ROSS STORES, INC.
FISCAL 1999 FORM 10-K
EXHIBIT 10.5
THIRD AMENDED AND RESTATED
ROSS STORES, INC.
1992 STOCK OPTION PLAN
(EFFECTIVE AS OF MARCH 16, 2000)
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Second Amended and Restated Ross
Stores, Inc. 1992 Stock Option Plan is hereby amended and restated in its
entirety as the Third Amended and Restated Ross Stores, Inc. 1992 Stock
Option Plan (the "PLAN") effective as of March 16, 2000 (the "EFFECTIVE
DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the
interests of the Participating Company Group and its stockholders by
providing an incentive to attract, retain and reward persons performing
services for the Participating Company Group and by motivating such persons
to contribute to the growth and profitability of the Participating Company
Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the
shares of Stock available for issuance under the Plan have been issued and
all restrictions on such shares under the terms of the Plan and the
agreements evidencing Options granted under the Plan have lapsed. However,
all Options shall be granted, if at all, prior to March 16, 2002.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following terms
shall have their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company.
If one or more Committees have been appointed by the Board to administer the
Plan, "BOARD" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(c) "CHANGE IN CONTROL" means the occurrence of any of
the following:
(i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than (1) a trustee or other
fiduciary holding stock of the Company under an employee benefit plan of a
Participating Company or (2) a corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportions as
their ownership of the stock of the Company, becomes the "beneficial owner"
(as defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of stock of the Company representing more than fifty percent
(50%) of the total combined voting power of the Company's then-outstanding
voting stock; or
(ii) an Ownership Change Event or a series of
related Ownership Change Events (collectively, a "TRANSACTION") wherein the
stockholders of the Company immediately before the Transaction do not retain
immediately after the Transaction direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or, in the event of a sale of assets,
of the corporation or corporations to which the assets of the Company were
transferred (the "TRANSFEREE CORPORATION(S)"); or
(iii) a liquidation or dissolution of the Company.
For purposes of the preceding sentence, indirect beneficial ownership shall
include, without limitation, an interest resulting from ownership of the
voting stock of one or more corporations which, as a result of the
Transaction, own the Company or the Transferee Corporation(s), as the case
may be, either directly or through one or more subsidiary corporations. The
Board shall have the right to determine whether multiple Ownership Change
Events are related, and its determination shall be final, binding and
conclusive.
(d) "COMMITTEE" means the Compensation Committee or
other committee of one or more members of the Board duly appointed to
administer the Plan and having such powers as shall be specified by the
Board. Unless the powers of the Committee have been specifically limited, the
Committee shall have all of the powers of the Board granted herein,
including, without limitation, the power to amend or terminate the Plan at
any time, subject to the terms of the Plan and any applicable limitations
imposed by law.
(e) "COMPANY" means Ross Stores, Inc. a Delaware
corporation, or any successor corporation thereto.
(f) "CONSULTANT" means a person engaged to provide
consulting or advisory services (other than as an Employee or a Director) to
a Participating Company, provided that the identity of such person, the
nature of such services or the entity to which such services are provided
would not preclude the Company from offering or selling securities to such
person pursuant to the Plan in reliance on registration on a Form S-8
Registration Statement under the Securities Act.
(g) "DIRECTOR" means a member of the Board.
(h) "DISABILITY" means the permanent and total
disability of the Optionee within the meaning of Section 22(e)(3) of the Code.
(i) "EMPLOYEE" means any person treated as an
employee (including an officer or a Director who is also treated as an employee)
in the records of a Participating Company and, with respect to any Incentive
Stock Option granted to such person, who is an employee for purposes of Section
422 of the Code; provided, however, that neither service as a Director nor
payment of a director's fee shall be sufficient to constitute employment for
purposes of the Plan.
(j) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(k) "FAIR MARKET VALUE" means, as of any date, the value
of a share of Stock or other property as determined by the Board, in its
discretion, or by the Company, in its discretion, if such determination is
expressly allocated to the Company herein, subject to the following:
(i) If, on such date, the Stock is listed on a
national or regional securities exchange or market system, the Fair Market
Value of a share of Stock shall be the closing price of a share of Stock (or
the closing bid price of a share of Stock if the Stock is so quoted instead)
as quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or such
other national or regional securities exchange or market system constituting
the primary market for the Stock, as reported in THE WALL STREET JOURNAL or
such other source as the Company deems reliable. If the relevant date does
not fall on a day on which the Stock has traded on such securities exchange
or market system, the date on which the Fair Market Value shall be
established shall be the last day on which the Stock was so traded prior to
the relevant date, or such other appropriate day as shall be determined by
the Board, in its discretion.
(ii) If, on such date, the Stock is not listed on a
national or regional securities exchange or market system, the Fair Market
Value of a share of Stock shall be as determined by the Board in good faith
without regard to any restriction other than a restriction which, by its
terms, will never lapse.
(l) "INCENTIVE STOCK OPTION" means an Option intended to
be (as set forth in the Option Agreement) and which qualifies as an incentive
stock option within the meaning of Section 422(b) of the Code.
(m) "INSIDER" means an officer of the Company, Director
or any other person whose transactions in Stock are subject to Section 16 of
the Exchange Act.
(n) "NON-EMPLOYEE DIRECTOR" means a Director who (i) is
not a current employee or officer of a Participating Company; (ii) does not
receive compensation, either directly or indirectly, from a Participating
Company for services rendered as a consultant or in any capacity other than
as a Director, except for an amount that does not exceed the dollar amount
for which disclosure would be required pursuant to Item 404(a) of Regulation
S-K under
the Securities Act ("REGULATION S-K"); (iii) does not possess an interest in
any other transaction for which disclosure would be required pursuant to Item
404(a) of Regulation S-K; and (iv) is not engaged in a business relationship
for which disclosure would be required pursuant to Item 404(b) of Regulation
S-K.
(o) "NONSTATUTORY STOCK OPTION" means an Option not
intended to be (as set forth in the Option Agreement) or which does not
qualify as an Incentive Stock Option.
(p) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions
of the Plan. An Option may be either an Incentive Stock Option or a
Nonstatutory Stock Option.
(q) "OPTION AGREEMENT" means a written agreement between
the Company and an Optionee setting forth the terms, conditions and
restrictions of the Option granted to the Optionee and any shares acquired
upon the exercise thereof.
(r) "OPTIONEE" means a person who has been granted one
or more Options.
(s) "OUTSIDE DIRECTOR" means a Director who (i) is not a
current employee of the Company or a member of an affiliated group of
corporations within the meaning of Section 162(m) of the Code (together with
the Company, the "AFFILIATED GROUP"); (ii) is not a former employee of the
Affiliated Group who receives compensation for prior services (other than
benefits under a tax-qualified retirement plan) during the taxable year;
(iii) has not been an officer of the Affiliated Group; and (iv) does not
receive remuneration within the meaning of Section 162(m) of the Code from
the Affiliated Group, either directly or indirectly, in any capacity other
than as a Director.
(t) "OWNERSHIP CHANGE EVENT" means the occurrence of any
of the following with respect to the Company: (i) the direct or indirect sale
or exchange in a single or series of related transactions by the stockholders
of the Company of more than fifty percent (50%) of the voting stock of the
Company; (ii) a merger or consolidation in which the Company is a party; or
(iii) the sale, exchange, or transfer of all or substantially all of the
assets of the Company.
(u) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(v) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.
(w) "PARTICIPATING COMPANY GROUP" means, at any point in
time, all corporations collectively which are then Participating Companies.
(x) "RULE 16b-3" means Rule 16b-3 under the Exchange
Act, as amended from time to time, or any successor rule or regulation.
(y) "SECURITIES ACT" means the Securities Act of 1933,
as amended.
(z) "SERVICE" means an Optionee's employment or service
with the Participating Company Group, whether in the capacity of an Employee,
a Director or a Consultant. An Optionee's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided
that there is no interruption or termination of the Optionee's Service.
Furthermore, an Optionee's Service shall not be deemed to have terminated if
the Optionee takes any military leave, sick leave, or other bona fide leave
of absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the one hundred eighty-first (181st) day
following the commencement of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option and
instead shall be treated thereafter as a Nonstatutory Stock Option unless the
Optionee's right to return to Service with the Participating Company Group is
guaranteed by statute or contract. Unless otherwise provided by the Board in
the grant of an Option and set forth in the Option Agreement evidencing such
Option, an approved leave of absence shall be treated as Service for purposes
of determining vesting under the Option. The Optionee's Service shall be
deemed to have terminated either upon an actual termination of Service or
upon the corporation for which the Optionee performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its
discretion, shall determine whether the Optionee's Service has terminated and
the effective date of such termination.
(aa) "STOCK" means the common stock of the Company,
as adjusted from time to time in accordance with Section 4.2.
(bb) "SUBSIDIARY CORPORATION" means any present or
future "subsidiary corporation" of the Company, as defined in Section 424(f)
of the Code.
(cc) "TEN PERCENT OWNER OPTIONEE" means an Optionee who,
at the time an Option is granted to the Optionee, owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of a Participating Company within the meaning of Section 422(b)(6) of
the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are
for convenience only and shall not affect the meaning or interpretation of
any provision of the Plan. Except when otherwise indicated by the context,
the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be
administered by the Board. All questions of interpretation of the Plan or of
any Option shall be determined by the
Board, and such determinations shall be final and binding upon all persons
having an interest in the Plan or such Option.
3.2 AUTHORITY OF OFFICERS. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect
to any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right,
obligation, determination or election.
3.3 POWERS OF THE BOARD. In addition to any other powers set
forth in the Plan and subject to the provisions of the Plan, the Board shall
have the full and final power and authority, in its discretion:
(a) to determine the persons to whom, and the time or
times at which, Options shall be granted and the number of shares of Stock to
be subject to each Option;
(b) to designate Options as Incentive Stock Options or
Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of
Stock or other property;
(d) to determine the terms, conditions and restrictions
applicable to each Option (which need not be identical) and any shares
acquired upon the exercise thereof, including, without limitation, (i) the
exercise price of the Option, (ii) the method of payment for shares purchased
upon the exercise of the Option, (iii) the method for satisfaction of any tax
withholding obligation arising in connection with the Option or such shares,
including by the withholding or delivery of shares of stock, (iv) the timing,
terms and conditions of the exercisability of the Option or the vesting of
any shares acquired upon the exercise thereof, (v) the time of the expiration
of the Option, (vi) the effect of the Optionee's termination of Service with
the Participating Company Group on any of the foregoing, and (vii) all other
terms, conditions and restrictions applicable to the Option or such shares
not inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement;
(f) to amend, modify, extend, cancel or renew any Option
or to waive any restrictions or conditions applicable to any Option or any
shares acquired upon the exercise thereof;
(g) to accelerate, continue, extend or defer the
exercisability of any Option or the vesting of any shares acquired upon the
exercise thereof, including with respect to the period following an
Optionee's termination of Service with the Participating Company Group;
(h) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and
(i) to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option Agreement and to make
all other determinations and take such other actions with respect to the Plan
or any Option as the Board may deem advisable to the extent not inconsistent
with the provisions of the Plan or applicable law.
3.4 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if
any, of Rule 16b-3. For this purpose, the Board may delegate authority to
administer the Plan to a Committee composed solely of two or more
Non-Employee Directors.
3.5 ADMINISTRATION IN COMPLIANCE WITH SECTION 162(m). The
Board may establish a Committee composed solely of two or more Outside
Directors to approve the grant of any Option which might reasonably be
anticipated to result in the payment of employee remuneration that would
otherwise exceed the limit on employee remuneration deductible for income tax
purposes pursuant to Section 162(m) of the Code.
3.6 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually
and necessarily incurred in connection with the defense of any action, suit
or proceeding, or in connection with any appeal therein, to which they or any
of them may be a party by reason of any action taken or failure to act under
or in connection with the Plan, or any right granted hereunder, and against
all amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such person is liable for gross negligence,
bad faith or intentional misconduct in duties; provided, however, that within
sixty (60) days after the institution of such action, suit or proceeding,
such person shall offer to the Company, in writing, the opportunity at its
own expense to handle and defend the same.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment
as provided in Section 4.2, the maximum aggregate number of shares of Stock
that may be issued under the Plan shall be thirty-five million
(35,000,000)(1) and shall consist of authorized but
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(1) As adjusted through the two-for-one stock split effective on September 22,
1999.
unissued or reacquired shares of Stock or any combination thereof. If an
outstanding Option for any reason expires or is terminated or canceled or if
shares of Stock are acquired upon the exercise of an Option subject to a
Company repurchase option and are repurchased by the Company at the
Optionee's exercise price, the shares of Stock allocable to the unexercised
portion of such Option or such repurchased shares of Stock shall again be
available for issuance under the Plan; provided, however, that in no event
shall more than 35,000,000 shares of Stock be available for issuance pursuant
to the exercise of Incentive Stock Options (the "ISO SHARE ISSUANCE LIMIT").
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the
event of any stock dividend, stock split, reverse stock split,
recapitalization, merger, combination, exchange of shares, reclassification
or similar change in the capital structure of the Company, appropriate
adjustments shall be made in the number and class of shares subject to the
Plan and to any outstanding Options, in the Section 162(m) Grant Limit set
forth in Section 5.4, in the ISO Share Issuance Limit set forth in Section
4.1, and in the exercise price per share of any outstanding Options. If a
majority of the shares which are of the same class as the shares that are
subject to outstanding Options are exchanged for, converted into, or
otherwise become (whether or not pursuant to an Ownership Change Event)
shares of another corporation (the "NEW SHARES"), the Board may unilaterally
amend the outstanding Options to provide that such Options are exercisable
for New Shares. In the event of any such amendment, the number of shares
subject to, and the exercise price per share of, the outstanding Options
shall be adjusted in a fair and equitable manner as determined by the Board,
in its discretion. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 4.2 shall be rounded
down to the nearest whole number, and in no event may the exercise price of
any Option be decreased to an amount less than the par value, if any, of the
stock subject to the Option. The adjustments determined by the Board pursuant
to this Section 4.2 shall be final, binding and conclusive.
5. ELIGIBILITY AND OPTION LIMITATIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only
to Employees (including Directors who are also Employees) and Consultants.
For purposes of the foregoing sentence, the term "Employees" shall include
persons who become Employees within thirty (30) days of the date of grant of
an Option to such person. Eligible persons may be granted more than one (1)
Option.
5.2 OPTION GRANT RESTRICTIONS. Any person who is not an
Employee on the effective date of the grant of an Option to such person may
be granted only a Nonstatutory Stock Option. An Incentive Stock Option
granted to a prospective Employee upon the condition that such person become
an Employee shall be deemed granted effective on the date such person
commences Service, with an exercise price determined as of such date in
accordance with Section 6.1. Notwithstanding the foregoing, no Director who
is not also an Employee shall be eligible to be granted an Option, even if
such person is also a Consultant.
5.3 FAIR MARKET VALUE LIMITATION. To the extent that options
designated as Incentive Stock Options (granted under all stock option plans
of the Participating Company
Group, including the Plan) become exercisable by an Optionee for the first
time during any calendar year for stock having a Fair Market Value greater
than One Hundred Thousand Dollars ($100,000), the portions of such options
which exceed such amount shall be treated as Nonstatutory Stock Options. For
purposes of this Section 5.3, options designated as Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of stock shall be determined as of the time the option with
respect to such stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and
with respect to such Options as required or permitted by such amendment to
the Code. If an Option is treated as an Incentive Stock Option in part and as
a Nonstatutory Stock Option in part by reason of the limitation set forth in
this Section 5.3, the Optionee may designate which portion of such Option the
Optionee is exercising. In the absence of such designation, the Optionee
shall be deemed to have exercised the Incentive Stock Option portion of the
Option first. Separate certificates representing each such portion shall be
issued upon the exercise of the Option.
5.4 SECTION 162(m) GRANT LIMIT. Subject to adjustment as
provided in Section 4.2, no person shall be granted one or more Options
within any calendar year which in the aggregate are for the purchase of more
than 1,970,622 shares(2) (representing that number of shares equal to 2% of
the number of shares of Stock issued and outstanding at the close of business
on the records of the Company's transfer agent on April 10, 1995) (the
"SECTION 162(m) GRANT LIMIT"). An Option which is canceled in the same
calendar year of the Company in which it was granted shall continue to be
counted against the Section 162(m) Grant Limit for such period.
6. TERMS AND CONDITIONS OF OPTIONS.
Options shall be evidenced by Option Agreements specifying the
number of shares of Stock covered thereby, in such form as the Board shall
from time to time establish. No Option or purported Option shall be a valid
and binding obligation of the Company unless evidenced by a fully executed
Option Agreement. Option Agreements may incorporate all or any of the terms
of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
6.1 EXERCISE PRICE. The exercise price for each Option shall
be established in the discretion of the Board; provided, however, that (a)
the exercise price per share for any Option shall be not less than one
hundred percent (100%) of the Fair Market Value of a share of Stock on the
effective date of grant of the Option and (b) no Option granted to a Ten
Percent Owner Optionee shall have an exercise price per share less than one
hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory
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(2) On April 10, 1995, a total of 24,632,786 shares of common stock were
outstanding, two percent of which is 492,655 shares. Under Section 4.2, this
limit was adjusted to 985,311 shares to reflect a two-for-one stock split on
March 5, 1997 (2% of 49,265,572 shares), and to 1,970,622 shares to reflect a
two-for-one stock split on September 22, 1999 (2% of 98,531,144 shares).
Stock Option) may be granted with an exercise price lower than the minimum
exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying under the
provisions of Section 424(a) of the Code.
6.2 EXERCISABILITY AND TERM OF OPTIONS. Options shall be
exercisable at such time or times, or upon such event or events, and subject
to such terms, conditions, performance criteria and restrictions as shall be
determined by the Board and set forth in the Option Agreement evidencing such
Option; provided, however, that (a) no Incentive Stock Option shall be
exercisable after the expiration of ten (10) years after the effective date
of grant of such Option, (b) no Incentive Stock Option granted to a Ten
Percent Owner Optionee shall be exercisable after the expiration of five (5)
years after the effective date of grant of such Option, and (c) no
Nonstatutory Stock Option shall be exercisable after the expiration of ten
(10) years and one (1) month after the effective date of grant of such
Option. Subject to the foregoing, unless otherwise specified by the Board in
the grant of an Option, any Option granted hereunder shall terminate ten (10)
years after the effective date of grant of the Option, unless earlier
terminated in accordance with its provisions.
6.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the exercise price for the number of
shares of Stock being purchased pursuant to any Option shall be made (i) in
cash or by check, (ii) by tender to the Company, or attestation to the
ownership, of shares of Stock owned by the Optionee having a Fair Market
Value (as determined by the Company without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company) not less
than the exercise price, (iii) by delivery of a properly executed notice
together with irrevocable instructions to a broker providing for the
assignment to the Company of the proceeds of a sale or loan with respect to
some or all of the shares being acquired upon the exercise of the Option
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System) (a "CASHLESS EXERCISE"), (iv)
provided that the Optionee is an Employee (unless otherwise not prohibited by
law, including, without limitation, any regulation promulgated by the Board
of Governors of the Federal Reserve System) and in the Company's sole
discretion at the time the Option is exercised, by delivery of the Optionee's
promissory note in a form approved by the Company for the aggregate exercise
price, provided that, if the Company is incorporated in the State of
Delaware, the Optionee shall pay in cash that portion of the aggregate
exercise price not less than the par value of the shares being acquired, (v)
by such other consideration as may be approved by the Board from time to time
to the extent permitted by applicable law, or (vi) by any combination
thereof. The Board may at any time or from time to time, by approval of or by
amendment to the standard forms of Option Agreement described in Section 7,
or by other means, grant Options which do not permit all of the foregoing
forms of consideration to be used in payment of the exercise price or which
otherwise restrict one or more forms of consideration.
(b) LIMITATIONS ON FORMS OF CONSIDERATION.
(i) TENDER OF STOCK. Notwithstanding the foregoing,
an Option may not be exercised by tender to the Company, or attestation to
the ownership, of shares of Stock to the extent such tender or attestation
would constitute a violation of the provisions of any law, regulation or
agreement restricting the redemption of the Company's stock. Unless otherwise
provided by the Board, an Option may not be exercised by tender to the
Company, or attestation to the ownership, of shares of Stock unless such
shares either have been owned by the Optionee for more than six (6) months or
were not acquired, directly or indirectly, from the Company.
(ii) CASHLESS EXERCISE. The Company reserves, at
any and all times, the right, in the Company's sole and absolute discretion,
to establish, decline to approve or terminate any program or procedures for
the exercise of Options by means of a Cashless Exercise.
(iii) PAYMENT BY PROMISSORY NOTE. No promissory note
shall be permitted if the exercise of an Option using a promissory note would
be a violation of any law. Any permitted promissory note shall be on such
terms as the Board shall determine at the time the Option is granted. The
Board shall have the authority to permit or require the Optionee to secure
any promissory note used to exercise an Option with the shares of Stock
acquired upon the exercise of the Option or with other collateral acceptable
to the Company. Unless otherwise provided by the Board, if the Company at any
time is subject to the regulations promulgated by the Board of Governors of
the Federal Reserve System or any other governmental entity affecting the
extension of credit in connection with the Company's securities, any
promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the
extent necessary to comply with such applicable regulations.
6.4 TAX WITHHOLDING. The Company shall have the right, but
not the obligation, to deduct from the shares of Stock issuable upon the
exercise of an Option, or to accept from the Optionee the tender of, a number
of whole shares of Stock having a Fair Market Value, as determined by the
Company, equal to all or any part of the federal, state, local and foreign
taxes, if any, required by law to be withheld by the Participating Company
Group with respect to such Option or the shares acquired upon the exercise
thereof. Alternatively or in addition, in its discretion, the Company shall
have the right to require the Optionee, through payroll withholding, cash
payment or otherwise, including by means of a Cashless Exercise, to make
adequate provision for any such tax withholding obligations of the
Participating Company Group arising in connection with the Option or the
shares acquired upon the exercise thereof. The Fair Market Value of any
shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates. The Company shall have no obligation to deliver
shares of Stock or to release shares of Stock from an escrow established
pursuant to the Option Agreement until the Participating Company Group's tax
withholding obligations have been satisfied by the Optionee.
6.5 REPURCHASE RIGHTS. Shares issued under the Plan may be
subject to one or more repurchase options or other conditions and
restrictions as determined by the Board in its discretion at the time the
Option is granted. The Company shall have the right to assign at any
time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company. Upon
request by the Company, each Optionee shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder
and shall promptly present to the Company any and all certificates
representing shares of Stock acquired hereunder for the placement on such
certificates of appropriate legends evidencing any such transfer restrictions.
6.6 EFFECT OF TERMINATION OF SERVICE.
(a) OPTION EXERCISABILITY. Subject to earlier
termination of the Option as otherwise provided herein and unless otherwise
provided by the Board in the grant of an Option and set forth in the Option
Agreement, an Option shall be exercisable after an Optionee's termination of
Service only during the applicable time period determined in accordance with
this Section 6.6 and thereafter shall terminate:
(i) DISABILITY. If the Optionee's Service
terminates because of the Disability of the Optionee, the Option, to the
extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee (or the Optionee's
guardian or legal representative) at any time prior to the expiration of
twelve (12) months (or such longer period of time as determined by the Board,
in its discretion) after the date on which the Optionee's Service terminated,
but in any event no later than the date of expiration of the Option's term as
set forth in the Option Agreement evidencing such Option (the "OPTION
EXPIRATION DATE").
(ii) DEATH. If the Optionee's Service terminates
because of the death of the Optionee, the Option, to the extent unexercised
and exercisable on the date on which the Optionee's Service terminated, may
be exercised by the Optionee's legal representative or other person who
acquired the right to exercise the Option by reason of the Optionee's death
at any time prior to the expiration of twelve (12) months (or such longer
period of time as determined by the Board, in its discretion) after the date
on which the Optionee's Service terminated, but in any event no later than
the Option Expiration Date. The Optionee's Service shall be deemed to have
terminated on account of death if the Optionee dies within three (3) months
(or such longer period of time as determined by the Board, in its discretion)
after the Optionee's termination of Service.
(iii) TERMINATION FOR CAUSE. Notwithstanding any
other provision of the Plan to the contrary, if the Optionee's Service is
terminated for Cause, as defined by the Optionee's Option Agreement or
contract of employment or service (or, if not defined in any of the
foregoing, as defined below), the Option, to the extent unexercised and
exercisable by the Optionee on the date on which the Optionee's Service
terminated, may be exercised by the Optionee at any time prior to the
expiration of three (3) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. Unless
otherwise defined by the Optionee's Option Agreement or contract of
employment or service, for purposes of this Section 6.6(a)(iii) "CAUSE" shall
mean any of the following: (1) the Optionee's theft, dishonesty, or
falsification of any Participating Company documents or records; (2) the
Optionee's improper use or disclosure of a Participating Company's
confidential
or proprietary information; (3) any action by the Optionee which has a
detrimental effect on a Participating Company's reputation or business; (4)
the Optionee's failure or inability to perform any reasonable assigned duties
after written notice from a Participating Company of, and a reasonable
opportunity to cure, such failure or inability; (5) any material breach by
the Optionee of any employment or service agreement between the Optionee and
a Participating Company, which breach is not cured pursuant to the terms of
such agreement; or (6) the Optionee's conviction (including any plea of
guilty or nolo contendere) of any criminal act which impairs the Optionee's
ability to perform his or her duties with a Participating Company.
(iv) OTHER TERMINATION OF SERVICE. If the
Optionee's Service terminates for any reason, except Disability, death or
Cause, the Option, to the extent unexercised and exercisable by the Optionee
on the date on which the Optionee's Service terminated, may be exercised by
the Optionee at any time prior to the expiration of three (3) months (or such
longer period of time as determined by the Board, in its discretion, or as
provided by the Option Agreement evidencing such Option) after the date on
which the Optionee's Service terminated, but in any event no later than the
Option Expiration Date.
(b) EXTENSION IF EXERCISE PREVENTED BY LAW.
Notwithstanding the foregoing other than termination of an Optionee's Service
for Cause, if the exercise of an Option within the applicable time periods
set forth in Section 6.6(a) is prevented by the provisions of Section 9
below, the Option shall remain exercisable until three (3) months (or such
longer period of time as determined by the Board, in its discretion) after
the date the Optionee is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.
(c) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing other than termination of an Optionee's Service
for Cause, if a sale within the applicable time periods set forth in Section
6.6(a) of shares acquired upon the exercise of the Option would subject the
Optionee to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th)
day after the Optionee's termination of Service, or (iii) the Option
Expiration Date.
6.7 TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, an Option shall be exercisable only by the Optionee or the
Optionee's guardian or legal representative. No Option shall be assignable or
transferable by the Optionee, except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by the
Board, in its discretion, and set forth in the Option Agreement evidencing
such Option, a Nonstatutory Stock Option shall be assignable or transferable
subject to the applicable limitations, if any, described in the General
Instructions to the Form S-8 Registration Statement under the Securities Act.
7. STANDARD FORMS OF OPTION AGREEMENT.
7.1 OPTION AGREEMENT. Unless otherwise provided by the Board
at the time the Option is granted, an Option shall comply with and be subject
to the terms and conditions set forth in the form of Option Agreement
approved by the Board concurrently with its adoption of the Plan and as
amended from time to time.
7.2 AUTHORITY TO VARY TERMS. The Board shall have the
authority from time to time to vary the terms of any standard form of Option
Agreement described in this Section 7 either in connection with the grant or
amendment of an individual Option or in connection with the authorization of
a new standard form or forms; provided, however, that the terms and
conditions of any such new, revised or amended standard form or forms of
Option Agreement are not inconsistent with the terms of the Plan.
8. EFFECT OF CHANGE IN CONTROL.
Except as otherwise provided by the Board in the grant of any
Option and set forth in the Option Agreement evidencing such Option, in the
event of a Change in Control, the Board, in its discretion, shall either (a)
arrange for the surviving, continuing, successor, or purchasing corporation
or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), to either assume the Company's rights and obligations under
outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock, or (b) provide that
any unexercisable or unvested portion of such outstanding Option and any
shares acquired upon the exercise thereof held by an Optionee whose Service
has not terminated prior to such date shall be immediately exercisable and
vested in full as of the date ten (10) days prior to the Change in Control.
Furthermore, the Board may, in its discretion, provide in any Option
Agreement or employment or other agreement between the Optionee and a
Participating Company that if the Optionee's Service ceases as a result of a
"Termination After Change in Control" (as defined in such agreement) then the
exercisability and vesting of any Option held by such Optionee and any shares
acquired upon the exercise thereof shall be accelerated effective as of the
date on which the Optionee's Service terminated to such extent, if any, as
shall have been determined by the Board, in its discretion, and set forth in
such agreement. The exercise or vesting of any Option and any shares acquired
upon the exercise thereof that was permissible solely by reason of this
Section 8 shall be conditioned upon the consummation of the Change in
Control. Any Options which are neither assumed or substituted for by the
Acquiring Corporation in connection with the Change in Control nor exercised
as of the date of the Change in Control shall terminate and cease to be
outstanding effective as of the date of the Change in Control.
9. COMPLIANCE WITH SECURITIES LAW.
The grant of Options and the issuance of shares of Stock upon
exercise of Options shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such
securities. Options may not be exercised if the issuance of shares of Stock
upon exercise would constitute a violation of any applicable federal, state
or foreign securities laws or other law or regulations or the requirements of
any stock exchange or market system
upon which the Stock may then be listed. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance
and sale of any shares hereunder shall relieve the Company of any liability
in respect of the failure to issue or sell such shares as to which such
requisite authority shall not have been obtained. As a condition to the
exercise of any Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance
with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company.
10. TERMINATION OR AMENDMENT OF PLAN.
The Board may terminate or amend the Plan at any time.
However, subject to changes in applicable law, regulations or rules that
would permit otherwise, without the approval of the Company's stockholders,
there shall be (a) no increase in the maximum aggregate number of shares of
Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (b) no change in the class of persons eligible to
receive Incentive Stock Options, and (c) no other amendment of the Plan that
would require approval of the Company's stockholders under any applicable
law, regulation or rule. No termination or amendment of the Plan shall affect
any then outstanding Option unless expressly provided by the Board. In any
event, no termination or amendment of the Plan may adversely affect any then
outstanding Option without the consent of the Optionee, unless such
termination or amendment is required to enable an Option designated as an
Incentive Stock Option to qualify as an Incentive Stock Option or is
necessary to comply with any applicable law, regulation or rule.
11. MISCELLANEOUS PROVISIONS.
11.1 PROVISION OF INFORMATION. Each Optionee shall be
given access to information concerning the Company equivalent to that
information generally made available to the Company's common stockholders.
11.2 BENEFICIARY DESIGNATION. Each Optionee may file with
the Company a written designation of a beneficiary who is to receive any
benefit under the Plan to which the Optionee is entitled in the event of such
Optionee's death before he or she receives any or all of such benefit. Each
designation will revoke all prior designations by the same Optionee, shall be
in a form prescribed by the Company, and will be effective only when filed by
the Optionee in writing with the Company during the Optionee's lifetime. If a
married Optionee designates a beneficiary other than the Optionee's spouse,
the effectiveness of such designation shall be subject to the consent of the
Optionee's spouse.
11.3 RIGHTS AS A STOCKHOLDER. An Optionee shall have no
rights as a stockholder with respect to any shares covered by an Option until
the date of the issuance of a certificate for such shares (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date
such certificate is issued, except as provided in Section 4.2 or another
provision of the Plan.
11.4 RIGHTS AS EMPLOYEE, CONSULTANT OR DIRECTOR. No
person, even though eligible pursuant to Section 5, shall have a right to be
granted an Option, or, having been once been granted an Option, to be granted
an additional Option. Nothing in the Plan or any Option Agreement shall
confer on any Optionee a right to remain an Employee, Consultant or Director,
or interfere with or limit in any way the right of a Participating Company to
terminate the Optionee's Service at any time.
11.5 CONTINUATION OF PRIOR VERSIONS OF THE PLAN AS TO
OUTSTANDING OPTIONS. Notwithstanding any other provision of the Plan to the
contrary, each Option outstanding prior to the Effective Date shall continue
to be governed by the terms of the applicable version of the Plan as in
effect on the date of grant of such Option. For purposes of the preceding
sentence, such prior versions of the Plan include the Ross Stores, Inc. 1984
Stock Option Plan adopted on February 24, 1984; the Amended and Restated Ross
Stores, Inc. 1984 Stock Option Plan adopted on February 19, 1987; the Second
Amended and Restated Ross Stores, Inc. 1984 Stock Option Plan adopted on
March 14, 1988; the Third Amended and Restated Ross Stores, Inc. 1984 Stock
Option Plan adopted on March 17, 1989; the Fourth Amended and Restated Ross
Stores, Inc. 1984 Stock Option Plan adopted on March 18, 1991; the Ross
Stores, Inc. 1992 Stock Option Plan adopted on March 16, 1992; the Amended
and Restated Ross Stores, Inc. 1992 Stock Option Plan adopted on March 16,
1995; and the Second Amended and Restated Ross Stores, Inc. 1992 Stock Option
Plan adopted on May 28, 1998.
IN WITNESS WHEREOF, the undersigned Secretary of the Company
certifies that the foregoing sets forth the Third Amended and Restated Ross
Stores, Inc. 1992 Stock Option Plan as duly adopted by the Board on March 16,
2000.
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Secretary