-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P1G0DM4q2+nT5ivsfqJIXnt9b1P7UDI+ZPLwWUK7aLvGtihw3hFXBGxDkOZ3RLmo FqDxl7eX69cbrSllNBDfLQ== 0000745732-99-000002.txt : 19990628 0000745732-99-000002.hdr.sgml : 19990628 ACCESSION NUMBER: 0000745732-99-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990501 FILED AS OF DATE: 19990614 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROSS STORES INC CENTRAL INDEX KEY: 0000745732 STANDARD INDUSTRIAL CLASSIFICATION: 5651 IRS NUMBER: 941390387 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14678 FILM NUMBER: 99645543 BUSINESS ADDRESS: STREET 1: 8333 CENTRAL AVE CITY: NEWARK STATE: CA ZIP: 94560-3433 BUSINESS PHONE: 5105054841 MAIL ADDRESS: STREET 1: 8333 CENTRAL AVENUE CITY: NEWARK STATE: CA ZIP: 94560-3433 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) _X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 1, 1999 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number 0-14678 ROSS STORES, INC. (Exact name of registrant as specified in its charter) Delaware 94-1390387 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8333 Central Avenue, Newark, 94560-3433 California (Zip Code) (Address of principal executive offices) Registrant's telephone number, (510) 505-4400 including area code Former name, former address and N/A former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ The number of shares of Common Stock, with $.01 par value, outstanding on May 29, 1999 was 45,661,134. 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ROSS STORES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS ($000) May 1, January 30, May 2, ASSETS 1999 1999 1998 (Unaudited) (Note A) (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 33,307 $ 80,083 $ 29,725 Accounts receivable 15,199 11,566 10,513 Merchandise inventory 516,107 466,460 460,578 Prepaid expenses and other 16,301 15,825 15,304 _______ _______ _______ Total Current Assets 580,914 573,934 516,120 PROPERTY AND EQUIPMENT Land and buildings 48,937 48,789 24,183 Fixtures and equipment 225,571 217,629 196,609 Leasehold improvements 146,020 142,716 145,849 Construction-in-progress 30,878 32,023 24,563 _______ _______ _______ 451,406 441,157 391,204 Less accumulated depreciation and amortization 201,613 192,445 186,951 _______ _______ _______ 249,793 248,712 204,253 Deferred income taxes and other assets 50,439 47,660 40,934 _______ _______ _______ TOTAL ASSETS $881,146 $870,306 $761,307 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $253,473 $248,103 $216,013 Accrued expenses and other 122,549 114,151 93,164 Accrued payroll and benefits 31,262 40,885 27,773 _______ _______ _______ Total Current Liabilities 407,284 403,139 336,950 Long-term liabilities 45,570 42,464 40,085 STOCKHOLDERS' EQUITY Common stock 458 462 478 Additional paid-in capital 217,867 215,831 199,008 Retained earnings 209,967 208,410 184,786 _______ _______ _______ 428,292 424,703 384,272 ________ ________ ________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $881,146 $870,306 $761,307
See notes to condensed consolidated financial statements. 3 ROSS STORES, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS Three Months Ended ____________________ May 1, May 2, ($000 except per share data, unaudited) 1999 1998 Sales $550,825 $484,276 Costs and Expenses Cost of goods sold and occupancy 379,378 336,816 General, selling and administrative 106,192 94,057 Depreciation and amortization 9,320 7,882 Interest income (162) (135) 494,728 438,620 Earnings before taxes 56,097 45,656 Provision for taxes on earnings 21,934 17,806 Net earnings $34,163 $27,850 Net earnings per share: Basic $.74 $.58 Diluted $.73 $.57 Weighted average shares outstanding: Basic 45,964 47,849 Diluted 46,740 48,814 Stores open at end of period 355 331
See notes to condensed consolidated financial statements. 4 ROSS STORES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended May 1, May 2, ($000, unaudited) 1999 1998 CASH FLOWS FROM OPERATING ACTIVITES Net earnings $34,163 $27,850 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization of property and equipment 9,320 7,882 Other amortization 2,498 2,412 Change in assets and liabilities: Merchandise inventory (49,647) (41,753) Other current assets - net (4,109) (2,587) Accounts payable 8,376 16,651 Other current liabilities - net (10,882) (3,698) Other 1,025 1,519 _________ ________ Net cash provided by (used in) operating activities (9,256) 8,276 CASH FLOWS FROM INVESTING ACTIVITES Additions to property and equipment (17,247) (11,519) ________ ________ Net cash used in investing activities (17,247) (11,519) CASH FLOWS FROM FINANCING ACTIVITES Borrowing under lines of credit 15,600 5,700 Issuance of common stock related to stock plans 3,118 3,937 Repurchase of common stock (36,000) (30,418) Dividends paid (2,991) (2,620) ________ ________ Net cash used in financing activities (20,273) (23,401) ________ ________ Net decrease in cash and cash equivalents (46,776) (26,644) Cash and cash equivalents: Beginning of year 80,083 56,369 _______ ________ End of quarter $33,307 $29,725 SUPPLEMENTAL CASH FLOW DISCLOSURES Interest paid $42 $55 Income taxes paid $19,535 $3,934
See notes to condensed consolidated financial statements. 5 ROSS STORES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Three Months Ended May 1, 1999 and May 2, 1998 (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared from the records of the company without audit and, in the opinion of management, include all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position at May 1, 1999 and May 2, 1998; the interim results of operations for the three months ended May 1, 1999 and May 2, 1998; and changes in cash flows for the three months ended May 1, 1999 and May 2, 1998. The balance sheet at January 30, 1999, presented herein, has been derived from the audited financial statements of the company for the fiscal year then ended. Certain reclassifications have been made to the 1998 presentation to conform to the 1999 presentation. Accounting policies followed by the company are described in Note A to the audited consolidated financial statements for the fiscal year ended January 30, 1999. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted for purposes of the interim condensed consolidated financial statements. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including notes thereto, for the year ended January 30, 1999. The results of operations for the three-month period herein presented are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements at May 1, 1999 and May 2, 1998, and for the three months then ended, have been reviewed, prior to filing, by the registrant's independent accountants whose report covering their review of the financial statements is included in this report on page 6. 6 INDEPENDENT ACCOUNTANTS' REPORT Board of Directors and Stockholders of Ross Stores, Inc. Newark, California We reviewed the accompanying condensed consolidated balance sheets of Ross Stores, Inc. (the "Company") as of May 1, 1999 and May 2, 1998, and the related condensed consolidated statements of earnings and cash flows for the three-month periods then ended. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Ross Stores, Inc. as of January 30, 1999, and the related consolidated statements of earnings, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated March 12, 1999, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 30, 1999 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/Deloitte & Touche LLP San Francisco, CA May 21, 1999 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This section and other parts of this Form 10-Q contain forward- looking statements that involve risks and uncertainties. The Company's actual results may vary significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the subsection entitled "Forward-Looking Statements and Factors Affecting Future Performance" below. The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q and the consolidated financial statements in the Company's 1998 Form 10-K. All information is based on the Company's fiscal calendar. RESULTS OF OPERATIONS PERCENTAGE OF SALES Three Months Ended May 1, May 2, 1999 1998 SALES Sales ($000) $550,825 $484,276 Sales growth 13.7% 9.4% Comparable store sales 7% 4% growth COSTS AND EXPENSES Cost of goods sold and occupancy 68.9% 69.6% General, selling and administrative 19.3% 19.4% Depreciation and amortization 1.7% 1.6% Interest income (0%) (0%) NET EARNINGS 6.2% 5.8% Sales The increase in sales for the three months ended May 1, 1999, compared to the same period in the prior year, reflects an increase in the number of stores open during the current period as well as an increase in comparable store sales. Costs and Expenses Cost of goods sold and occupancy expenses as a percentage of sales for the three months ended May 1,1999 decreased compared to the same period in the prior year, primarily due to (i) leverage on occupancy costs realized from the increase in comparable store sales; and (ii) improved merchandise margins, mainly from higher initial markups. The decrease in general, selling and administrative expenses as a percentage of sales for the three months ended May 1, 1999, compared to the same period in the prior year, primarily reflects leverage realized from the increase in comparable store sales. 8 Net Earnings The increase in net earnings as a percentage of sales in the three months ended May 1, 1999, compared to the same period in the prior year, is primarily due to the improvement in the cost of goods sold and occupancy expenses ratio. Income Taxes Paid The company paid $19.5 million in income taxes in the quarter ended May 1, 1999, versus $3.9 million in the quarter ended May 2, 1998. This increase in income taxes paid primarily resulted from the timing of certain tax deductions taken by the company related to its employee common stock plans. The Company's effective tax rate in each quarter was approximately 39%. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The primary uses of cash during the three months ended May 1, 1999 were for (i) the purchase of inventory; (ii) the repurchase of the company's common stock; and (iii) capital expenditures for new stores, improvements to existing locations, improvements in management information systems, and various expenditures to improve the central office and distribution centers. Total consolidated inventories increased 12% at May 1, 1999 from May 2, 1998, due mainly to a 7% increase in the number of stores open at the end of each period and a planned increase in the level of packaway merchandise. The increase in accounts payable at May 1, 1999 from May 2, 1998 resulted mainly from the higher level of inventory purchases over the prior year. The increase in accrued expenses and other in these same periods is due primarily to higher sales tax accruals, an increase in short-term borrowings and an increase in income taxes payable. In January 1999, the company announced a $120 million common stock repurchase program. In the three months ended May 1, 1999, the company repurchased approximately 828,000 shares for an aggregate purchase price of approximately $36 million. The company believes it can fund its operating cash requirements and capital needs for the balance of this fiscal year (and for the next fiscal year) through internally generated cash, trade credit, established bank lines and lease financing. YEAR 2000 MATTERS The year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Certain information technology systems and their associated software ("IT Systems"), and certain equipment that uses programmable logic chips to control aspects of their operation ("embedded chip equipment"), may recognize "00" as a year other than the year 2000. Some IT Systems and embedded chip equipment used by the company and by third parties who do business with the company contain two-digit programming to define a year. The year 2000 issue could result, at the company and elsewhere, in system failures or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions or to engage in other normal business activities. Readiness for Year 2000 The company is addressing its year 2000 issue, including efforts relating to IT Systems and embedded chip equipment used within the company, efforts to address issues the company faces if third parties who do business with the company are not prepared for the year 2000, and contingency planning. In 1997, the company created a corporation-wide year 2000 task force 9 representing all business and staff units with the goal of achieving an uninterrupted transition into the year 2000. The company is using both internal and external resources to identify, correct, upgrade or replace and test its IT Systems and embedded chip equipment for year 2000 compliance. The company uses a variety of IT Systems, internally developed and third-party provided software and embedded chip equipment, depending upon business function and location. For these IT Systems, software and embedded chip equipment, the company has divided its year 2000 efforts into four phases: (i) identification and inventorying of IT Systems and embedded chip equipment with potential year 2000 problems; (ii) assessment of scope of year 2000 issues for, and assigning priorities to, each item based on its importance to the company's operations; (iii) remediation of year 2000 issues in accordance with assigned priorities, by correction, upgrade, replacement or retirement; (iv) testing for and validation of year 2000 compliance, including integration testing. Phases (i) and (ii) are complete across all business functions and locations. The company has categorized as "mission critical" those IT Systems and embedded chip equipment whose failure would cause cessation of store operations, or could otherwise have a sustained and significant detrimental financial impact on the company. All mission critical IT Systems either are currently in phase (iv) or have been completed through phase (iv). The majority of embedded chip equipment is in phase (iv). As of May 1999, over 90% of the company's mission critical IT Systems were determined to be year 2000 compliant, or replacements, changes, upgrades or workarounds have been identified, tested and deployed. The company is in the process of conducting a comprehensive program of integration testing of its IT Systems in order to ensure that all systems still work together properly and without year 2000 problems. This integration testing began in the third quarter of 1998 and will be completed by mid-1999. The company's operations are also dependent on the year 2000 readiness of third parties that do business with the company. In particular, the company's IT Systems interact with commercial electronic transaction processing systems to handle customer credit card purchases and other point-of-sale transactions, and the company is dependent on third-party suppliers of such infrastructure elements as, but not limited to, telecommunications services, electric power, water and banking facilities. The company does not depend to any significant degree on any single merchandise vendor or upon electronic transaction processing with individual vendors for merchandise purchases. The company has identified and initiated formal communications with these third parties to determine the extent to which the company will be vulnerable to such parties' failure to resolve their own year 2000 issues. The company has received responses from over 90% of those suppliers and merchandise vendors that it believes are highly critical to its year 2000- remediation efforts. As a follow-up, the company plans to seek to determine whether the supplier is taking appropriate steps to achieve year 2000 readiness and to be prepared to continue functioning effectively as a supplier in accordance with the company's business needs. The company is assessing its risks with respect to failure by third parties to be year 2000 compliant and intends to seek to mitigate those risks. The company is also developing contingency plans, discussed below, to address issues related to suppliers the company determines are not making sufficient progress toward becoming year 2000 compliant. Costs The company estimates that its IT Systems and embedded chip equipment will be year 2000 compliant by mid-1999. Aggregate costs for work related to year 2000 efforts in fiscal 1998 and 1999 currently are anticipated to total approximately $12.0 million, including about $6.0 million for capital investments in IT Systems and embedded chip equipment, and are expected to be funded through operating cash flows. Operating costs related to year 2000 compliance projects will be incurred over several quarters and will be expensed as incurred. In 1998, the company incurred approximately $4.0 million in expenses related to year 2000, with approximately $2.0 million expected in fiscal 1999. Capital expenditures in 1998 totaled approximately $4.0 million with approximately $2.0 million in capital expenditures expected in fiscal 1999. The company's estimates of the costs of achieving year 2000 compliance and the date by which year 2000 compliance will be achieved are based on management's best estimates, which were derived using numerous assumptions about future events including the continued availability of certain resources, third-party modification plans and other factors. However, there can be no assurance that these estimates will be achieved, and actual results could differ materially from these estimates. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in year 2000 remediation work, the ability to locate and correct all relevant computer codes, the success achieved by the company's suppliers in reaching year 2000 readiness, the timely availability of necessary replacement items and similar uncertainties. Risks The company expects to implement the changes necessary to address the year 2000 issue for IT Systems and embedded chip equipment used within the company. The company presently believes that, with modifications to existing software, conversions to new software, and appropriate remediation of embedded chip equipment, the year 2000 issue with respect to the company's IT Systems and embedded chip equipment is not reasonably likely to pose significant operational problems for the company. However, if unforeseen difficulties arise or such modifications, conversions and replacements are not completed timely, or if the company's vendors' or suppliers' systems are not modified to become year 2000 compliant, the year 2000 issue may have a material impact on the results of operations and financial condition of the company. The company is presently unable to assess the likelihood that the company will experience significant operational problems due to unresolved year 2000 problems of third parties that do business with the company. Although the company has not been put on notice that any known third-party problem will not be timely resolved, the company has limited information and no assurance of additional information concerning the year 2000 readiness of third parties. The resulting risks to the company's business are very difficult to assess due to the large number of variables involved. If third parties fail to achieve year 2000 compliance, year 2000 problems could have a material impact on the company's operations. Similarly, there can be no assurance that the company can timely mitigate its risks related to a supplier's failure to resolve its year 2000 issues. If such mitigation is not achievable, year 2000 problems could have a material impact on the company's operations. Contingency Plans The company presently believes that its most reasonably likely worst-case year 2000 scenarios would relate to the possible failure in one or more geographic regions of third party systems over which the company has no control and for which the company has no ready substitute, such as, but not limited to, power and telecommunications services. For example, if such services were to fail, it could be necessary for the company to temporarily close stores in the affected geographic areas. The company has in place a business resumption plan that addresses recovery from various kinds of disasters, including recovery from significant interruptions to data flows and distribution capabilities at the company's major data systems centers and major distribution centers. The company is using that plan as a starting point for developing specific year 2000 contingency plans, which will generally emphasize locating alternate sources of supply, methods of distribution and ways of processing information. The company expects its year 2000 contingency plans will be substantially complete by the end of the second quarter of fiscal year 1999. However, there can be no assurance that the company will be able to complete its contingency planning on that schedule. 11 FORWARD-LOOKING STATEMENTS AND FACTORS AFFECTING FUTURE PERFORMANCE This report includes a number of forward-looking statements, which reflect the company's current beliefs and estimates with respect to future events and the company's future financial performance, operations and competitive strengths. The words "expect," "anticipate," "estimate," "believe" and similar expressions identify forward-looking statements. The company's continued success depends, in part, upon its ability to increase sales at existing locations, to open new stores and to operate stores on a profitable basis. There can be no assurance that the company's existing strategies and store expansion program will result in a continuation of revenue and profit growth. Future economic and industry trends that could potentially impact revenue and profitability remain difficult to predict. As a result, the forward-looking statements that are contained herein are subject to certain risks and uncertainties that could cause the company's actual results to differ materially from historical results or current expectations. These factors include, without limitation, ongoing competitive pressures in the apparel industry, obtaining acceptable store locations, the company's ability to continue to purchase attractive name-brand merchandise at desirable discounts, successful implementation of the company's merchandise diversification strategy, the company's ability to successfully extend its geographic reach, unseasonable weather trends, changes in the level of consumer spending on or preferences in apparel or home-related merchandise and greater than planned costs, including those that could be related to necessary modifications to or replacements of the company's IT Systems and embedded chip equipment to enable them to process information with dates or date ranges spanning the year 2000 and beyond. If unforeseen difficulties arise or such modifications and replacements are not completed timely, or if the company's vendors' or suppliers' IT Systems and embedded chip equipment are not modified to become year 2000 compliant, the year 2000 issue may have a material impact on the operations of the company. In addition, the company's corporate headquarters, one of its distribution centers and 44% of its stores are located in California. Therefore, a downturn in the California economy or a major natural disaster there could significantly affect the company's operating results and financial condition. In addition to the above factors, the apparel industry is highly seasonal. The combined sales of the company for the third and fourth (holiday) fiscal quarters are historically higher than the combined sales for the first two fiscal quarters. The company has realized a significant portion of its profits in each fiscal year during the fourth quarter. Intensified price competition, lower than anticipated consumer demand or other factors, if they were to occur during the third and fourth quarters, and in particular during the fourth quarter, could adversely affect the company's fiscal year results. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Management believes that the market risk associated with the company's ownership of market-risk sensitive financial instruments (including interest rate risk and equity price risk) as of May 1, 1999 is not material. 12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Incorporated herein by reference to the list of Exhibits contained in the Exhibit Index that begins on page 13 of this Report. (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned thereunto duly authorized. ROSS STORES, INC. Registrant Date: June 14, 1999 /s/John G. Call John G. Call, Senior Vice President, Chief Financial Officer and Principal Accounting Officer 13 INDEX TO EXHIBITS Exhibit Number Exhibit 3.1 Corrected First Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to the Form 10- K filed by Ross Stores for its year ended January 30, 1999. 3.2 Amended By-laws, dated August 25, 1994, incorporated by reference to Exhibit 3.2 to the Form 10-Q filed by Ross Stores for its quarter ended July 30, 1994. 10.36 Consulting Agreement between Ross Stores and Stuart G. Moldaw, effective as of April 1, 1999, through March 31, 2002. 10.37 Employment Agreement between Ross Stores and Michael Hamilton, effective as of March 1, 1999, through March 1, 2002. 10.38 Employment Agreement between Ross Stores and James Fassio, effective as of April 1, 1999, through April 1, 2002. 15 Letter re: Unaudited Interim Financial Information. 27 Financial Data Schedules (submitted for SEC use only). EX-15 2 EXHIBIT 15 June 14, 1999 Ross Stores, Inc. Newark, California We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim condensed consolidated financial statements of Ross Stores, Inc. for the three-month periods ended May 1, 1999, and May 2, 1998, as indicated in our independent accountants' report dated May 21, 1999; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended May1, 1999 is incorporated by reference in Registration Statements Nos. 33-61373, 33-51916, 33-51896, 33-51898, 33-41415, 33-41413, 33-29600, 333-56831, and 333-06119 of Ross Stores, Inc. on Form S-8. We are also aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. Yours truly, /s/Deloitte & Touche LLP San Francisco, California EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF EARNINGS FOR THE THREE MONTHS ENDED MAY 1, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000745732 ROSS STORES, INC. 1,000 3-MOS JAN-29-2000 JAN-31-1999 MAY-01-1999 33,307 0 15,199 0 516,107 580,914 451,406 201,613 881,146 407,284 0 0 0 458 427,834 881,146 550,825 550,825 379,378 494,728 0 0 (162) 56,097 21,934 34,163 0 0 0 34,163 0.74 0.73
EX-10 4 CONSULTING AGREEMENT BETWEEN ROSS STORES, INC. AND STUART G. MOLDAW This Agreement is made as of April 1, 1999 (the "Effective Date") through March 31, 2002 (the Completion Date"), by and between Ross Stores, Inc., a Delaware corporation ("Ross") and Stuart G. Moldaw ("Consultant"). This Agreement amends and restates the prior agreement, dated April 1, 1997, and any subsequent oral modifications. RECITAL Consultant desires to perform, and Ross desires to have Consultant perform, consulting services as an independent contractor to Ross. NOW, THEREFORE, the parties agree as follows: 1. SERVICES 1.1 Performance. Consultant agrees to perform consulting services for Ross as deemed necessary. 1.2 Payment. (a) Ross agrees to pay Consultant $20,000 per calendar quarter, payable on the first day of each calendar quarter. (b) Ross agrees to pay the salary and benefits for a Financial Administrator for the period in which consulting services are rendered. (c) Pursuant to the terms of that certain Split-Dollar Agreement by and among Ross, Stuart G. Moldaw and Citicorp Trust South Dakota dated as of February 8, 1999, Ross agrees to pay a portion of the premiums of the Split-Dollar Life Insurance Policy No. VP60622150 with Pacific Life Insurance Company (the "Policy") through the Completion Date of this Agreement. (d) Consultant and his spouse will be eligible to participate in Ross' medical plan and supplemental medical plan. Ross agrees to pay the annual premiums of the medical plans for consultant and his spouse. 2. RELATIONSHIP OF PARTIES 2.1 Independent Contractor. Consultant is an independent contractor and not an agent or employee of Ross. Consultant will perform consulting services specified by Ross, but Consultant will determine, in Consultant's sole discretion, the manner and means by which the services are accomplished, subject to the requirement that Consultant shall at all times comply with applicable law. Ross has no right or authority to control the manner or means by which the services are accomplished. Consultant may represent, perform services for, or be employed by such additional clients, persons or companies as Consultant sees fit. 2.2 Employment Taxes and Benefits. Consultant will report as self-employment income all compensation received by Consultant pursuant to this Agreement. Consultant will indemnify Ross and hold it harmless from and against all claims, damages, losses and expenses, including reasonable fees and expenses of attorneys and other professionals, relating to any obligation imposed by law on Ross to pay any withholding taxes, social security, unemployment or disability insurance, or similar items in connection with compensation received by Consultant pursuant to this Agreement. Consultant will not be entitled to receive any vacation or illness payments, or to participate in any plans, arrangements, or distributions by Company pertaining to any bonus, stock option, profit sharing, insurance or similar benefits for Company's employees except as expressly provided in this Agreement. 3. TERMINATION 3.1 Termination. Either Ross or Consultant may terminate this Agreement at any time, for any reason or no reason, by giving 30 days' prior written notice to the other party. 3.2 Confidential Information. Consultant agrees during the term of his consultancy and thereafter to take all steps necessary to hold Ross' confidential information in strict confidence and not to disclose such confidential information. Upon the termination of this Agreement for any reason, Consultant will promptly notify Ross of all confidential information in Consultant's possession and, in accordance with Ross' instructions, will promptly deliver to Ross all such confidential information. 4. GENERAL 4.1 Governing Law: Severability. This Agreement will be governed by and construed in accordance with laws of the State of California excluding that body of law pertaining to conflict of laws. If any provision of this Agreement is for any reason found to be unenforceable, the remainder of this Agreement will continue in full force and effect. 4.2 Successors and Assigns. Neither this Agreement nor any of the rights or obligations of Consultant arising under this Agreement may be assigned or transferred without Ross' prior written consent. This Agreement will be for the benefit of Ross' successors and assigns, and will be binding on Consultant's heirs and legal representatives. 4.3 Notices. Any notices under this Agreement will be sent by certified or registered mail, return receipt requested, to the address specified below or such other address as the party specifies in writing. Such notice will be effective upon its mailing as specified. 4.4 Complete Understanding: Modification. This Agreement, together with the Policy, constitutes the complete and exclusive understanding and agreement of the parties and supersedes all prior understandings and agreement, whether written or oral, with respect to the subject matter hereof. Any waiver, modification or amendment of any provision of this Agreement will be effective only if in writing and signed by the parties hereto. IN WITNESS WHEREOF, the parties have signed this Agreement as of the Effective Date. ROSS STORES, INC. CONSULTANT By: /s/Michael Balmuth /s/Stuart G. Moldaw Michael Balmuth Stuart G. Moldaw Vice Chairman and Chief Executive Officer Address: Address: 8333 Central Avenue c/o Gymboree Corporation Newark, CA 94560-3433 700 Airport Blvd., Suite 200 Burlingame, CA 94010 EX-10 5 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is made effective as of April 1, 1999, by and between Ross Stores, Inc. (the "Company") and James Fassio (the "Executive"). The Executive is presently employed by the Company as Senior Vice President, Property Development and it is now the intention of the Company and the Executive to enter into a written employment agreement. Accordingly, the Company and the Executive enter into this Agreement. 1. Term. The employment of the EXECUTIVE by the Company will continue as of the effective date hereof and end on April 1, 2002, unless extended or terminated in accordance with this Agreement. For so long as the EXECUTIVE is employed by the Company, upon the written request of the EXECUTIVE, the Company's Chief Executive Officer shall request that the Board of Directors of the Company ("Board") consider extending the EXECUTIVE's employment with the Company. The initial such request must be delivered to the Chief Executive Officer no later than February 1, 2001 and subsequent requests must be delivered at least twelve months before the end of any extended term of this Agreement. The Chief Executive Officer shall advise the EXECUTIVE, in writing, within thirty (30) days following the EXECUTIVE's written request, whether the requested extension has been approved. The failure of the Chief Executive Officer to provide such written advice shall constitute approval of the EXECUTIVE's request for extension. If the EXECUTIVE's request for an extension is approved, this Agreement shall be extended two additional years. 2. Position and Duties. The EXECUTIVE shall serve as Senior Vice President, Property Development of the Company. The EXECUTIVE shall report directly to the Company's Chief Operating Officer. The EXECUTIVE shall devote substantially all of his working time and efforts to the business and affairs of the Company. During the term of his employment, the EXECUTIVE may engage in outside activities provided those activities do not conflict with his duties and responsibilities hereunder, and provided further that the EXECUTIVE gives written notice to the Board of any significant outside business activity in which he plans to become involved, whether or not such activity is pursued for profit. The EXECUTIVE may not render services to or invest in any business competitive with any existing or contemplated business of the Company except with respect to personal investments in securities, limited partnerships or similar passive investment interests that are publicly traded subject to the restrictions set forth in paragraph 9. 3. Place of Performance. The EXECUTIVE shall be employed at the Company's offices in Newark, California except for required travel on the Company's business. 4. Compensation and Related Matters. a. Salary. During his employment, the Company shall pay the EXECUTIVE a monthly salary of $30,000 less applicable withholding ($360,000 on an annualized basis). This salary shall be payable in equal installments in accordance with the Company's normal payroll practices applicable to senior officers. Subject to the first sentence of this paragraph, the EXECUTIVE's salary may be adjusted upward from time to time by the Company in accordance with normal business practices of the Company. In the event of the occurrence of a Change of 2 Control (as defined in paragraph 6(f) hereof), then during the period commencing on the effective date of the Change of Control and expiring two years thereafter (the "Remaining Term"), the EXECUTIVE shall receive as additional salary the aggregate amount of $500,000 per year (the "Additional Salary") which shall be payable in equal installments during the Remaining Term in accordance with the Company's normal payroll policies applicable for senior officers. The provisions of paragraph 1 ("Term") of the Agreement notwithstanding, the EXECUTIVE's employment by the Company under this Agreement shall continue until the later of (a) the expiration of the Remaining Term or (b) the expiration of any extension pursuant to paragraph 1. If any portion of the Additional Salary is subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal Revenue Code, the Company shall reimburse the EXECUTIVE in such amounts so that, after deduction of any Excise Taxes paid by the EXECUTIVE and any federal, state or local income tax and Excise Taxes paid upon such reimbursements, the net amounts retained by the EXECUTIVE are equal to the Additional Salary. For all purposes of paragraph 8 hereof ("Compensation and Benefits Upon Termination"), the Additional Salary shall be included within the term "salary" as used in such paragraph 8. Notwithstanding the above, the Additional Salary shall not be included in base salary for purposes of determining any payments under the Company's Incentive Compensation Plan. The EXECUTIVE's entitlement to this Additional Salary is expressly conditioned upon the EXECUTIVE's compliance with the terms of this Agreement. b. Bonus. During his employment the Company shall pay the EXECUTIVE an annual bonus in accordance with the terms of a bonus incentive plan that covers the EXECUTIVE (or any replacement plan of substantially equivalent or greater value that may subsequently be established and in effect at the time for such action). c. Expenses. During his employment the EXECUTIVE shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him in performing services hereunder, including all reasonable expenses of travel and living while away from home, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company. d. Other Benefits. The EXECUTIVE shall be entitled to continue to participate in all of the Company's employee benefit plans and arrangements in effect on the date hereof in which the EXECUTIVE now participates (including without limitation each pension and retirement plan and arrangement, supplemental pension and retirement plan, deferred compensation plan, short-term and long-term incentive plan, stock option plan, life insurance and health-and-accident plan and arrangement, medical insurance plan, physical examination program, dental care plan, accidental death and disability plan, survivor income plan, relocation plan, financial, tax and legal counseling programs, and vacation plan). The Company shall not make any changes in such plans or arrangements which would adversely affect the EXECUTIVE's rights or benefits thereunder, unless such change occurs pursuant to a program applicable to all senior executives of the Company and does not result in a proportionately greater reduction in the rights of, or benefits to, the EXECUTIVE as compared with any other senior executive of the Company. The EXECUTIVE shall be entitled to participate in or receive benefits under any employee benefit plan or arrangement made available by the Company in the future to its executives and key management employees, subject to, and on a basis consistent with, the terms, conditions and overall administration of such plans and arrangements. Except as 3 otherwise specifically provided herein, nothing paid to the EXECUTIVE under any plan or arrangement presently in effect or made available in the future shall be in lieu of the salary or bonus payable under subsections (a) and (b). e. Vacations. The EXECUTIVE shall be entitled to the number of vacation days in each calendar year, and to compensation in respect of earned but unused vacation days, determined in accordance with the Company's vacation plan. The EXECUTIVE shall also be entitled to all paid holidays given by the Company to its executives. Unused vacation days shall not be forfeited once they have been earned and, if still unused at the time of the EXECUTIVE's termination of employment with the Company, shall be promptly paid to the EXECUTIVE at their then-current value, based on the EXECUTIVE's rate of pay at the time of his termination of employment. f. Services Furnished. The Company shall furnish the EXECUTIVE with office space and such services as are suitable to the EXECUTIVE's position and adequate for the performance of his duties. 5. Confidential Information. a. The EXECUTIVE agrees not to disclose, either while in the Company's employ or at any time thereafter, to any person not employed by the Company, or not engaged to render services to the Company, any confidential information obtained while in the employ of the Company, including, without limitation, any of the Company's inventions, processes, methods of distribution or customers or trade secrets; provided, however, that this provision shall not preclude the EXECUTIVE from use or disclosure of information known generally to the public or from disclosure required by law or court order. b. The EXECUTIVE agrees that upon leaving the Company's employ, he will make himself reasonably available to answer questions from Company officers regarding his former duties and responsibilities and the knowledge he obtained in connection therewith. In addition, he will not take with him, without the prior written consent of any officer authorized to act in the matter by the Board, any study, memoranda, drawing, blueprint, specification or other document of the Company, its subsidiaries, affiliates and divisions, which is of a confidential nature relating to the Company, its subsidiaries, affiliates and divisions. c. The EXECUTIVE understands and agrees that his obligation pursuant to this paragraph 5 shall survive the termination of this Agreement and his termination of employment for any reason under this Agreement. 6. Termination. The EXECUTIVE's employment may be terminated during the term of this Agreement only as follows: a. Death. The EXECUTIVE's employment shall terminate upon his death. b. Disability. If, as a result of the EXECUTIVE's incapacity due to physical or mental illness, the EXECUTIVE shall have been absent from his duties hereunder on a full-time basis for the entire period of six consecutive months, and within thirty days after written notice 4 of termination is given by the Company or the EXECUTIVE (which may occur before or after the end of such six-month period), the EXECUTIVE shall not have returned to the performance of his duties hereunder on a full-time basis, the EXECUTIVE's employment shall terminate. A termination of employment pursuant to this paragraph 6(b) shall be deemed an involuntary termination for purposes of this Agreement or any plan or practice of the Company. c. Cause. The Company may terminate the EXECUTIVE's employment for Cause. The Company shall have "Cause" to terminate the EXECUTIVE's employment upon (A) the continued failure by the EXECUTIVE to substantially perform his duties hereunder (other than a failure resulting from a disability as defined in subsection (b)) after written notice is delivered by the Company that specifically identifies the manner in which the EXECUTIVE has not substantially performed his duties, or (B) the engaging by the EXECUTIVE in knowing, illegal or grossly negligent conduct which is materially injurious to the Company monetarily or otherwise. d. Without Cause. The Company may terminate the EXECUTIVE's employment at any time without cause. A termination "without cause" is a termination of the EXECUTIVE's employment by the Company for any reason other than those set forth in subsections (a)[Death], (b)[Disability] or (c)[For Cause] of this paragraph. e. Termination by Executive for Good Reason. The EXECUTIVE may terminate his employment with the Company for Good Reason which shall be deemed to occur if he terminates his employment within six months after (i) written notice of a failure by the Company to comply with any material provision of this Agreement which failure has not been cured within ten days after such written notice of noncompliance has been given by the EXECUTIVE to the Company; (ii) a significant diminishment in the nature or scope of the authority, power, function or duty attached to the position which the EXECUTIVE currently maintains without the express written consent of the EXECUTIVE; or (iii) the Company requires that the EXECUTIVE relocate his place of employment or residence outside of the San Francisco Bay Area. f. Termination Following Change of Control. The EXECUTIVE may terminate his employment with the Company within six months after a Change of Control, which shall be deemed to have occurred in the event of: (i) the direct or indirect sale or exchange by the stockholders of the Company of all or substantially all of the stock of the Company, in a single or series of related transactions, after which sale or exchange the stockholders of the Company immediately prior to such transactions do not retain, directly or indirectly, at least a majority of the beneficial interest in the voting stock of the Company; (ii) a merger in which the Company is a party after which merger the stockholders of the Company do not retain, directly or indirectly, at least a majority of the beneficial interest in the voting stock of the surviving company; or (iii) the sale, exchange, or transfer of all or substantially all of the Company's assets (other than a sale, exchange, or transfer to one or more corporations where the stockholders of the Company before such sale, exchange, or transfer retain, directly or indirectly, at least a majority of the beneficial interest in the voting stock of the corporation(s) to which the assets were transferred). Provided, however, that the EXECUTIVE shall not be entitled to terminate his employment under this subsection in the event that the purchaser of the Company, or any successor by merger, consolidation or otherwise, or the entity to which all or a significant portion of the 5 Company's assets have been transferred, shall have expressly assumed in writing all duties and obligations of the Company under this Agreement. g. Voluntary Termination. The EXECUTIVE may voluntarily terminate his employment with the Company at any time. A termination of employment by the EXECUTIVE pursuant to paragraph 6(e)[For Good Reason] or (f)[Change of Control] shall not be deemed a voluntary termination by the EXECUTIVE for purposes of this Agreement or any plan or practice of the Company but shall be deemed an involuntary termination. h. Non-Renewal. If the EXECUTIVE fails to request an extension of this Agreement in accordance with paragraph 1, or if the Board shall fail to approve such request, this Agreement shall automatically expire at the end of its term. Such expiration shall not entitle the EXECUTIVE to any compensation or benefits except as earned by the EXECUTIVE through the date of expiration of this Agreement and set forth in paragraph 8(e). The parties shall have no further obligations to each other thereafter except as set forth in paragraphs 5 and 11. 7. Notice and Effective Date of Termination. a. Notice. Any termination of the EXECUTIVE's employment by the Company or by the EXECUTIVE during the term of this Agreement (other than as a result of death) shall be communicated by written notice of termination to the other party hereto. Such notice shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the EXECUTIVE's employment under that provision. b. Date of Termination. The date of termination shall be: (i) if the EXECUTIVE's employment is terminated by his death, the date of his death; (ii) if the EXECUTIVE's employment is terminated pursuant to paragraph 6(b)[Disability], the date of termination shall be the 31st day following delivery of the notice of termination; (iii) if the EXECUTIVE's employment is terminated for any other reason by either party, the date on which a notice of termination is delivered to the other party; and (iv) if the Agreement expires pursuant to paragraph 6(h)[Non- Renewal], the parties' employment relationship shall terminate on the last day of the term of this Agreement without any notice. 6 8. Compensation and Benefits Upon Termination. a. Disability, Without Cause or For Good Reason. If the EXECUTIVE's employment terminates pursuant to paragraph 6(b)[Disability], (d)[Without Cause] or (e)[For Good Reason], the Company shall: (i) Salary: continue to pay the EXECUTIVE his then-current salary through the remaining term of this Agreement as defined in paragraph 1; (ii) Bonus: continue to pay the EXECUTIVE an annual bonus(es) throughout such remaining term; each such bonus shall be in an amount equal to the greater of (A) the EXECUTIVE's bonus during the year prior to his termination or (B) the bonus that the EXECUTIVE would have earned under the Company's bonus plan in the year that he was terminated had he remained in its employment; provided, however, that such post-termination bonuses shall not exceed the lesser of the 100% targeted amounts for those bonus payments in the prior and then-current year, and such bonuses shall not be paid until due under the Company's present bonus plan; (iii) Stock Options: with respect to any stock options granted to the EXECUTIVE by the Company, the EXECUTIVE shall immediately become vested in any unvested stock options upon such termination; and (iv) Restricted Stock: with respect to any restricted stock granted to the EXECUTIVE by the Company which has not become vested as of such termination, the EXECUTIVE shall immediately become vested in a pro rata portion of such unvested stock determined on the basis of the number of full months that have elapsed from the date of grant of such restricted stock. Such pro rata vesting shall be determined separately with respect to each portion of any restricted stock grant that is subject to a different restriction lapse date. That is, for each portion of any restricted stock grant that is subject to a different restriction lapse date, the EXECUTIVE shall immediately become vested in the number of shares that equals (i) the quantity A divided by B times C minus (ii) the number of shares that have previously vested [(A/B x C)-D], where A is the number of full months that have elapsed from the date of grant to and including the date of termination, B is the number of months between the date of grant and the restriction lapse date, C is the number of shares that would otherwise become vested on that restriction lapse date and D is the number of shares that have previously vested. As a hypothetical example, presume the EXECUTIVE had been granted 30,000 shares of restricted stock on April 1, 1999, and that the restrictions on that grant lapse as to 10,000 shares on April 1, 2000, 5,000 shares on April 1, 2001, and 15,000 shares on April 1, 2002. If the EXECUTIVE's employment terminated pursuant to paragraph 6(b) on September 1, 1999 (i.e., at a time when no shares had previously vested), the EXECUTIVE would immediately become vested under this subsection (iv) in 5,000 of the shares whose restrictions were to lapse on April 1, 2000, 1,250 of the shares whose restrictions were to lapse on April 1, 2001, and 2,500 of the shares whose restrictions were to lapse on April 1, 2002. The Company shall have no further obligations to the EXECUTIVE as a result of such termination except as set forth in paragraph 11. 7 b. For Cause. If the EXECUTIVE's employment is terminated for cause as defined in paragraph 6(c)(A)[Failure to Perform], the EXECUTIVE shall receive the post-termination compensation and benefits described in paragraph 8(a)[Compensation and Benefits Upon Disability, Termination Without Cause or For Good Reason]. If the EXECUTIVE's employment is terminated for cause as defined in paragraph 6(c)(B)[Materially Injurious Conduct], he shall only receive the post-termination compensation and benefits described in paragraph 8(d) [Compensation and Benefits Upon Voluntary Termination]. c. Change of Control. Upon a Change of Control (whether or not the EXECUTIVE's employment terminates), the EXECUTIVE shall immediately become vested in any shares of restricted stock granted to the EXECUTIVE by the Company which had not vested prior to the Change of Control. In addition, if the EXECUTIVE's employment terminates pursuant to paragraph 6(f)[Change of Control], the Company shall: (i) Salary: continue to pay the EXECUTIVE his then-current salary through the remaining term of this Agreement as defined in paragraph 1; (ii) Bonus: continue to pay the EXECUTIVE his annual bonus(es) throughout such remaining term; each such bonus shall be in an amount equal to the greater of (A) the EXECUTIVE's bonus during the year prior to his termination or (B) the bonus that the EXECUTIVE would have earned under the Company's bonus plan in the year that he was terminated had he remained in its employment; provided, however, that such post-termination bonuses shall not exceed the lesser of the 100% targeted amounts for those bonus payments in the prior and then-current year, and such bonuses shall not be paid until due under the Company's present bonus plan; and (iii) Stock Options: with respect to any stock options granted to the EXECUTIVE by the Company, the EXECUTIVE shall immediately become vested in any unvested stock options upon such termination. The Company shall reimburse the EXECUTIVE for any excise taxes paid by the EXECUTIVE pursuant to Internal Revenue Code section 4999 as a result of any "excess parachute payments" that he receives from the Company as determined under section 280G of said Code. This reimbursement shall not include any additional amount to cover the EXECUTIVE's income or other taxes on such reimbursement. The Company shall have no further obligations to the EXECUTIVE as a result of such termination except as set forth in paragraph 11. d. Death or Voluntary Termination. If the EXECUTIVE's employment terminates pursuant to paragraph 6(a)[Death] or 6(g)[Voluntary Termination], he (or his designee or his estate) shall be paid his salary through his termination date and not thereafter. He (or his designee or his estate) shall not be entitled to any bonus payments which were not fully earned prior to his termination date, and he (or his designee or his estate) shall not be entitled to any pro-rated bonus payment for the year in which his employment terminates. Any stock options granted to the EXECUTIVE by the Company will continue to vest only through the date on which his employment terminates (provided, however, that if the EXECUTIVE's employment terminates as a result of his voluntary termination (but not as a result of his death) within six months after a Change of Control, the EXECUTIVE shall immediately become fully-vested in 8 any unvested stock options previously granted to him by the Company) and any restricted stock that was granted to the EXECUTIVE by the Company that is unvested as of the date on which his employment terminates will automatically be reacquired by the Company and the EXECUTIVE (or his designee or his estate) shall have no further rights with respect to such restricted stock. The Company shall have no further obligations to the EXECUTIVE as a result of the termination of his employment pursuant to paragraph 6(a)[Death] or 6(g)[Voluntary Termination] except as set forth in paragraph 11. e. Non-Renewal. If the Agreement expires as set forth in paragraph 6(h)[Non-Renewal], the Company shall have no further obligations to the EXECUTIVE except as set forth in paragraph 11 and except that with respect to any restricted stock granted to the EXECUTIVE by the Company which has not become vested as of such expiration date, the EXECUTIVE shall immediately become vested in a pro rata portion of such unvested stock determined on the basis of the number of full months that have elapsed from the date of grant of such restricted stock (as described more fully in paragraph 8(a)(iv)). 9. Employment and Post-Employment Restrictions. The Company and the EXECUTIVE acknowledge that the Company has a special interest in and derives significant benefit from the unique skills and experience of the EXECUTIVE. In addition, the EXECUTIVE will use and have access to some of the Company's proprietary and valuable Confidential Information during the course of the EXECUTIVE's employment. Accordingly, except as hereafter noted, during the term of the EXECUTIVE's employment with the Company and in the event that the EXECUTIVE voluntarily terminates his employment with the Company prior to April 1, 2002, the EXECUTIVE agrees that for a period of three years following his voluntary termination pursuant to paragraph 6(g), he shall not provide any labor, work, services or assistance to (whether as an officer, director, employee, partner, agent, owner, independent contractor, stockholder or otherwise) Burlington Coat Factory Warehouse Corporation, Dillard Department Stores, Inc., Filene's Basement Corp., The Federated Stores, The May Department Stores Company, The TJX Companies, Inc. and Value City Department Stores, Inc. as well as all subsidiaries, divisions and/or the surviving entity of any of the above that do business in the retail industry in the case of a merger or acquisition. However, this subsection shall not prohibit the EXECUTIVE from making any investment of 1% or less of the equity securities of any publicly-traded corporation that is engaged in any business of the type or character engaged in by the Company. The preceding sentence shall have no force and effect in the event that (i) the EXECUTIVE's employment with the Company is terminated (1) by the Company pursuant to paragraph 6(c)[with Cause], 6(d)[without Cause] or (2) by the EXECUTIVE pursuant to either paragraph 6(e)[Termination by the Executive for Good Reason] or paragraph 6(f)[Termination Following Change of Control] or (ii) the Company fails to approve or grant an extension of this Agreement in accordance with paragraph 1 hereof. During the term of the EXECUTIVE's employment with the Company and for a period of three years following the termination of that employment for any reason, the EXECUTIVE shall not directly or indirectly solicit any other employee of the Company to terminate his or her employment with the Company. 10. Exercise of Stock Options Following Termination. If the EXECUTIVE's employment terminates pursuant to paragraph 6(a)[Death] or (b)[Disability], he (or his estate) 9 may exercise his right to purchase any vested stock under the stock options granted to him by the Company for up to one year following the date of his termination, but not later than the termination date of such options. In all other instances, he may exercise that right for up to three months following the date of his termination, but not later than the termination date of such options. All such purchases must be made by the EXECUTIVE in accordance with the applicable stock option plans and agreements between the parties. 11. Insurance and Indemnity. The Company shall, to the extent permitted by law, include the EXECUTIVE during the term of this Agreement under any directors and officers liability insurance policy maintained for its directors and officers, with coverage at least as favorable to the EXECUTIVE in amount and each other material respect as the coverage of other directors and officers covered thereby. This obligation to provide insurance and indemnify the EXECUTIVE shall survive expiration or termination of this Agreement with respect to proceedings or threatened proceedings based on acts or omissions of the EXECUTIVE occurring during the EXECUTIVE's employment with the Company or with any affiliated company. Such obligations shall be binding upon the Company's successors and assigns and shall inure to the benefit of the EXECUTIVE's heirs and personal representatives. 12. Successors; Binding Agreement. This Agreement and all rights of the EXECUTIVE hereunder shall inure to the benefit of and be enforceable by the EXECUTIVE's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the EXECUTIVE should die while any amounts would still be payable to him hereunder all such amounts shall be paid in accordance with the terms of this Agreement to the EXECUTIVE's written designee, or if there be no such designee, to the EXECUTIVE's estate. 13. Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States registered mail, return receipt requested, postage prepaid, addressed as follows: If to the EXECUTIVE: James Fassio c/o Ross Stores, Inc. 8333 Central Avenue Newark, CA 94560-3433 If to the Company: Ross Stores, Inc. 8333 Central Avenue Newark, CA 94560-3433 Attention: Corporate Secretary or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 14. Modification or Waiver; Entire Agreement. No provision of this Agreement may be modified or waived except in a document signed by the EXECUTIVE and the chairman of the Compensation Committee of the Board or such other person as may be designated by the Board. 10 This Agreement, along with any stock option or restricted stock agreements between the parties, constitute the entire agreement between the parties regarding their employment relationship. No agreements or representations, oral or otherwise, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. 15. Governing Law; Severability. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 16. Severability. In the event any provision of this Agreement shall be found unenforceable by an arbitrator or a court of competent jurisdiction, the provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the Company shall receive the benefits contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby. 17. Mitigation. In the event the EXECUTIVE's employment with the Company terminates for any reason other than death, the EXECUTIVE shall be obligated to seek other employment following such termination in order to mitigate payments that the Company may be required to make to him or for his benefit hereunder. Such obligation shall not apply during any period in which the EXECUTIVE is disabled. If the EXECUTIVE obtains other employment during any period in which he is entitled to receive continued salary or bonus payments under paragraph 8, any salary or bonus payments earned by the EXECUTIVE during such period shall reduce the Company's obligation to pay continued salary and/or bonus payments under paragraph 8 by the amount of the salary and/or bonus payments so earned by the EXECUTIVE. 18. Withholding. All payments required to be made by the Company hereunder to the EXECUTIVE or his estate or beneficiaries shall be subject to the withholding of such amounts as the Company may reasonably determine it should withhold pursuant to any applicable law. To the extent permitted, the EXECUTIVE may provide all or any part of any necessary withholding by contributing Company stock with value, determined on the date such withholding is due, equal to the number of shares contributed multiplied by the closing Nasdaq price on the date preceding the date the withholding is determined. 19. Arbitration. In the event of any dispute or claim relating to or arising out of the parties' employment relationship or this Agreement (including, but not limited to, any claims of breach of contract, wrongful termination or age, race, sex, disability or other discrimination), all such disputes shall be fully, finally and exclusively resolved by binding arbitration conducted by the American Arbitration Association in San Francisco, California; provided, however, that this arbitration provision shall not apply to any disputes or claims relating to or arising out of the misuse or misappropriation of the Company's trade secrets or proprietary information or to any disputes or claims relating to or arising out of the EXECUTIVE's failure to comply with the requirements of paragraph 9 regarding Employment and Post- Employment Restrictions. 11 20. Attorneys' Fees. Each party shall bear its own attorneys' fees and costs incurred in any action or dispute arising out of this Agreement. 21. Miscellaneous. No right or interest to, or in, any payments shall be assignable by the EXECUTIVE; provided, however, that this provision shall not preclude the EXECUTIVE from designating in writing one or more beneficiaries to receive any amount that may be payable after the EXECUTIVE's death and shall not preclude the legal representative of the EXECUTIVE's estate from assigning any right hereunder to the person or persons entitled thereto. This Agreement shall be binding upon and shall inure to the benefit of the EXECUTIVE, his heirs and legal representatives and the Company and its successors. IN WITNESS WHEREOF, the parties have executed this Employment Agreement effective as of the date and year first above written. ROSS STORES, INC. /s/ James Fassio James Fassio By: /s/ Melvin A. Wilmore Title: President & COO EX-10 6 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is made effective as of March 1, 1999, by and between Ross Stores, Inc. (the "Company") and Michael Hamilton (the "Executive"). 1. Term. The employment of the EXECUTIVE by the Company will commence as of the effective date hereof and end on March 1, 2002, unless extended or terminated in accordance with this Agreement. For so long as the EXECUTIVE is employed by the Company, upon the written request of the EXECUTIVE, the Company's Chief Executive Officer shall request that the Board of Directors of the Company ("Board") consider extending the EXECUTIVE's employment with the Company. The initial such request must be delivered to the Chief Executive Officer no later than February 1, 2001 and subsequent requests must be delivered at least twelve months before the end of any extended term of this Agreement. The Chief Executive Officer shall advise the EXECUTIVE, in writing, within thirty (30) days following the EXECUTIVE's written request, whether the requested extension has been approved. The failure of the Chief Executive Officer to provide such written advice shall constitute approval of the EXECUTIVE's request for extension. If the EXECUTIVE's request for an extension is approved, this Agreement shall be extended two additional years. 2. Position and Duties. The EXECUTIVE shall serve as the Senior Vice President, Stores of the Company. The EXECUTIVE shall report directly to the Company's Chief Operating Officer. The EXECUTIVE shall devote substantially all of his working time and efforts to the business and affairs of the Company. During the term of his employment, the EXECUTIVE may engage in outside activities provided those activities do not conflict with his duties and responsibilities hereunder, and provided further that the EXECUTIVE gives written notice to the Board of any significant outside business activity in which he plans to become involved, whether or not such activity is pursued for profit. The EXECUTIVE may not render services to or invest in any business competitive with any existing or contemplated business of the Company except with respect to personal investments in securities, limited partnerships or similar passive investment interests that are publicly traded subject to the restrictions set forth in paragraph 9. 3. Place of Performance. The EXECUTIVE shall be employed at the Company's offices in Newark, California except for required travel on the Company's business. 4. Compensation and Related Matters. a. Salary. During his employment, the Company shall pay the EXECUTIVE a monthly salary of $33, 333.33, less applicable withholding ($400,000.00 on an annualized basis). This salary shall be payable in equal installments in accordance with the Company's normal payroll practices applicable to senior officers. Subject to the first sentence of this paragraph, the EXECUTIVE's salary may be adjusted upward from time to time by the Company in accordance with normal business practices of the Company. In the event of the occurrence of a Change of Control (as defined in paragraph 6(f) hereof), then during the period commencing on the effective date of the Change of Control and expiring two years thereafter (the "Remaining 2 Term"), the EXECUTIVE shall receive as additional salary the aggregate amount of $500,000 per year (the "Additional Salary") which shall be payable in equal installments during the Remaining Term in accordance with the Company's normal payroll policies applicable for senior officers. The provisions of paragraph 1 ("Term") of the Agreement notwithstanding, the EXECUTIVE's employment by the Company under this Agreement shall continue until the later of (a) the expiration of the Remaining Term or (b) the expiration of any extension pursuant to paragraph 1. If any portion of the Additional Salary is subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal Revenue Code, the Company shall reimburse the EXECUTIVE in such amounts so that, after deduction of any Excise Taxes paid by the EXECUTIVE and any federal, state or local income tax and Excise Taxes paid upon such reimbursements, the net amounts retained by the EXECUTIVE are equal to the Additional Salary. For all purposes of paragraph 8 hereof ("Compensation and Benefits Upon Termination"), the Additional Salary shall be included within the term "salary" as used in such paragraph 8. The EXECUTIVE's entitlement to this Additional Salary is expressly conditioned upon the EXECUTIVE's compliance with the terms of this Agreement. b. Bonus. During his employment the Company shall pay the EXECUTIVE an annual bonus in accordance with the terms of a bonus incentive plan that covers the EXECUTIVE (or any replacement plan of substantially equivalent or greater value that may subsequently be established and in effect at the time for such action). c. Expenses. During his employment the EXECUTIVE shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him in performing services hereunder, including all reasonable expenses of travel and living while away from home, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company. d. Other Benefits. The EXECUTIVE shall be entitled to continue to participate in all of the Company's employee benefit plans and arrangements in effect on the date hereof in which the EXECUTIVE now participates (including without limitation each pension and retirement plan and arrangement, supplemental pension and retirement plan, deferred compensation plan, short-term and long-term incentive plan, stock option plan, life insurance and health-and-accident plan and arrangement, medical insurance plan, physical examination program, dental care plan, accidental death and disability plan, survivor income plan, relocation plan, financial, tax and legal counseling programs, and vacation plan). The Company shall not make any changes in such plans or arrangements which would adversely affect the EXECUTIVE's rights or benefits thereunder, unless such change occurs pursuant to a program applicable to all senior executives of the Company and does not result in a proportionately greater reduction in the rights of, or benefits to, the EXECUTIVE as compared with any other senior executive of the Company. The EXECUTIVE shall be entitled to participate in or receive benefits under any employee benefit plan or arrangement made available by the Company in the future to its executives and key management employees, subject to, and on a basis consistent with, the terms, conditions and overall administration of such plans and arrangements. Except as otherwise specifically provided herein, nothing paid to the EXECUTIVE under any plan or arrangement presently in effect or made available in the future shall be in lieu of the salary or bonus payable under subsections (a) and (b). 3 e. Vacations. The EXECUTIVE shall be entitled to the number of vacation days in each calendar year, and to compensation in respect of earned but unused vacation days, determined in accordance with the Company's vacation plan. The EXECUTIVE shall also be entitled to all paid holidays given by the Company to its executives. Unused vacation days shall not be forfeited once they have been earned and, if still unused at the time of the EXECUTIVE's termination of employment with the Company, shall be promptly paid to the EXECUTIVE at their then-current value, based on the EXECUTIVE's rate of pay at the time of his termination of employment. f. Services Furnished. The Company shall furnish the EXECUTIVE with office space and such services as are suitable to the EXECUTIVE's position and adequate for the performance of his duties. 5. Confidential Information. a. The EXECUTIVE agrees not to disclose, either while in the Company's employ or at any time thereafter, to any person not employed by the Company, or not engaged to render services to the Company, any confidential information obtained while in the employ of the Company, including, without limitation, any of the Company's inventions, processes, methods of distribution or customers or trade secrets; provided, however, that this provision shall not preclude the EXECUTIVE from use or disclosure of information known generally to the public or from disclosure required by law or court order. b. The EXECUTIVE agrees that upon leaving the Company's employ he will make himself reasonably available to answer questions from Company officers regarding his former duties and responsibilities and the knowledge he obtained in connection therewith. In addition, he will not take with him, without the prior written consent of any officer authorized to act in the matter by the Board, any study, memoranda, drawing, blueprint, specification or other document of the Company, its subsidiaries, affiliates and divisions, which is of a confidential nature relating to the Company, its subsidiaries, affiliates and divisions. c. The EXECUTIVE understands and agrees that his obligation pursuant to this paragraph 5 shall survive the termination of this Agreement and his termination of employment for any reason under this Agreement. 6. Termination. The EXECUTIVE's employment may be terminated during the term of this Agreement only as follows: a. Death. The EXECUTIVE's employment shall terminate upon his death. b. Disability. If, as a result of the EXECUTIVE's incapacity due to physical or mental illness, the EXECUTIVE shall have been absent from his duties hereunder on a full-time basis for the entire period of six consecutive months, and within thirty days after written notice of termination is given by the Company or the EXECUTIVE (which may occur before or after the end of such six-month period), the EXECUTIVE shall not have returned to the performance of his duties hereunder on a full-time basis, the EXECUTIVE's employment shall terminate. A 4 termination of employment pursuant to this paragraph 6(b) shall be deemed an involuntary termination for purposes of this Agreement or any plan or practice of the Company. c. Cause. The Company may terminate the EXECUTIVE's employment for Cause. The Company shall have "Cause" to terminate the EXECUTIVE's employment upon (A) the continued failure by the EXECUTIVE to substantially perform his duties hereunder (other than a failure resulting from a disability as defined in subsection (b)) after written notice is delivered by the Company that specifically identifies the manner in which the EXECUTIVE has not substantially performed his duties, or (B) the engaging by the EXECUTIVE in knowing, illegal or grossly negligent conduct which is materially injurious to the Company monetarily or otherwise. d. Without Cause. The Company may terminate the EXECUTIVE's employment at any time without cause. A termination "without cause" is a termination of the EXECUTIVE's employment by the Company for any reason other than those set forth in subsections (a)[Death], (b)[Disability] or (c)[For Cause] of this paragraph. e. Termination by Executive for Good Reason. The EXECUTIVE may terminate his employment with the Company for Good Reason which shall be deemed to occur if he terminates his employment within six months after (i) written notice of a failure by the Company to comply with any material provision of this Agreement which failure has not been cured within ten days after such written notice of noncompliance has been given by the EXECUTIVE to the Company; (ii) a significant diminishment in the nature or scope of the authority, power, function or duty attached to the position which the EXECUTIVE currently maintains without the express written consent of the EXECUTIVE; or (iii) the Company requires that the EXECUTIVE relocate his place of employment or residence outside of the San Francisco Bay Area. f. Termination Following Change of Control. The EXECUTIVE may terminate his employment with the Company within six months after a Change of Control, which shall be deemed to have occurred in the event of: (i) the direct or indirect sale or exchange by the stockholders of the Company of all or substantially all of the stock of the Company, in a single or series of related transactions, after which sale or exchange the stockholders of the Company immediately prior to such transactions do not retain, directly or indirectly, at least a majority of the beneficial interest in the voting stock of the Company; (ii) a merger in which the Company is a party after which merger the stockholders of the Company do not retain, directly or indirectly, at least a majority of the beneficial interest in the voting stock of the surviving company; or (iii) the sale, exchange, or transfer of all or substantially all of the Company's assets (other than a sale, exchange, or transfer to one or more corporations where the stockholders of the Company before such sale, exchange, or transfer retain, directly or indirectly, at least a majority of the beneficial interest in the voting stock of the corporation(s) to which the assets were transferred). Provided, however, that the EXECUTIVE shall not be entitled to terminate his employment under this subsection in the event that the purchaser of the Company, or any successor by merger, consolidation or otherwise, or the entity to which all or a significant portion of the Company's assets have been transferred, shall have expressly assumed in writing all duties and obligations of the Company under this Agreement. 5 g. Voluntary Termination. The EXECUTIVE may voluntarily terminate his employment with the Company at any time. A termination of employment by the EXECUTIVE pursuant to paragraph 6(e)[For Good Reason] or (f)[Change of Control] shall not be deemed a voluntary termination by the EXECUTIVE for purposes of this Agreement or any plan or practice of the Company but shall be deemed an involuntary termination. h. Non-Renewal. If the EXECUTIVE fails to request an extension of this Agreement in accordance with paragraph 1, or if the Board shall fail to approve such request, this Agreement shall automatically expire at the end of its term. Such expiration shall not entitle the EXECUTIVE to any compensation or benefits except as earned by the EXECUTIVE through the date of expiration of this Agreement and set forth in paragraph 8(e). The parties shall have no further obligations to each other thereafter except as set forth in paragraphs 5 and 11. 7. Notice and Effective Date of Termination. a. Notice. Any termination of the EXECUTIVE's employment by the Company or by the EXECUTIVE during the term of this Agreement (other than as a result of death) shall be communicated by written notice of termination to the other party hereto. Such notice shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the EXECUTIVE's employment under that provision. b. Date of Termination. The date of termination shall be: (i) if the EXECUTIVE's employment is terminated by his death, the date of his death; (ii) if the EXECUTIVE's employment is terminated pursuant to paragraph 6(b)[Disability], the date of termination shall be the 31st day following delivery of the notice of termination; (iii) if the EXECUTIVE's employment is terminated for any other reason by either party, the date on which a notice of termination is delivered to the other party; and (iv) if the Agreement expires pursuant to paragraph 6(h)[Non- Renewal], the parties' employment relationship shall terminate on the last day of the term of this Agreement without any notice. 8. Compensation and Benefits Upon Termination. a. Disability, Without Cause or For Good Reason. If the EXECUTIVE's employment terminates pursuant to paragraph 6(b)[Disability], (d)[Without Cause] or (e)[For Good Reason], the Company shall: (i) Salary: continue to pay the EXECUTIVE his then-current salary through the remaining term of this Agreement as defined in paragraph 1; 6 (ii) Bonus: continue to pay the EXECUTIVE an annual bonus(es) throughout such remaining term; each such bonus shall be in an amount equal to the greater of (A) the EXECUTIVE's bonus during the year prior to his termination or (B) the bonus that the EXECUTIVE would have earned under the Company's bonus plan in the year that he was terminated had he remained in its employment; provided, however, that such post-termination bonuses shall not exceed the lesser of the 100% targeted amounts for those bonus payments in the prior and then-current year, and such bonuses shall not be paid until due under the Company's present bonus plan; (iii) Stock Options: with respect to any stock options granted to the EXECUTIVE by the Company, the EXECUTIVE shall immediately become vested in any unvested stock options upon such termination; and (iv) Restricted Stock: with respect to any restricted stock granted to the EXECUTIVE by the Company which has not become vested as of such termination, the EXECUTIVE shall immediately become vested in a pro rata portion of such unvested stock determined on the basis of the number of full months that have elapsed from the date of grant of such restricted stock. Such pro rata vesting shall be determined separately with respect to each portion of any restricted stock grant that is subject to a different restriction lapse date. That is, for each portion of any restricted stock grant that is subject to a different restriction lapse date, the EXECUTIVE shall immediately become vested in the number of shares that equals (i) the quantity A divided by B times C minus (ii) the number of shares that have previously vested [(A/B x C)-D], where A is the number of full months that have elapsed from the date of grant to and including the date of termination, B is the number of months between the date of grant and the restriction lapse date, C is the number of shares that would otherwise become vested on that restriction lapse date and D is the number of shares that have previously vested. As a hypothetical example, presume the EXECUTIVE had been granted 30,000 shares of restricted stock on March 1, 1999, and that the restrictions on that grant lapse as to 10,000 shares on March 1, 2000, 5,000 shares on March 1, 2001, and 15,000 shares on March 1, 2002. If the EXECUTIVE's employment terminated pursuant to paragraph 6(b) on September 1, 1999 (i.e., at a time when no shares had previously vested), the EXECUTIVE would immediately become vested under this subsection (iv) in 5,000 of the shares whose restrictions were to lapse on March 1, 2000, 1,250 of the shares whose restrictions were to lapse on March 1, 2001, and 2,500 of the shares whose restrictions were to lapse on March 1, 2002. The Company shall have no further obligations to the EXECUTIVE as a result of such termination except as set forth in paragraph 11. b. For Cause. If the EXECUTIVE's employment is terminated for cause as defined in paragraph 6(c)(A)[Failure to Perform], the EXECUTIVE shall receive the post-termination compensation and benefits described in paragraph 8(a)[Compensation and Benefits Upon Disability, Termination Without Cause or For Good Reason]. If the EXECUTIVE's employment is terminated for cause as defined in paragraph 6(c)(B)[Materially Injurious Conduct], he shall only receive the post-termination compensation and benefits described in paragraph 8(d) [Compensation and Benefits Upon Voluntary Termination]. 7 c. Change of Control. Upon a Change of Control (whether or not the EXECUTIVE's employment terminates), the EXECUTIVE shall immediately become vested in any shares of restricted stock granted to the EXECUTIVE by the Company which had not vested prior to the Change of Control. In addition, if the EXECUTIVE's employment terminates pursuant to paragraph 6(f)[Change of Control], the Company shall: (i) Salary: continue to pay the EXECUTIVE his then-current salary through the remaining term of this Agreement as defined in paragraph 1; (ii) Bonus: continue to pay the EXECUTIVE his annual bonus(es) throughout such remaining term; each such bonus shall be in an amount equal to the greater of (A) the EXECUTIVE's bonus during the year prior to his termination or (B) the bonus that the EXECUTIVE would have earned under the Company's bonus plan in the year that he was terminated had he remained in its employment; provided, however, that such post-termination bonuses shall not exceed the lesser of the 100% targeted amounts for those bonus payments in the prior and then-current year, and such bonuses shall not be paid until due under the Company's present bonus plan; and (iii) Stock Options: with respect to any stock options granted to the EXECUTIVE by the Company, the EXECUTIVE shall immediately become vested in any unvested stock options upon such termination. The Company shall reimburse the EXECUTIVE for any excise taxes paid by the EXECUTIVE pursuant to Internal Revenue Code section 4999 as a result of any "excess parachute payments" that he receives from the Company as determined under section 280G of said Code. This reimbursement shall not include any additional amount to cover the EXECUTIVE's income or other taxes on such reimbursement. The Company shall have no further obligations to the EXECUTIVE as a result of such termination except as set forth in paragraph 11. d. Death or Voluntary Termination. If the EXECUTIVE's employment terminates pursuant to paragraph 6(a)[Death] or 6(g)[Voluntary Termination], he (or his designee or his estate) shall be paid his salary through his termination date and not thereafter. He (or his designee or his estate) shall not be entitled to any bonus payments which were not fully earned prior to his termination date, and he (or his designee or his estate) shall not be entitled to any pro-rated bonus payment for the year in which his employment terminates. Any stock options granted to the EXECUTIVE by the Company will continue to vest only through the date on which his employment terminates (provided, however, that if the EXECUTIVE's employment terminates as a result of his voluntary termination (but not as a result of his death) within six months after a Change of Control, the EXECUTIVE shall immediately become fully-vested in any unvested stock options previously granted to him by the Company) and any restricted stock that was granted to the EXECUTIVE by the Company that is unvested as of the date on which his employment terminates will automatically be reacquired by the Company and the EXECUTIVE (or his designee or his estate) shall have no further rights with respect to such restricted stock. The Company shall have no further obligations to the EXECUTIVE as a result of the termination of his employment pursuant to paragraph 6(a)[Death] or 6(g)[Voluntary Termination] except as set forth in paragraph 11. 8 e. Non-Renewal. If the Agreement expires as set forth in paragraph 6(h)[Non-Renewal], the Company shall have no further obligations to the EXECUTIVE except as set forth in paragraph 11 and except that with respect to any restricted stock granted to the EXECUTIVE by the Company which has not become vested as of such expiration date, the EXECUTIVE shall immediately become vested in a pro rata portion of such unvested stock determined on the basis of the number of full months that have elapsed from the date of grant of such restricted stock (as described more fully in paragraph 8(a)(iv)). 9. Employment and Post-Employment Restrictions. The Company and the EXECUTIVE acknowledge that the Company has a special interest in and derives significant benefit from the unique skills and experience of the EXECUTIVE. In addition, the EXECUTIVE will use and have access to some of the Company's proprietary and valuable Confidential Information during the course of the EXECUTIVE's employment. Accordingly, except as hereafter noted, during the term of the EXECUTIVE's employment with the Company and in the event that the EXECUTIVE voluntarily terminates his employment with the Company prior to March 1, 2002, the EXECUTIVE agrees that for a period of three years following his voluntary termination pursuant to paragraph 6(g), he shall not provide any labor, work, services or assistance to (whether as an officer, director, employee, partner, agent, owner, independent contractor, stockholder or otherwise) Burlington Coat Factory Warehouse Corporation, Dillard Department Stores, Inc., Filene's Basement Corp., The Federated Stores, The May Department Stores Company, The TJX Companies, Inc. and Value City Department Stores, Inc. as well as all subsidiaries, divisions and/or the surviving entity of any of the above that do business in the retail industry in the case of a merger or acquisition. However, this subsection shall not prohibit the EXECUTIVE from making any investment of 1% or less of the equity securities of any publicly-traded corporation that is engaged in any business of the type or character engaged in by the Company. The preceding sentence shall have no force and effect in the event that (i) the EXECUTIVE's employment with the Company is terminated (1) by the Company pursuant to paragraph 6(c)[with Cause], 6(d)[without Cause] or (2) by the EXECUTIVE pursuant to either paragraph 6(e)[Termination by the Executive for Good Reason] or paragraph 6(f)[Termination Following Change of Control] or (ii) the Company fails to approve or grant an extension of this Agreement in accordance with paragraph 1 hereof. During the term of the EXECUTIVE's employment with the Company and for a period of three years following the termination of that employment for any reason, the EXECUTIVE shall not directly or indirectly solicit any other employee of the Company to terminate his or her employment with the Company. 10. Exercise of Stock Options Following Termination. If the EXECUTIVE's employment terminates pursuant to paragraph 6(a)[Death] or (b)[Disability], he (or his estate) may exercise his right to purchase any vested stock under the stock options granted to him by the Company for up to one year following the date of his termination, but not later than the termination date of such options. In all other instances, he may exercise that right for up to three months following the date of his termination, but not later than the termination date of such options. All such purchases must be made by the EXECUTIVE in accordance with the applicable stock option plans and agreements between the parties. 9 11. Insurance and Indemnity. The Company shall, to the extent permitted by law, include the EXECUTIVE during the term of this Agreement under any directors and officers liability insurance policy maintained for its directors and officers, with coverage at least as favorable to the EXECUTIVE in amount and each other material respect as the coverage of other directors and officers covered thereby. This obligation to provide insurance and indemnify the EXECUTIVE shall survive expiration or termination of this Agreement with respect to proceedings or threatened proceedings based on acts or omissions of the EXECUTIVE occurring during the EXECUTIVE's employment with the Company or with any affiliated company. Such obligations shall be binding upon the Company's successors and assigns and shall inure to the benefit of the EXECUTIVE's heirs and personal representatives. 12. Successors; Binding Agreement. This Agreement and all rights of the EXECUTIVE hereunder shall inure to the benefit of and be enforceable by the EXECUTIVE's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the EXECUTIVE should die while any amounts would still be payable to him hereunder all such amounts shall be paid in accordance with the terms of this Agreement to the EXECUTIVE's written designee, or if there be no such designee, to the EXECUTIVE's estate. 13. Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States registered mail, return receipt requested, postage prepaid, addressed as follows: If to the EXECUTIVE: Michael Hamilton c/o Ross Stores, Inc. 8333 Central Avenue Newark, CA 94560-3433 If to the Company: Ross Stores, Inc. 8333 Central Avenue Newark, CA 94560-3433 Attention: Corporate Secretary or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 14. Modification or Waiver; Entire Agreement. No provision of this Agreement may be modified or waived except in a document signed by the EXECUTIVE and the chairman of the Compensation Committee of the Board or such other person as may be designated by the Board. This Agreement, along with any stock option or restricted stock agreements between the parties, constitute the entire agreement between the parties regarding their employment relationship. No agreements or representations, oral or otherwise, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. 15. Governing Law; Severability. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. The 10 invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 16. Severability. In the event any provision of this Agreement shall be found unenforceable by an arbitrator or a court of competent jurisdiction, the provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the Company shall receive the benefits contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby. 17. Mitigation. In the event the EXECUTIVE's employment with the Company terminates for any reason other than death, the EXECUTIVE shall be obligated to seek other employment following such termination in order to mitigate payments that the Company may be required to make to him or for his benefit hereunder. Such obligation shall not apply during any period in which the EXECUTIVE is disabled. If the EXECUTIVE obtains other employment during any period in which he is entitled to receive continued salary or bonus payments under paragraph 8, any salary or bonus payments earned by the EXECUTIVE during such period shall reduce the Company's obligation to pay continued salary and/or bonus payments under paragraph 8 by the amount of the salary and/or bonus payments so earned by the EXECUTIVE. 18. Withholding. All payments required to be made by the Company hereunder to the EXECUTIVE or his estate or beneficiaries shall be subject to the withholding of such amounts as the Company may reasonably determine it should withhold pursuant to any applicable law. To the extent permitted, the EXECUTIVE may provide all or any part of any necessary withholding by contributing Company stock with value, determined on the date such withholding is due, equal to the number of shares contributed multiplied by the closing Nasdaq price on the date preceding the date the withholding is determined. 19. Arbitration. In the event of any dispute or claim relating to or arising out of the parties' employment relationship or this Agreement (including, but not limited to, any claims of breach of contract, wrongful termination or age, race, sex, disability or other discrimination), all such disputes shall be fully, finally and exclusively resolved by binding arbitration conducted by the American Arbitration Association in San Francisco, California; provided, however, that this arbitration provision shall not apply to any disputes or claims relating to or arising out of the misuse or misappropriation of the Company's trade secrets or proprietary information or to any disputes or claims relating to or arising out of the EXECUTIVE's failure to comply with the requirements of paragraph 9 regarding Employment and Post- Employment Restrictions. 20. Attorneys' Fees. Each party shall bear its own attorneys' fees and costs incurred in any action or dispute arising out of this Agreement. 21. Miscellaneous. No right or interest to, or in, any payments shall be assignable by the EXECUTIVE; provided, however, that this provision shall not preclude the EXECUTIVE from designating in writing one or more beneficiaries to receive any amount that may be payable after the EXECUTIVE's death and shall not preclude the legal representative of the EXECUTIVE's estate from assigning any right hereunder to the person or persons entitled 11 thereto. This Agreement shall be binding upon and shall inure to the benefit of the EXECUTIVE, his heirs and legal representatives and the Company and its successors. IN WITNESS WHEREOF, the parties have executed this Employment Agreement effective as of the date and year first above written. ROSS STORES, INC. /s/ Michael Hamilton Michael Hamilton By: /s/ Melvin A. Wilmore Title: President & COO -----END PRIVACY-ENHANCED MESSAGE-----