of Board of
Egghead.com, Inc. In addition, from January 1997 through November 1999, he
served as Chief Executive Officer of Egghead.com, Inc., in addition to being
the Chairman of its Board of Directors. Melvin A. Wilmore, former President
and Chief Operating Officer of the company, served on the Board of Directors
of Egghead.com, Inc. from July 1996 until November 1999.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
MICHAEL BALMUTH. The company and Michael Balmuth, Vice Chairman of
the Board and Chief Executive Officer, entered into an employment agreement
as of February 1, 1995, which was most recently amended and restated
effective February 3, 1999, with a term that currently runs through February
3, 2003. The amended and restated agreement was subsequently amended
effective February 25, 2000. Upon notice from Mr. Balmuth at specified times,
the Board will consider extending the term of the employment agreement for
successive two-year periods. The employment agreement provides that Mr.
Balmuth will receive an annual salary of not less than $800,000. In the event
(i) Mr. Balmuth's employment involuntarily terminates due to disability; (ii)
the company terminates his employment without 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 would 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
Mr. Balmuth resigns voluntarily or his employment is terminated for cause, he
would be entitled to payment of salary through the termination date and any
bonus that was fully earned prior to the termination date; vesting of stock
options would cease as of the termination date; and any unvested restricted
stock would be automatically reacquired by the company.
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.
MICHAEL HAMILTON, BARRY S. GLUCK, IRENE A. JAMIESON AND BARBARA
LEVY. The company entered into an employment agreement with Michael Hamilton,
Senior Vice President, Stores, on March 1, 1999. The company also 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, which were amended on September 1, 1996 and March 1,
1998. The terms are the same for each employment agreement, unless otherwise
noted. Each of the employment agreements extends through March 31, 2002. Upon
notice from the officer, at specified times, the Board will consider
extending the terms of these agreements. The agreement with Mr. Hamilton
provides that he will receive an annual salary of not less than $418,000. 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
16
<PAGE>
term of the employment agreement and all stock options held by the officer
would become fully vested. He or she also 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 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 ($500,000 in the
case of Mr. Hamilton) 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.
MELVIN A. WILMORE. The company and Melvin A. Wilmore, President and
Chief Operating Officer, entered into an employment agreement as of March 15,
1994, which was most recently amended on January 26, 2000, with a term that
expired on January 28, 2000 (the "Resignation Date"). The employment
agreement provides that Mr. Wilmore will receive a salary continuation of
$680,000 payable in equal installments commencing February 15, 2000 and
ending December 15, 2000, along with administrative support and office space
provided by the company through January 29, 2001. Upon the Resignation Date,
all stock options and restricted stock held by Mr. Wilmore became immediately
vested. The agreement also provides for the payment of a lump sum bonus on
December 31, 2000. In addition, Mr. Wilmore will be entitled to the
continuation of employee benefits at no cost to him until his death and
medical benefits for his spouse until her death.
PARTICIPANTS IN THE RESTRICTED STOCK PLAN AND OPTION PLAN. Under the
terms of the individual agreements for each participant in the company's
Restricted Stock Plan and Option Plan, each employee, including executive
officers, is entitled only to those shares vested as of the date of
termination. However, the company's Board of Directors generally has the
discretion to accelerate vesting or change other terms of an outstanding
agreement. In the event of certain merger or acquisition transactions which
result in a change in control of the company, any unvested shares of
restricted stock automatically become vested shares and the company's Board
of Directors must either accelerate vesting of all outstanding stock options
or arrange for the options to be assumed by the acquiring or successor
corporation.
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%, secured by a deed of trust
on his home. The loan was originally due on February 5, 1996. On January 25,
1996, the Board approved a three-year term extension at an interest rate of
5.5%, payable on March 31 of each year. On March 17, 1999, the Board approved
another term extension until the earlier of January 28, 2000 or 60 days after
Mr. Wilmore's successor began employment with the company. All principal and
interest due on this note were paid in full by Mr. Wilmore as of March 31,
2000.
The company leases one store in Roseville, 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 1999, the
company paid $315,000 in rent. Mr. Moldaw's and his trusts' interest in the
partnership total 40.4%. The company believes that the general terms and
conditions of the lease, including the rental payments by the company, are on
prevailing market terms.
17
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
company's directors, executive officers and holders or more than 10% of the
Common Stock to file with the Securities and Exchange Commission reports
regarding their ownership and changes in ownership of company Common Stock.
The company believes that during fiscal 1999, its executive officers,
directors and 10% stockholders complied with all Section 16(a) filing
requirements with the following exceptions: (i) Ivy Council, Senior Vice
President, Human Resources, filed an Amended Form 3 to correct her original
filing on Form 3 which inadvertently omitted shares held by her broker in
street name, (ii) Barry Gluck, Senior Vice President and General
Merchandising Manager, filed an amended Form 4 to correct an earlier filing
which omitted two transactions, and made one late Form 4 filing in respect of
one transaction, and (iii) Michael Wilson, Senior Vice President,
Transportation and Distribution, made a late filing of his Form 3.
PROPOSAL 1
ELECT CLASS II DIRECTORS
If elected, each nominee will hold office for a three-year term or
until his successor is elected and qualified unless he resigns or his office
becomes vacant by death, removal, or other cause in accordance with the
Bylaws of the company. Management knows of no reason why any of these
nominees should be unable or unwilling to serve, but if any nominee(s) should
for any reason be unable or unwilling to serve, the proxies will be voted for
the election of such other person(s) for the office of director as management
may recommend in the place of such nominee(s).
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The plurality of the votes cast by the shares of common stock
present or represented by proxy and voting at the Annual Meeting will
determine the election of the directors. Abstentions and broker non-votes
will be counted as present in determining if a quorum is present but will not
affect the election of directors.
==============================================================================
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE TWO NOMINEES LISTED UNDER "INFORMATION REGARDING NOMINEES
AND INCUMBENT DIRECTORS."
==============================================================================
PROPOSAL 2
EMPLOYEE STOCK PURCHASE PLAN
APPROVAL OF AN AMENDMENT TO INCREASE
THE SHARE RESERVE BY 1,000,000 SHARES
BACKGROUND
The Fourth Amended and Restated Employee Stock Purchase Plan (the
"Purchase Plan") is a broad-based employee benefit plan. The Purchase Plan
encourages broad employee stock ownership, and the level of participation in
this voluntary plan indicates its success in practice. Approximately 1,300
employees purchased company stock through the Purchase Plan in 1999. The
Board believes that the availability of an adequate number of shares in the
share reserve of the Purchase Plan is an important factor in attracting,
retaining and motivating qualified employees essential to the success of the
company.
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The Board of Directors of the Company has adopted, subject to
stockholder approval, an amendment to the Purchase Plan to increase the
maximum number of shares that may be issued under the Purchase Plan by
1,000,000 shares, from four million (4,000,000) shares to five million
(5,000,000) shares. As of May 8, 2000, no purchases had been made by any
employee conditioned on stockholder approval of an increase in the share
reserve under the Purchase Plan. Participation in the Purchase Plan is at the
employees' discretion. Accordingly, future purchases under the Purchase Plan
are not yet determinable.
Non-employee directors are not eligible to participate in the
Purchase Plan. During the fiscal year ended January 29, 2000, no shares were
purchased under the Purchase Plan by any associate of any director, executive
officer or director nominee, and no person purchased 5% or more of the total
number of shares purchased under the Purchase Plan during that year. The
following table lists the purchases made under the Purchase Plan during
fiscal 1999 by the named executive officers of the company and all executive
officers as a group:
<TABLE>
<CAPTION>
- -------------------------------- -------------------------------
SHARES ACQUIRED UNDER
EMPLOYEE STOCK PURCHASE PLAN
EXECUTIVE OFFICER IN FISCAL 1999
- -------------------------------- -------------------------------
<S> <C>
Michael Balmuth 1,028
- -------------------------------- -------------------------------
Michael Hamilton 0
- -------------------------------- -------------------------------
Barry S. Gluck 1,302
- -------------------------------- -------------------------------
Irene A. Jamieson 1,302
- -------------------------------- -------------------------------
Barbara Levy 1,302
- -------------------------------- -------------------------------
Melvin A. Wilmore 1,302
- -------------------------------- -------------------------------
All Executive Officers
(11 individuals) 8,271
- -------------------------------- -------------------------------
All Other Employees (who are
not executive officers) 162,912
- -------------------------------- -------------------------------
</TABLE>
VOTE REQUIRED
The affirmative votes of a majority of the shares of Common Stock
present or represented 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 for purposes of determining whether 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 THIS PROPOSAL TO INCREASE THE SHARE RESERVE FOR THE PURCHASE PLAN
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SUMMARY OF THE PURCHASE PLAN
The following summary of the Purchase Plan is qualified in its
entirety by the specific language of the Purchase Plan, as amended. Copies of
the Purchase Plan are available to any stockholder upon written request to
the Corporate Secretary of the company at the corporate offices of the
company in Newark, California.
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The Purchase Plan enables employees to purchase shares of the
company's Common Stock through payroll deductions. Subject to approval by the
stockholders, the Board has amended the Purchase Plan to increase the maximum
aggregate number of shares issuable under the plan by 1,000,000 shares to a
total of 5,000,000 shares. As of April 1, 2000, only 633,000 shares remained
available for purchase under the plan. The Purchase Plan provides that
appropriate adjustments will be made to the shares subject to purchase and in
the purchase price in the event of any stock dividend, stock split, reverse
stock split, combination, reclassification, merger, sale, reorganization or
similar change in the capital structure of the company. To the extent that
any purchase right under the Purchase Plan expires or is terminated, the
shares subject to the unexercised portion of such purchase right are returned
to the plan.
The Purchase Plan is administered by the Board of Directors or a
committee appointed by the Board. The Board of Directors may at any time
amend or terminate the Purchase Plan, except that approval of the company's
stockholders is required to increase the number of shares authorized for
issuance under the Purchase Plan or to change the designation of corporations
whose employees may purchase shares of the company's Common Stock pursuant to
the Purchase Plan. The Plan will continue until terminated by the Board of
Directors or all of the shares reserved for issuance under the Purchase Plan
have been issued.
Any employee of the company or any parent or subsidiary corporation
of the company (including any officer or director who is also an employee) is
eligible to participate in the Purchase Plan as long as the employee is
customarily employed for more than five months in any calendar year and for
at least 20 hours per week. Participation in the Purchase Plan is limited to
employees who have completed at least six months of continuous employment as
of the commencement of an Offering (as defined below). However, no employee
who owns or holds options to purchase, or who as a result of participation in
the Purchase Plan would own or hold options to purchase, 5% or more of the
company's Common Stock is entitled to participate in the Purchase Plan.
The Purchase Plan, which is intended to qualify under Section 423 of
the Internal Revenue Code, is implemented by two separate offerings of Common
Stock each year (either of which is referred to as an "Offering"). One
Offering is for a period of twelve months, beginning on or about January 1 of
each year. The second Offering is for a period of six months, beginning on or
about July 1 of each year. Employees are eligible to participate in the
six-month Offering only if they meet the eligibility criteria set forth above
and if they are not participating in the twelve-month Offering. To
participate in the plan, eligible employees must authorize payroll
deductions, which may not exceed 10% of the participant's compensation for
any pay period during an Offering. The purchase price per share at which the
shares of the company's Common Stock are sold under the Purchase Plan is
equal to 85% of the lesser of the fair market value of the Common Stock on
(i) the first day of the Offering or (ii) the last day of the Offering. The
number of shares of the company's Common Stock a participant purchases in
each Offering is determined by dividing the total amount of payroll
deductions withheld from the participant's compensation by the per share
purchase price. In a single twelve month Offering, participants may not
purchase more than that number of shares of the company's Common Stock having
a fair market value (determined as of the first day of the Offering)
exceeding $25,000. In a single six month Offering, participants may not
purchase more than that number of shares of the company's Common Stock having
a fair market value (determined as of the first day of the Offering)
exceeding $12,500.
The Purchase Plan provides that in the event of a "change in
control" of the company, with respect to Offerings beginning on or after July
1, 2000, rights granted under the plan will continue in effect or the
acquiring or successor corporation may assume outstanding purchase rights or
substitute substantially equivalent purchase rights for such corporation's
stock. If the acquiring or successor corporation elects not to assume or
substitute for such outstanding purchase rights and such rights do not
continue in effect, such rights will be exercised immediately prior to the
date of the change in control, and any offerings in progress will terminate.
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SUMMARY OF THE FEDERAL TAX CONSEQUENCES OF THE PURCHASE 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 Purchase Plan.
Rights granted under the Purchase Plan are intended to qualify for
favorable federal tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under provisions of Section 423
of the Internal Revenue Code.
A participant will be taxed on amounts withheld for the purchase
of shares as if such amounts were actually received. Other than this, a
participant recognizes no taxable income either as a result of commencing to
participate in the Purchase Plan or purchasing shares of the company's Common
Stock under the terms of the Purchase Plan.
If a participant disposes of shares acquired under the Purchase Plan
more than two years after the beginning of the Offering and more than one
year after the stock is transferred to the participant, then the lesser of
(i) the excess of the fair market value of the stock at the time of such
disposition over the purchase price or (ii) 15% of the fair market value of
the stock as of the beginning of the Offering will be treated as ordinary
income. Any further gain or any loss will be taxed as a long-term capital
gain or loss. Capital gains currently are generally subject to lower tax
rates than ordinary income. The maximum capital gains rate for federal income
tax purposes is 20% while the maximum ordinary rate is effectively 39.6% at
the present time.
If the participant disposes of shares acquired under the Purchase
Plan before the expiration of either of the holding periods described above
(a "disqualifying disposition"), then the excess of the fair market value of
the stock on the purchase date over the purchase price will be treated as
ordinary income at the time of such disposition. The balance of any gain will
be treated as capital gain. Even if the stock is later disposed of for less
than its fair market value on the exercise date, the same amount of ordinary
income is attributed to the participant, and a capital loss is recognized
equal to the difference between the sale price and the fair market value of
the stock on the purchase date. Any capital gain or loss will be long or
short-term depending on whether the stock has been held for more than one
year.
There are no federal income tax consequences to the company by
reason of the grant or exercise of rights under the Purchase Plan. The
company is entitled to a deduction in the year of a disqualifying disposition
equal to the amount of ordinary income recognized by the participant as a
result of the disposition, except to the extent such deduction is limited by
Section 162(m) of the Code and the satisfaction of a tax reporting obligation.
PROPOSAL 3
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
February 3, 2001. 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 votes 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 FEBRUARY 3, 2001.
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PROXY SOLICITATION
The cost of solicitation of proxies will be borne by the company.
The company has retained Beacon Hill Partners to assist in soliciting proxies
by mail, telephone and personal interview for a fee of approximately $5,000
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 January 8, 2001 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,
/s/ John G. Call
John G. Call
Corporate Secretary
Dated: May 8, 2000
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ROSS STORES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael Balmuth and John G. Call, 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 June 7, 2000 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
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<PAGE>
Please mark /X/
your votes as
indicated in
this example
The Board of Directors Recommends a vote "FOR" the following proposals:
1. To elect two Class II Directors for a three-year term as proposed in the
accompanying Proxy Statement.
Michael Balmuth Lawrence G. Higby
FOR all nominees listed WITHHOLD AUTHORITY
(except as marked to the contrary) 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.
_____________________________________________________________
FOR AGAINST ABSTAIN
2. To approve amendments to the Employee
Stock Purchase Plan to increase the / / / / / /
share reserve by 1,000,000 shares.
3. To ratify the appointment of Deloitte &
Touche LLP as the company's independent / / / / / /
certified public accountants for the
fiscal year ending February 3, 2001.
4. 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 MAY 8,
2000; (B) THE ACCOMPANYING PROXY
STATEMENT; AND (C) THE ANNUAL REPORT
TO STOCKHOLDERS FOR THE FISCAL YEAR
ENDED JANUARY 29, 2000 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
SECRETARY OF THE CORPORATION, GIVES
NOTICE OF SUCH REVOCATION.
Signature(s) ____________________________________ Dated ________________, 2000
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.
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